Galloway Consulting Group Inc. is a Toronto based accounting firm  that helps small and medium size companies grow and  reach greater profitability.
Tax fraud nets pair $1,683,688 fine and six years jail

Brampton, Ontario, December 03, 2013... The Canada Revenue Agency (CRA) announced today that Deborah Dieckmann was sentenced to four years in jail and fined $1,285,930 for tax fraud. Her father, George Salmon, was sentenced to two years less-a-day in jail and fined $397,758 for tax fraud. On July 24, 2013 Dieckmann was found guilty, in the Superior court of Justice, of seven counts of fraud over $5,000, while Salmon was found guilty of one count of fraud over $5,000. Dieckmann, upon her release from jail after serving her term, will have one year to pay the fine or she will serve an additional five consecutive years in jail. Salmon was also given one year, upon his release from jail after serving his term, to pay the fine or he will serve an additional three years in jail.

A CRA investigation found that from 2003 to 2006, Dieckmann, through a complicated system of nominee directors, controlled and operated staffing companies that provided temporary workers and payroll services to various clients. Dieckmann failed to remit to the CRA payroll deductions (Canada Pension Plan contributions and Employment Insurance premiums) and income tax deductions collected from clients on behalf of the temporary workers. Dieckmann also failed to remit payroll and income tax deductions on behalf of clients for whom her companies were administering the payroll. During the period in question approximately $5.8 million was not remitted to the CRA. The court found that Dieckmann derived a direct personal benefit from the diverted deductions.

The CRA investigation further revealed that George Salmon, Dieckmann’s father and owner of TPM Machining Group, knowingly used the payroll services of the Dieckmann companies to avoid the remittance of payroll and income tax deductions to the CRA on behalf of his employees.

The preceding information was obtained from the court records.

"The Canada Revenue Agency pursues tax evaders to maintain public confidence in the integrity of the tax system," said Vince Pranjivan, Deputy Assistant Commissioner of the Ontario Region of the Canada Revenue Agency. "Canadians have to trust that our self-assessment system is working and that it is fair."

Taxpayers who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They may not be penalized or prosecuted if they make a valid disclosure before they become aware of any compliance action being initiated by the CRA against them. These taxpayers may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA's Web site at www.cra.gc.ca/voluntarydisclosures.

Further information on convictions can also be found in the Media Room on the CRA website at www.cra.gc.ca/convictions.

Posted: December 3, 2013 at 11:33 PM
By: Gordon Galloway
Comments Disabled | Categories: Tax Enforcement
Professional engineer fined and sentenced to house arrest for tax evasion

Thunder Bay, Ontario, October 30, 2013... The Canada Revenue Agency (CRA) announced today that Carl Gustafson, a professional engineer (P.Eng.) and a director of Norall Group Contracting Inc., was sentenced on October 25, 2013, in the Ontario Court of Justice in Thunder Bay to a fine of $84,417 and given a nine month conditional sentence that included five months of house arrest and four months of curfew. Gustafson pleaded guilty on September 3, 2013, to one count of income tax evasion. The fine represents 100% of the total federal income tax evaded. Gustafson was given two years to pay the fine.

A CRA investigation found that Gustafson followed a tax evasion scheme promoted by Russell Porisky through the Paradigm Education Group (Paradigm) and in doing so failed to report $459,174.01 in income. The unreported income was paid to Gustafson by Norall Group Contracting Inc. for services rendered, for the years 2005 to 2009 inclusive. Gustafson was counseled to file false income tax returns by a member of the Paradigm Education Group. The Paradigm scheme is based on the faulty premise that the Federal Government cannot impose a direct tax on a human being because it would be unconstitutional and further, that taxing the labour of a human being would violate the Canadian Bill of Rights as it is a confiscation of property.

The preceding information was obtained from the court records.

“Canadian taxpayers must have confidence in the fairness of the tax system,” said Vince Pranjivan, Deputy Assistant Commissioner of the Ontario Region of the Canada Revenue Agency. “To maintain that confidence, the Canada Revenue Agency is determined to hold tax evaders accountable for their actions.”

