CRA Investigates First Canadian Mentioned in the Panama Papers
May 21, 2018
written on behalf of Feigenbaum Law
A Calgary businessman who is alleged to have evaded tax on more than $2.7 million in payments that were routed through the Cayman Islands is reportedly the first Canadian known to part of the Canada Revenue Agency’s (CRA) criminal investigations into the Panama Papers. While Revenue Minister Diane Lebouthillier has noted that the CRA has been conducting criminal investigations based on the Panama Papers leak, this is the first time that a target of the investigations has become public.
The man in question had already come under scrutiny when the CRA raided a number of residences in Toronto, Calgary, and Vancouver in search of evidence of tax evasion. During that raid, the man’s Calgary home, a mansion used by him and his wife in West Vancouver, and his accountants office in North York were searched.
Unreported Multi-Million Dollar Transactions
The CRA was first alerted to the man’s extensive offshore holdings by the Washington-based International Consortium of Investigative Journalists (ICIJ), which was critical in bringing the Panama Papers to light.
The CRA notes that the investigation began after a review of the ICIJ’s website indicated that the man owns shares in foreign companies that are listed in the Panama Papers. Upon further research, the CRA discovered several Caribbean corporations that the man either held shares in or appeared to control. One of these companies, Marquee Financial Services Inc. (registered in the Cayman Islands) was found to have played a significant role in a major Alberta oilpatch deal in 2016 worth $770 million.
The deal, which was partially arranged by the man, involved the acquisition of a Calgary oil and gas producer by Chinese investors. Shortly after the acquisition, the acquiring company transferred $11.5 million to Marquee Financial Services Inc. Marquee then wired the equivalent of $2.7 million CAD to two TD Bank accounts that belonged to the man. This was done through two transactions, one of which was labelled “consulting fees”.
The CRA alleges that the man never reported the money on his 2016 tax return, and evaded more than $735,000 in taxes and failed to report and remit $126,993 in goods and services tax.
The CRA is contemplating conducting a net worth analysis of the man’s wife and her parents to ascertain whether any of them under-reported income as well.
Off-Shore Companies
The man is also involved in several companies that have been buying resources assets in Alberta and B.C., including a Calgary-based company which acquired thousands of gas wells in Alberta but later filed for bankruptcy, and another company which has stakes in oil and gas properties in B.C. and is proposing a liquefied natural gas terminal on Vancouver Island.
The Panama Papers reveal that the man is also a shareholder in several companies registered in the British Virgin Islands. As we previously wrote about, that is a jurisdiction that is set to be under increased scrutiny following recent legislative changes in Great Britain that will require public identification of owners of companies registered there.
Other Investigations
This investigation is the first in which the CRA has shared public records about their activities following the Panama Papers probe. At the time of the raids in February of this year, while the CRA confirmed that it had executed a number of search warrants, it did not provide details about those warrants, citing taxpayer privacy.
Now the agency has confirmed that:
This investigation is one of the 42 international/offshore tax evasion cases that CRA is currently investigating which involve complex structures and potentially multimillion dollars in taxes evaded, which is consistent with our priority of focusing on sophisticated and well-organized tax evasion schemes.
The allegations against the man are currently unproven, and he has not been charged with any offence.
We will continue to follow developments in this investigation and will provide updates as details unfold.
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