The Canada Revenue Agency (CRA) sent more than 700,000 records to the U.S. Internal Revenue Service (IRS) in 2017 as part of a tax-information sharing deal between the two countries, said a CRA official during a roundtable discussion at the annual national conference of the Canadian arm of the Society of Trust and Estate Practitioners (STEP Canada) in Toronto on Friday. The figure is current as of April 2019.
In 2014, the Canadian government signed an intergovernmental agreement (IGA) with the U.S. to exchange tax information on each other’s tax residents on an annual basis.
Under the IGA, which took effect in 2015, Canadian banks and other financial institutions report information on their American accountholders who have an aggregate balance of US$50,000 or more, excluding balances in some tax-sheltered accounts, to the CRA, which shares the data with the U.S. government.
In effect, the IGA implements the U.S. Foreign Account Tax Compliance Act (FATCA), a law passed in the U.S. in 2010 that compels global banks to report on their U.S. clients to the U.S. government. FATCA was designed to prevent offshore tax evasion by U.S. taxpayers.
So far, the U.S. government has not requested any further information in respect of the data sent by the CRA, said panellist Marina Panaourgias, an industry sector specialist in the trust section of the income tax ruling directorate of the CRA.
Terry Ritchie, director of cross border wealth services at Cardinal Point Capital Management in Toronto, suggests he isn’t surprised that the IRS has made no further inquiries about the exchanged data.
“Now that they have that information, what is the IRS likely to do with it? Probably nothing,” Ritchie says. “They have more problems in their own backyard that they should be more attentive to than to be chasing non-compliant U.S.-resident taxpayers in Canada.”
In recent years, global governments have made it an increasing priority to clamp down on offshore tax evasion.
For example, in 2017, Canadian financial institutions began identifying accounts belonging to individuals who are tax residents of foreign countries and reporting that information to the CRA under the Common Reporting Standard (CRS) regime, which was developed by the Organization for Economic Co-operation and Development. Canada began exchanging that information with foreign countries under the CRS the following year.