The Canada Revenue Agency warns all Canadians to beware of individuals that try to convince you that Canadians do not have to pay tax on the income they earn. These individuals, also known as tax protesters, not only fail to report their own earnings, but they also conspire, counsel, and promote these tax schemes. Canadian courts have repeatedly and consistently rejected all arguments made in these tax protester schemes. For those involved in tax protester schemes, the CRA will reassess income tax, and charge interest and penalties. In some cases, these individuals will be prosecuted for tax evasion. If convicted, they could face significant fines and possibly jail time. More information on tax protester schemes is available at www.cra.gc.ca/alert.

Taxpayers who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They may not be penalized or prosecuted if they make a valid disclosure before they become aware of any compliance action being initiated by the CRA against them. These taxpayers may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA's Web site at www.cra.gc.ca/voluntarydisclosures.

Further information on convictions can be found in the Media Room on the CRA website at www.cra.gc.ca/convictions.

Posted: October 30, 2013 at 11:27 PM
By: Gordon Galloway
Comments Disabled | Categories: Tax Enforcement
Spouses fined $13,000 for failure to file tax returns

Brampton, Ontario, October 10, 2013... The Canada Revenue Agency (CRA) announced today that on June 7, 2013, Pawanjeet Garewal pleaded guilty in the Ontario Court of Justice in Brampton, Ontario, to ten counts of failure to file corporate income tax returns. Her husband, Prabhjeet Garewal, also pleaded guilty to three counts of failure to file individual income tax returns. On October 9, 2013, they were fined $1,000 per count by the Court, for a total of $10,000 for Ms. Garewal and $3,000 for Mr. Garewal. The fine has since been paid in full. All outstanding returns have been filed.

Pawanjeet Garewal, as the director for East West Ebazaar Com Inc., an online Indian shopping business, failed to file the 2003 to 2008 corporate income tax returns for the company. In addition, Ms. Garewal, in her role as director for Onkar Group Inc., did not file the 2010 corporate income tax return for this company. She also failed to file the 2008 to 2010 corporate income tax returns as a director of the advertising firm Onkar Publishing Inc.

Her husband, Prabhjeet Garewal, failed to file his 2008 to 2010 personal income tax returns. Charges were laid only after repeated requests to file the outstanding returns were ignored. The Garewals only filed the returns after charges were laid.

The preceding information was obtained from the court records.

In addition to the fines imposed by the courts, individuals or corporations convicted of failing to file tax returns are still obligated to file the tax returns and pay the full amount of taxes owing, plus interest, as well as any civil penalties that may be assessed by the CRA.

Individuals who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They may not be penalized or prosecuted if they make a valid disclosure before they become aware of any compliance action being initiated by the CRA against them. These individuals may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA's website at www.cra.gc.ca/voluntarydisclosures.

Further information on convictions can also be found in the Media Room on the CRA website at
www.cra.gc.ca/convictions .

Posted: October 10, 2013 at 11:22 PM
By: Gordon Galloway
Comments Disabled | Categories: Tax Enforcement
Tax Avoidance: Canada-Barbados Tax Deal Loopholes Revealed

Tax Avoidance: Canada-Barbados Tax Deal Loopholes Revealed

 

An exclusive CBC News hidden-camera investigation into the world of offshore banking found professionals in Canada and Barbados willing to help hide business profits in Barbados by exploiting loopholes in a long-standing tax saving arrangement between the two countries.

“My advice to [the Canada Revenue Agency] would be, every time you see a Barbados [company] in the structure, investigate it,” said an individual who used to run one of Canada’s largest offshore companies and also spent time in prison.

For decades, Canadian companies have flocked to Barbados with their cash in order to legally avoid paying Canadian taxes. If a Canadian company wants to expand its business outside of Canada, it can create a subsidiary in Barbados where it can park its international profits. This way, it legally doesn’t have to pay Canadian taxes on those profits.

More than 1,000 Canadian companies, including giants like Petro-Canada and Loblaws, have legitimate offices there. Canadian banks are on almost every corner to serve all the Canadian companies.

