Tax cheats in KPMG Isle of Man avoidance scheme could face criminal charges: minister

Minister of National Revenue Diane Lebouthillier says people who have used KPMG to avoid taxes by setting up shell companies on the Isle of Man could face criminal charges.

Lebouthillier made the comments in an interview with Radio-Canada host Anne-Marie Dussault after a tough day in the House of Commons, in which the minister and prime minister faced opposition demands for the federal government to crack down on tax evaders.

The calls for action came after a report last week by CBC's the fifth estate and Radio-Canada's Enquête revealed that several prominent and wealthy Canadians appear to be linked to a secret tax dodge on the Isle of Man.

The minister was asked if there could be criminal proceedings against those individuals, to which she replied, "Yes, yes. Because it's criminal to commit tax fraud."

The minister said that even in cases where people have voluntarily repaid any taxes owed, charges could still be laid.

• KPMG offshore tax dodge a 'facade' to hide money
• Wealthy Canadians exposed in KPMG tax 'sham'
• Trudeau vows to do 'better job' with tax avoiders

Opposition MPs demanded the federal government crack down on tax evaders during question period in the House earlier Monday.

"The prime minister talks about how much he wants to go after tax fraud, but how are Canadians expected to believe him when he refused to investigate this scandalous deal made by Revenue Canada," NDP Leader Tom Mulcair asked Prime Minister Justin Trudeau.

"How are Canadians expected to believe that this prime minister is serious about going after tax evasion when he refuses to go after tax evaders," he added.

Trudeau responded by insisting his government is serious about going after tax evaders, evasion in general and tax fraud.

"That's why we invested over $440 million in budget 2016 so that the Canada Revenue Agency can continue to press against any tax frauders [sic] or evaders," Trudeau said.

"We will continue to work very hard to make sure that that everyone pays their fair share of taxes, that's what Canadians expect, that's what we expect."

That answer was not enough for NDP MP Alexandre Boulerice, who mocked the federal government's efforts to crack down on the cheats.

"Four hundred and forty million dollars and yet no charges. I am sure that white-collar criminals are very scared," Boulerice said. "When will the Liberal government grow a spine, stand up for everyone, get rid of loopholes, renegotiate bilateral agreements and punish people who commit fraud."

'Sham' tax scheme

The MPs were responding to the latest in a series of investigative reports that revealed how accounting firm KPMG, in its internal marketing pitches, solicited Canadians with a "minimum" of $5 million to invest in an "offshore company structure," charging clients $100,000 simply to start it up. KPMG also guaranteed confidentiality.

T​he tax dodge was based on a simple — if fictitious — idea that "high net worth" clients give away their fortunes to an Isle of Man shell company. The money would be invested offshore and would be returned back to Canada, again untaxed, as a so-called gift.

The scheme was later described by the Canada Revenue Agency as a "sham" in court documents.  

The CRA eventually offered a secret amnesty to some of the accounting firm's clients who had been using the scheme.

Now some clients, and the process by which the offshore shell companies were set up, have been exposed and the opposition wants the government to take action immediately.

'Cancel KPMG contracts'

Interim Bloc Québécois Leader Rhéal Fortin said in the House that KPMG has received more than $92 million in federal contracts since 2006 — all the while advising its clients on how to evade taxes.

"As long as there is no light shed on these schemes, can the government at least cancel its contracts with KPMG or are we to understand that there's no problem dealing with a company that encourages tax evasion?" Fortin asked.

Lebouthillier said that it was the CRA that discovered the KPMG tax haven.

"The case of KPMG is before the courts right now and we continue to pursue action against KPMG," said Lebouthillier. "We will see this to the end as Canadians have asked us to do."

Boulerice tabled a motion in the House asking the government to tackle tax havens, tighten the rules for shell companies and end the "current practice of penalty-free amnesty deals for individuals suspected of tax evasion."

The House of Commons will vote on the NDP motion Tuesday.