Quebec’s finance minister is declaring war on what it terms “aggressive” tax planning (ATP) schemes, which may comply with the letter of the law, but not its spirit.

The province’s minister of finance, Raymond Bachand, Thursday announced measures to intensify efforts to combat aggressive tax planning, including raising the penalties for tax avoidance, and increasing the time limits for reviewing contentious transactions.

Finance said that is increasing the financial risk of a taxpayer who participates in an ATP scheme by attaching a penalty of 25% of the tax he sought to avoid to the general anti-avoidance rule; additionally, application of the GAAR will lead to a penalty, for the promoter, equal to 12.5% of the amounts he receives in relation to the scheme.

These consequences can be avoided if the scheme is disclosed to Revenu Québec, it said, warning that if disclosure is not made, the applicable penalties may reach $100,000 and Revenu Québec may review the undisclosed transaction with no time limit.

“Mandatory disclosure of transactions with a high likelihood of ATP is designed to discourage the development, by tax intermediaries, of a new business model based on marketing ‘off-the-shelf tax products’. It is also designed to quickly inform the tax authorities of new tax planning arrangements brought to market to enable, if necessary, a quick legislative response,” it said.

The government is also extending the period during which Revenu Québec can review a transaction covered by the GAAR by three years.

“Out of concern for social justice and with the objective of protecting the integrity of our tax system, the Québec government has decided to review the legislative framework of aggressive tax planning schemes,” Bachand said. “The immediate result of these measures will be to recover tax that eludes the public treasury and ensure that our tax system is fairer for all taxpayers.”

According to the Minister of Revenue, Robert Dutil, “the government’s action is consistent with what was announced in the 2008-2009 budget, when the government granted Revenu Québec additional financial resources of $5.3 million per year, over three years, to set up a specialized unit to act against ATP schemes. The intervention of my colleague the Minister of Finance provides us with even more resources to detect and counter aggressive tax planning schemes.”