As part of the joint investigation with Enquête, the CBC’s French-language investigative program, CBC News hired a private investigator, who is also a restaurant and bar owner in Toronto, to see if he could create an offshore company in order to test the system and to see if his Canadian restaurant profits could be shifted to Barbados.

That way, instead of being taxed at 30 per cent in Canada, he would pay the rate in Barbados — 2.5 percent.

“Unless CRA's got the money to come down and check us out, you'll get away with it. And that's the reality,” said the insider.

In order for that to be legal, his business must have legitimate international sales, which it doesn’t.

The CBC’s undercover businessman met Allan Madan, an accountant in Mississauga, Ont., who offers tax tips online — including the top 20 ways to beat the taxman — and other international tax advice.

In a meeting recorded with hidden cameras, Madan suggested the businessman fly his chef to Barbados to invent recipes there.

“You'd have to have some physical presence on the ground, you know, because who's developing these recipes? Do you know what I mean? Is there a chef or does the chef fly down there and do the work there?”

He said the man would also need an offshore office, one that’s managed and controlled in Barbados by nominee directors.

These directors for hire often know little or nothing about the company.

“I'm not saying we're going to shift all the income, that may not be possible, but maybe, you know, 25 per cent of it,” Madan said.

“So you've done this before, like you've got experience doing this?” the businessman asked.

“Yeah, absolutely, so you don't have to worry,” Madan said.

Madan then referred CBC’s undercover businessman to Andrea Mullin Henry, a Canadian-born Barbadian who also runs a law practice called Crane Chambers in Barbados. The businessman travelled there to meet her.

Mullin Henry, who is still a member of the Ontario bar, also specializes in creating and managing offshore companies in order to protect “hard won assets.”

The undercover businessman told Mullin Henry about the plan to bring down a chef once a year and about possibly having access to a kitchen.

“Yeah, that would work,” Mullin Henry said. “The more that you can show is actually happening here, the safer you are if CRA comes to audit.”

Mullin Henry said the businessman would need the appearance of a presence in Barbados, including an office with a phone and workers.

“You just want to show that there is some type of activity going on there in Barbados. I think that would be a good compromise. You're bringing your corporate chef, they work with the local chef, and it doesn't have to be for that long period, and all of the manuals and the procedures are seen to come from the Barbados office, even if they're actually manufactured in Canada.”

 

‘Creating a façade’

After reviewing the hidden camera footage, the former Canadian offshore banker said, “We're going to have a pretense of developing your recipes down here. We're going to have the pretense of training your staff down here.… We're creating a facade. A bit of theatre for CRA to see that there's some action.”

Mullin Henry declined to be interviewed by CBC News, but Madan defended his advice.

“The work being done in an offshore jurisdiction must actually be done there. And that’s precisely what I indicated. That if there was any recipes developed, if there were chefs, if any testing was being done, that the work be physically done in Barbados,” he said.

“We were discussing high-level ideas and which we could possibly use in offshore structure to legitimately minimize income tax. Until a proper Barbados lawyer is brought in, like I mentioned, and until we put pen to paper, it’s difficult to provide a precise answer.”

In a followup letter to the CBC, Madan said his proposal was a “valid tax saving strategy proven in the court of law.”

But Laval University professor André Lareau, who teaches tax law, said to create a foreign entity “requires employees, requires producing something and a real business.”

Instead, what’s being created is “an illusion,” he said, an attempt to show the tax agency that a foreign business has been created. 

Lareau said there’s nothing illegitimate about money in a tax haven, though you have to know what the source of that money is, and you have to declare the income from it.

But he said someone like Madan could be viewed as an accomplice to someone who’s not following the law.

 

‘Magic curtain’ approach

The undercover businessman also met with Canadian tax lawyer Jonathan Garbutt, who immediately shut down Madan’s ideas.

But instead, in a meeting recorded with hidden cameras, he proposed the businessman use his profits to buy an offshore life insurance policy, a structure he called the “magic curtain.”

“The magic curtain is something that exists in Canada that works, which is a life insurance policy,” Garbutt said.

