CRA begins crackdown on offshore tax havens

The CRA has since requested from RBC DS a list of the clients across the country who have dealt with the two advisors, as it attempts to expose other Canadians who are evading taxes by failing to report income earned in offshore accounts.

“This is in process,” said Blackburn. “We expect that RBC Dominion Securities will collaborate and we will obtain this information pretty soon.”

In response to the allegations, David Agnew, CEO and national director of RBC Dominion Securities Inc., said the firm never encouraged clients to establish such offshore accounts.

“As a firm, we have never encouraged Canadians — not 25 years ago and not today — to set up entities in Liechtenstein, and we have never instructed our investment advisors to recommend that practice,” Agnew said in a statement.

Other brokerage firms could soon join RBC DS in the spotlight, as the CRA continues to tackle the problem. Blackburn said the agency may seek similar client lists from all Canadian banks.

“Today, it’s RBC DS,” he said. “Tomorrow, and in the next few weeks, few months, we will look at all other Canadian banks in the country to obtain information about Canadians who do investing abroad.”

Blackburn said that addressing offshore tax havens is a key priority for the CRA. “We are serious in this matter,” he said. “Our eyes are on every bank in this country.”

The alleged involvement of the RBC DS advisors in the matter highlights the importance for advisors to exercise caution when assisting clients with complex tax planning activities, warns Robert Kepes, a partner with Toronto-based law firm Morris & Morris LLP who represents clients in tax dispute cases with the CRA. He notes that while clients are legally responsible for their own tax filings, advisors can face penalties for their participation in making a false statement on clients’ tax returns.

“Financial planners should really not be delving into complex areas of tax law,” Kepes says. “Where people get into trouble is when they, knowingly or unknowingly, help their clients participate in these plans.”

He explains that while advisors may think they are helping clients, they may not have enough of a comprehensive grasp of tax law to be advising clients on the matter.

“The fact is that you can end up crossing the line, where you end up participating or helping a person do something wrong.”

Greg Pollock, president of Advocis, the Financial Advisors Association of Canada, agrees that not all advisors are suited to be advising clients on tax issues. He says the expertise of chartered accounts is often required when dealing with advanced tax planning.

“Some issues get very complex, and not all financial advisors are accountants,” he says. “I think it’s important that advisors be very knowledgeable about what they’re doing.”

Pollock adds that it’s crucial for advisors to be up to date on laws, rules and regulations.

Brokerage firms have a role to play too, Kepes says. He says firms must ensure brokers are properly trained on dealing with situations outside their expertise.

“It’s a function of training them to identify those certain areas of risk,” he says.

He adds that firms can also help advisors deal with such situations appropriately by providing them access to resources, such as legal and accounting advice.

Pollock says that although the allegations around the RBC DS advisors have not been proven, the news is disappointing for the industry as a whole.

“It puts a damper on how the public view financial advisors,” he said. “While it’s a good thing to have public scrutiny, it’s always a bad thing that there’s this focus on the bad advisors, and meanwhile, we have so many out there who are doing very good work with their clients.”

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