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Released: 20 August, 1998
Talking Points For The Honourable Herb DhaliwalMinister Of National Revenue
Press Conference
August 20, 1998
Vancouver
I would like to begin by
thanking the Auditor General and others who made representations and were
consulted on the subject of foreign income verification.
To ensure the fairness of
Canada's tax system and the integrity of its tax base, we are moving forward
with measures to better verify foreign-based income.
We are streamlining the
procedures for the reporting of foreign-based income earned by Canadian
residents.
This reporting requirement
will be done through a streamlined "check-the-box" method of reporting
starting April 30, 1999.
Taxpayers will only have to
indicate the range and location of investment for different categories of assets
by checking the appropriate box on the reporting form.
A detailed description of
foreign assets will no longer be required.
These measures, including a
300 per cent increase in audit activities over the past four years aimed at tax
havens, will greatly assist the Department in its overall compliance efforts.
The Government will conduct a
comprehensive review of the foreign income verification rules, including the
penalties based on the cost of assets.
Penalties would be applicable
in cases of intentional non-filing for more than 24 months and for intentionally
reporting false information.
These penalties will be
reviewed based on analysis of the first two years of filing under the foreign
income verification rules.
The review will help
determine whether such penalties are required to ensure compliance and whether
foreign reporting rules can be improved to enhance compliance and minimize its
costs.
The five per cent penalty on
the original value of assets at the time of purchase cannot be applied during
the review period as reporting under these rules only begins in 1999.
During the review period,
Revenue Canada will emphasize educational and outreach activities to maximize
voluntary compliance.
The objective of this review
will be to determine ways to improve foreign reporting requirements, and to
determine whether penalties based on the cost of assets are in fact necessary to
ensure compliance.
My Department is firmly
committed to preserving the integrity of Canada's tax base.
We have and will continue to
challenge structures that are designed to assist taxpayers to intentionally
avoid reporting and paying tax on their world income.
This commitment is
demonstrated by the introduction of foreign income verification measures.
I recognize and understand
the concerns raised regarding the income verification reporting requirements.
We have listened to
Canadians.
This is why I have acted to
ease the compliance burden and respect privacy concerns by streamlining the
method of reporting.
This new streamlined method
of reporting represents a balanced approach that addresses privacy and cost of
compliance concerns while enhancing Revenue Canada's abilities to address
concerns with tax havens.
We said we would review the
foreign asset rules.
We did.
We have carefully considered
the recommendations made by the Auditor General in his June 5 report and we have
examined the concerns expressed about the reporting requirement.
We have determined that
Canadian residents will now be required to report foreign assets over $100,000.
This will make it clear to
all Canadians that foreign-based income is taxable.
Foreign reporting rules have
been subject to considerable misunderstanding and have created fears that are
unfounded.
This is not a new tax.
Canadian residents have
always had to report income from foreign sources. This remains an essential
principle of our tax system.
These rules simply ensure
that the income of all Canadian residents can be verified.
My Department is committed to
preserving the fairness of the tax system and the integrity of Canada's tax
base.
Ensuring that everyone pays
their fair share of taxes is vital to maintaining our system of public
education, universal health care, and public safety.
We examined the
recommendations of the Auditor General and we recognize the concerns expressed
by Canadians about the reporting requirement.
I have acted.
"
I have implemented a balanced approach that ensures
that our tax system is fair to all Canadian residents.
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