The plan involved a series of transactions including a loan, bonds, offshore trust accounts and ultimately using business profits to buy an offshore life insurance policy, which isn’t taxed in Canada. And all of this would take place in Barbados.

The structure would ultimately allow the undercover businessman to avoid paying taxes on his Canadian restaurant profits.

In Canada there is nothing that makes a structure like this illegal, but there are provisions that allow the tax authorities to challenge a structure if they feel it violates the spirit of Canadian tax law.

Laval professor Lareau questioned whether this plan is really what the legislature intended when it created the law.

“I think that wouldn't pass the test of the spirit of the law,” he said.

Lareau said the Canada Revenue Agency could disallow the approach, but that the agency would have the burden of proving that it constituted an abusive arrangement.

“To me, it's clearly an abuse. But the agency would have to succeed in convincing a court that it's an abuse.”

In an interview with CBC, Garbutt said he had done nothing wrong.

“I love these structures because they’re front-door tax planning. You walk in through the front door and tell the CRA what they’re doing and they can pound sand if they try to go after us.”

In a meeting filmed with hidden cameras, Garbutt said his role as a tax lawyer is to be the “most devious underhanded son of a bitch in the room and that’s what you’re paying me for.”

He later backtracked a bit, saying that he regretted saying “underhanded,” but stressed that his job as a tax lawyer is to ensure his clients don’t pay one penny more than they are legally required to.

“Like I said, they invent better mousetraps, we invent better mice. That’s the nature of the game.”


Source: CBC News

Posted: October 10, 2013 at 11:47 AM
By: Gordon Galloway
Comments Disabled | Categories: Government & Tax Issues
Minister Shea Highlights New Initiatives to Crack Down on International Tax Evasion

Minister Shea Highlights New Initiatives to Crack Down on International Tax Evasion

 

Ottawa, Ontario, April 9, 2013... The Honourable Gail Shea, Minister of National Revenue, today highlighted important new initiatives introduced by the Harper Government in Economic Action Plan 2013 to strengthen the capacity of the Canada Revenue Agency (CRA) to crack down on international tax avoidance and evasion.

“Our Government has long recognized that international tax evasion is a serious problem,” said Minister Shea. “As announced in Economic Action Plan 2013, our Government is taking strong action to tackle tax evasion. We are committed to cracking down on individuals who avoid paying their fair share of taxes.”

Economic Action Plan 2013 proposes the following measures to combat International Tax Evasion and close tax loopholes to ensure tax fairness for all Canadians:

  • Launching a new Stop International Tax Evasion Program that will allow the CRA to pay individuals with knowledge of major international tax non-compliance a percentage of tax collected as a result of the information provided;
  • Requiring financial institutions and others who currently report information on international electronic funds transfers greater than $10,000 to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to also report those transactions to the CRA;
  • Streamlining the process for obtaining information on third parties in the course of conducting an audit to speed up the process and allow the CRA faster access to information on unnamed individuals for the purposes of civil actions; and
  • Introducing new requirements for Canadian taxpayers with foreign income or properties to report more information, and extending the amount of time the CRA has to reassess those who have not properly reported this income.

The Minister of Revenue has also publicly called upon the International Consortium of Investigative Journalists to provide the CRA with the information they currently hold on individuals with income or property held offshore, including 450 Canadians. This request was supported by a written request from the CRA to the International Consortium of Investigative Journalists as well as to the Canadian Broadcasting Corporation (CBC), which underscored the public interest in confidential disclosure of the information to the Agency. In addition, the Agency is working with the United States and its international partners in exploring other avenues of addressing international tax evasion.

“These new measures will provide the CRA with additional tools to combat tax cheats,” said Minister Shea. “Our Government is serious about cracking down on those who attempt to cheat the system. Since 2006, our Government has introduced over 75 measures to improve the integrity of the tax system for the benefit of all Canadians.”


Source: Canada Revenue Agency 2013

Posted: April 5, 2013 at 12:07 PM
By: Gordon Galloway
Comments Disabled | Categories: Government & Tax Issues

[1] [2] [3] [4] [5] > » 

Recent Comments

No comments have been submitted.
RSS Feed | Blog