By Matthew Horwood
April 12, 2022
Senior Canada Revenue Agency executives are suspected of arranging “sweetheart tax treatments” for large corporations, according to an internal memo. In one case, managers were alleged to have manipulated preferential treatment for an unidentified company and then had employees “rubber stamp the deal.”
The allegations targeted so-called “advanced pricing arrangements” sought by multinational corporations for tax treatment of income transferred between subsidiaries in different countries.
“What did (they) get out of this?” read a 2020 employee complaint. “Prestige? A feeling of power? Influence? Future favours? 10M in a Swiss account?”
“It doesn’t matter,” the complaint continued. “It’s wrong no matter what they got. What are you going to do about it? Failure to act will result in us going to the Privy Council, the Auditor General, the Minister of Revenue and the Prime Minister.”
At the time of the memos in 2020, the Canada Revenue Agency (CRA) received 20 applications and had a backlog of 65 cases, according to an Advanced Pricing Arrangement Program Report.
Internal complaints alleged that in one case, executives manipulated the outcome of a routine application to have it “done quickly and without meaningful analysis” resulting in seven-figure tax savings. Managers were “acting outside the scope of their Agency commitments to taxpayers regarding advanced pricing arrangements with significant and continuing loss of tax revenues in the millions of dollars,” staff wrote.
“It was completed without allowing any substantial review or due diligence,” read one allegation. An executive “signed off on the advanced pricing arrangement without reading it and employees were allegedly pressured to rubber stamp an unverified settlement from another division that had no authority to enter into an advance pricing arrangement settlement,” it said.
Employees were told one executive “wants this done,” read a memo. All individuals were identified by name and title. Blacklock’s Reporter has withheld their identities since no agency manager was charged with a criminal offence and the allegations are unproven.
“There is a willingness … to manipulate tax outcomes for specific taxpayers that are outside the normal procedures which are designed to maintain integrity and fairness in the administration of tax laws by the Canada Revenue Agency,” read one internal document. “(A certain manager) was and is directly involved.”