The federal government is intensifying efforts to combat potential tax evasion by implementing new strategies to monitor cryptocurrency transactions and empowering the Canada Revenue Agency to penalize taxpayers who withhold requested information.
In the latest budget unveiled on Tuesday, additional measures are introduced to hold accountable tax planners aiding clients in tax evasion and aggressive tax avoidance. Moreover, the budget aims to enhance transparency regarding donations to specific foreign charities registered in Canada and the allocation of funds.
Criticism has been directed at the CRA for its limited success in apprehending significant cases of tax evasion and aggressive tax avoidance despite effectively handling minor instances. To address this, global initiatives are being pursued to exchange information across borders and counteract individuals utilizing cross-border transactions and modern technologies to evade taxes.
Finance Minister Chrystia Freeland’s budget includes the adoption of new international regulations mandating increased transparency in cryptocurrency dealings. The Crypto-Asset Reporting Framework, established by the Organisation for Economic Co-operation and Development, will be enforced in Canada from 2026 onwards. This framework necessitates that crypto-asset service providers in or operating in Canada report annually to the CRA, disclosing details of customers, crypto-assets, and transactions exceeding $50,000 US.
Furthermore, Canadian crypto-asset service providers must furnish the CRA with comprehensive customer information, including name, address, date of birth, and residency details. The budget allocates \(51.6 million over five years to the CRA for implementing the reporting system, along with an additional \)7.3 million annually for its maintenance.
In addition to crypto-assets, the government is seeking enhanced information sharing by the CRA. The budget addresses delays in information provision by imposing penalties for non-compliance, with fines of \(50 per day up to a maximum of \)25,000 for disregarding a “notice of non-compliance.” Moreover, individuals failing to adhere to a compliance order could face penalties amounting to 10% of the aggregate tax payable if tax obligations exceed $50,000 in a year.
The budget also introduces measures to make clients of tax planners who facilitate tax evasion or aggressive tax avoidance more accountable for their actions. Furthermore, foreign charities eligible to receive Canadian donations will undergo stricter scrutiny, including submitting annual reports detailing funds received from Canadian donors and their utilization, which will be publicly disclosed.
The proposed changes underscore the government’s commitment to combating tax evasion, enhancing transparency in financial transactions, and ensuring a fair tax system for all Canadians.