The Canada Revenue Agency has identified “roughly 600 corporate groups” that may fall into its audit program of high net-worth individuals, known as the related-party initiative, says an official with CRA.
“[It’s] still is a very early estimate as well, as [the CRA’s large files department] continues to identify groups or taxpayers that meet the thresholds,” said Steve Fron, a manager of the trusts section in the income tax rulings directorate of the CRA in Oshawa, Ont.
Fron spoke as a panelist during the CRA roundtable portion at the national conference for the Canadian chapter of the Society of Trust and Estate Practitioners (STEP Canada) in Toronto on Tuesday.
When asked by a fellow panelist if the RPI program could be characterized as still being in its early days, Fron answered yes.
“Taxpayers and their advisors should now be aware that the RPI appears to be a long-term project,” said Doug Carroll, vice president of tax and estate planning at Invesco Canada, based in Toronto, who attended the conference.
The RPI is a wide-ranging auditing program from the CRA targeting high net-worth individuals and their related groups who have a net asset value of more than $50 million and interests in approximately 30 financial entities, such as trusts or corporations. Letters and questionnaires started going out to these high net-worth individuals in the fall of 2010.
“The RPI is currently ongoing with a number of audits at various stages of completion,” Fron confirmed. “We’ve also enhanced our risk assessment process by having a specialized team of auditors look at that part of the process and have those auditors also monitor developments in the high net-worth individual population.”
Fron added that there have been some changes made to the questionnaire in order to obtain information with “a greater relevance to us” and in order to eliminate duplication of information in the form in an attempt to simplify matters for those who receive the questionnaire and their advisors.
The CRA has said that its RPI program is part of a larger, long-term project launched by member countries of the Organization for Economic Co-operation and Development to focus on the tax compliance of wealthy individuals globally.
“The CRA maintains an active presence within the OECD and of course, like any other country, Canada has serious concerns with respect to high net-worth individuals,” Fron said.
The program has been somewhat controversial since its launch, as the questionnaires are going out to individuals who meet certain wealth and financial complexity tests, but where there might be no indication whatsoever that there has been non-compliance.
“I think there is a danger that certain people will find it overly intrusive and we’ll end up losing these high net-worth individuals or families as people become increasingly mobile,” said Michael Cadesky, a managing partner with Cadesky and Associates LLP in Toronto, and a panelist on the roundtable. “I know that in a few countries that has been the experience.”