Fmr. Chair of IACCD: I’m not joking when I say Canada is a disorganized mess when it comes to managing financial assets

Attorney Patrick Monahan was on the executive committee of the International Association of Corporate Directors and represents thousands of companies in his role. He’s a lawyer by trade and spent years in academic and corporate posts around the world.

His experience leads him to this startling conclusion: Even as Canada attempts to impose tax policies based on smart management of financial assets, government agencies such as Canada Revenue Agency (CRA) have been utterly incompetent in cracking down on wealthy people who are trying to bend the rules by creating complex financial structures to minimize tax.

“The CRA is a disorganization,” Monahan told me.

Canadian-born Robert Levitt has a strong connection to the CRA. Levitt’s parents were immigrants from Russia and he was raised in Vancouver. Levitt is now a retired tax auditor and has long lived in Vancouver.

My heart broke watching Levitt in court last week. It’s hard to watch a good person live through this nightmare.

In court, he recounted the long journey to his decision to plead guilty to tax evasion and severe criminal penalties because he believed his plight will serve to put the CRA and others who engage in this form of tax evasion out of business.

Prior to Levitt’s guilty plea, Monahan had been on an exclusive conference call with friends who worked at CRSL. They explained to Monahan the insights CRSL has from years of work, expertise and hundreds of client connections that can be used to identify and tip the CBIs (board of directors) off to tax evasion.

This is one of the most imporant markets in the world and Canada is falling behind… with fewer prosecutions and better enforcement. Patrick Monahan, attorney, CRSL Law

“That day, I was really jolted,” Monahan said. “Our system failed.”

Their collective frustration appears to be growing.

“When you combine a government agency that is totally blind to the dangers of offshore tax schemes, with not having the capacity to go after them, they are here to stay,” Monahan told me. “Canada is the exception today, not the rule.”

Currently, Levitt is serving a five-year sentence in Kitchener-Waterloo, Ontario, the same prison where Donald Trump is set to serve up to 24 years.

Even as Levitt serves his time, his clients are still participating in schemes to evade taxes, relying on CRSL’s work and the Canadian government’s failure to take action.

CRA is investigating 200,000 offshore schemes that have been described as “wrongdoing that goes beyond legal restrictions.” But only 130 cases have been prosecuted, with 11 convictions and 87 remedial orders.

The numbers may be small, but as CRSL founder and Principal Investigator Marc Melamid told me, the goal of taking advantage of loopholes in the law is huge.

“There are a lot of opportunities there for people to be able to convert their tax liability to their tax asset,” Melamid told me. “That’s what tax optimization is all about.”

The CRA is feeling its pressure. As part of the Trudeau government’s crackdown on tax dodging, the government recently doubled levies on hiding assets offshore. The Tax Justice Network said this would have raised nearly $800 million in 2018 and nearly $1.7 billion over four years.

But the government is being dishonest about what it’s doing, Monahan and Melamid told me.

The CRA will trumpet that it’s been putting the kibosh on tax avoidance by other countries. It’s ignoring the thousands of illegal schemes that are happening right now at the office of Trudeau’s Liberal government, they say.

CIRS spokesperson Lucinda Chodan told me this is a great article – click here.

“We would hope the media would be more aware of how the Trudeau government is punishing people for trying to pay their taxes,” Monahan said. “Their tax evasion schemes are still going on.”

The Trudeau government called for more prosecutions of tax evasion cases. It’s time to get cracking.

Patrick Monahan is a partner with some of the country’s leading law firms specializing in criminal defense and white collar issues.

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