Written by Martin Sorensen and Nicholas Arrigo
The Canada Revenue Agency's (CRA) Offshore Tax Informant Program (OTIP) is a whistleblower program that rewards eligible individuals who come forward to provide CRA with information regarding the international non-compliance of Canadian taxpayers. Now, over five years into its existence, the OTIP has begun to pay out.
OTIP Payouts on the Rise
We recently submitted a request to CRA under the Access to Information Act, and obtained new data regarding the number of OTIP submissions and their outcomes. As of the end of 2018, the OTIP had received 593 written submissions which resulted in 100 audits, and CRA had entered into 38 contracts with informants.
These submissions helped to identify over $33.9 million in federal taxes owing by non-compliant taxpayers. Approximately $19.3 million in federal taxes and penalties have been collected so far. Of this, we understand that up to $1 million has been paid out to informants, although CRA was unable to confirm the exact number, citing confidentiality concerns.
These figures mark significant progress since the last time CRA released statistics pertaining to the OTIP. In 2016, CRA announced that it had received 333 written submissions and had entered into over a dozen contracts with informants. At that time, no rewards had been paid out.
Eligibility for the OTIP
Any individual can make a submission under the OTIP, provided that they do not fall within a class of ineligible individuals. Ineligible individuals include, among others, individuals convicted of tax evasion concerning the situation of non-compliance being reported, CRA employees and other government employees who acquired the information in the course of their employment duties. Additionally, individuals cannot make a submission regarding their own non-compliance.
Informants must provide information relating to international tax non-compliance; the OTIP is not concerned with purely domestic tax evasion. In addition, the non-compliance must involve at least $100,000 in potential federal tax (excluding interest and penalties) that CRA could collect.
If CRA is able to collect at least $100,000 using the information provided, the informant may be eligible to receive a reward equal to between 5 percent and 15 percent of the federal tax collected (again, excluding interest and penalties). In determining the amount of the reward, CRA may consider the quality, timeliness and relevance of the information, the cooperation of the informant, the value of the information to CRA, the informant's role (if any) in the tax non-compliance and whether any assets were identified that helped with the collection of taxes.
We Can Help
If you become aware of potential international tax non-compliance on the part of a Canadian taxpayer, consider making a submission under the OTIP. Relevant situations of non-compliance may include, for example:
- unreported taxable income earned in Canada that has been moved offshore;
- unreported income in foreign countries that would be taxable in Canada;
- the use of entities such as trusts or corporations in foreign countries to inappropriately reduce or avoid tax payable in Canada; or
- aggressive tax avoidance or tax evasion schemes that involve offshore transactions.
We have significant experience in helping potential informants navigate the OTIP rules and prepare written submissions to CRA. If you believe you have information that would qualify under the OTIP, we encourage you to reach out to a member of the Bennett Jones Tax group to discuss next steps.