The Next Whistleblower May Be You

June 21st, 2013 by Meliha Waddell

Imagine this. You’re at a dinner party and the guests beside you strike up a conversation about which country, Switzerland or the British Overseas Territory of the Cayman Islands, is the better place to stash money in order to avoid paying taxes at home. Would you pay attention to the conversation? Probably not, and I don’t blame you. However, this blog might change your mind, and I believe it warrants your attention for just a few minutes.

Although Switzerland and the Cayman Islands are notorious for being tax havens for individuals, Liechtenstein was also once known as an ideal tax haven. However, in 2006 whistleblower Heinrich Kieber gave German authorities a disk containing the names of individuals who stashed their money at LGT, Liechtenstein’s biggest financial institution, in order to avoid paying taxes at home. Since Kieber’s whistle blowing, the United States, Australia, and Germany have arrested, jailed, and fined their nationals identified on that disk for tax evasion. Over 100 Canadians were also identified in the recovered information, however, none have been prosecuted.

The event further clarifies that some Canadians are not paying their fair share in taxes and are placing their money at locations abroad to avoid paying the taxman. Seven years later, and perhaps somewhat inspired by whistleblower Kieber, as well as other governments that have enacted measures to deal with tax evasion, the Canada Revenue Agency (CRA) has introduced new measures to combat international tax evasion.

One of the measures that has caught the attention of some is the Stop International Tax Evasion Program. The program essentially pays individuals who give the CRA information that leads to them recovering over $100,000 in an assessment or reassessment of federal taxes.

Sounds good so far right? A glimpse of the necessary criteria prior to paying the whistleblower, however, demonstrates how the process can be lengthy and complicated. The CRA notes that among other criteria, all objection and appeal rights associated with the newly assessed tax must have expired. Not only that, but the newly assessed federal tax also has to first be collected prior to paying the whistleblower. These two criteria combined can take years. So, if you’re looking for a quick pay day, this program might not be for you.

Furthermore, when the CRA is prepared to pay you, they can give you anywhere from 5 – 15% of the recovered taxes. The actual percentage depends on the quantity and quality of the information given. However, believe it or not, any payment that you receive for assisting the government in collecting taxes (the same taxes that without you they may never have received) is subject to taxation.

Although the Stop International Tax Evasion Program is new to Canada, some are skeptical about how effective this program will be. However, one thing is for sure: it might be worth your time to pay a little more attention at the next dinner party.

If you believe you have been a victim of a tax shelter arrangement or some type of Tax Evasion Scheme, the Tax Litigation Group at Devry Smith Frank LLP can assist you.


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