KPMG executives may be summoned to Ottawa in offshore probe

KPMG accountants and executives involved in the firm's Isle of Man tax dodge will have to wait two more weeks to learn whether they will be called to testify before the House of Commons Finance Committee investigating the offshore "sham" and the controversial "no penalties" deal offered by the CRA to KPMG clients.

Details of that amnesty offer were leaked to CBC News in a brown envelope, and spelled out what critics have called a sweetheart deal that promised a "final and complete settlement" and no possibility of future "consequences" — so long as the taxpayers agreed to pay the back taxes owing on their undeclared offshore income. 

As part of the CRA's offer, the leaked document shows the agency demanded the multimillionaire clients never talk about the secret deal in public.

• Revenue agency routinely failed to meet Access to Information deadlines on KPMG
• CRA executives decline to answer KPMG questions before finance MPs
• KPMG officials tells MPs firm no longer in tax-shelter business

An NDP motion to compel KPMG officials involved in the scheme that promised "no tax" on investment income — and that the CRA alleges was "intended" to deceive the agency— was postponed at the finance committee today to give MPs more time to review new documents provided by KPMG and the Canada Revenue Agency.

The committee first requested those documents earlier in May. Today, MPs decided to make those materials public.

The NDP wants the committee to call KPMG personnel who had first-hand knowledge of the tax dodge.  That list includes current and former KPMG tax officials Denis Lacroix, Barrie Philp, and Paul Hickey, all of whom are mentioned in court documents as being involved in the offshore "product."

Hickey also provided the KPMG affidavit in its case objecting to providing the CRA the names of the firm's wealthy clients. The legal case between KPMG and the CRA is ongoing, with the next hearing in the MNR v. KPMG scheduled for early next year.

• Court document: Internal KPMG memo outlined "product alerts" that explained the Isle of Man Offshore Company​ structure to employees
• ​Court document: KPMG national tax partner Paul Hickey issued a memo to employees outlining "an innovative product for wealthy Canadians"

The NDP also wants to call CRA auditor Russell Lyon, who successfully obtained a judge's order in the case of MNR v. KPMG compelling the accounting firm to hand over the names of its clients caught using the offshore tax dodge, and Michael Hamersley, a former KPMG whistleblower in the United States, as well as tax professors and other experts.

Revenue Minister Diane Lebouthillier and CRA official Ted Gallivan testified in front of the finance committee today. Both the minister and Gallivan objected to the use of the word "amnesty" to describe the secret offer leaked to CBC News and said the term is not part of the agency's "vocabulary." 

The CRA runs what they call a Voluntary Disclosure Program, allowing taxpayers who have not reported income to pay up without penalty — on the condition that they are not currently under audit. A simple Google search shows that numerous Canadian tax law firms refer to this program routinely as the CRA's "amnesty" program.     

KPMG's Paul Lynch, a former CRA senior executive, described Canada's program as being one that would protect a taxpayer from "prosecution."

In the document leaked to CBC News, CRA said the offer was to "encourage taxpayers to voluntarily declare." The offer was made at the same time that KPMG was fighting the CRA in court to overturn a judge's order to provide those names to the agency. 

In her testimony before the finance committee today, Revenue Minister Lebouthiller said the CRA was committed to finding the names of the KPMG clients who did not come forward. Tax experts have argued these clients should not have been allowed to voluntarily declare as the CRA was already auditing the tax scheme.

"Legal action is underway to obtain the identities of participating KPMG clients who have not yet been exposed or have come forward voluntarily," the Minister said.   

The committee will reconvene at the end of May to consider the NDP motion.