After the CRA discovered an offshore “scam”, wealthy KPMG clients continued to evade tax for many years

After accumulating a lot of wealth through the sale of scrap metal in South Africa, Peter Cooper immigrated to Canada with his sons Marshall and Richard and their families in the mid-1990s.

They settled in Victoria, bought luxury homes and became permanent residents-eligible for Canadian health care and other social services.

But this also means that they will eventually have to start paying taxes on the $25 million investment income in their offshore accounts.

Instead, according to documents submitted by the Federal Court of Canada and the Federal Court, Peter and his sons signed a large-scale offshore tax avoidance project designed and operated by Canadian accounting firm KPMG in December 2001. Almost no income tax was paid. Canadian Tax Court.

Unreported documents obtained by CBC Fifth Manor And Canadian Radio survey It showed that Peter Cooper and his sons continued to use the scheme even after being found to have used KPMG’s offshore tax avoidance method, and the Canadian Revenue Agency auditor called it a “false” involving “deception.”

This KPMG Project Participated in the establishment of a shell company for Canadian multimillionaires and billionaires on the Isle of Man. The Isle of Man is a subsidiary of the British Royal in the Irish Sea. Customers claim to donate their wealth to one of the shell companies and then get back the regular tax-free “gifts” from the income earned when investing the funds abroad.

Through their lawyers, the Coopers declined to comment.

Beach visitors walk along the tidal causeway on the Isle of Man. The CRA announced in 2016 that it will carefully review all transfers of more than US$10,000 to the Royal Territories of the United Kingdom. (Rafael Sutter/Associated Press)

In 2015, Marshall Cooper stated that KPMG had contacted his family to apply for tax avoidance and that the question should be raised directly with the accounting firm.

The plan involves at least 25 wealthy Canadians.

Dennis Howlett, the former head of the Canadian Tax Fair Organization, said that the Cooper family was “just the tip of the iceberg” and the organization advocated against offshore tax secrecy.

House of Commons Finance committee restarted The long-term dormant investigation of the Isle of Man shell company last month CBC/Radio-Canada report Suspicious remittances not related to Coopers.

During the 2016 hearings on KPMG Isle of Man, the Liberal Chairman of the Finance Committee suddenly blocked the testimony-the shell company before members of Congress could know how much revenue the government might have lost or the names of all KPMG customers behind it.

Lifestyle “not supported by his reported income”

In the case of Peter Cooper, who passed away in 2016, documents submitted to the Federal Court and the Tax Court show that he has more than US$25 million in overseas wealth and owns a US$4 million mansion across the street from the Royal Victoria Yacht Club.

However, the CRA stated in court documents that he paid almost no income tax between 1999 and 2010.

In 2001, Cooper received a check for $250 from a federal government program designed to help low-income Canadians pay for home heating. The document states that from 1999 to 2010, he and his wife requested and received GST tax rebates every year-this is a tax credit for low- or middle-income individuals and families.

Court records show that his sons also benefited from government tax credits. Richard Cooper applied for a $9,000 home improvement tax credit in 2009, and Marshall Cooper paid a total of $3,049 in income tax from 2002 to 2011, and received Tax credit worth $5,420.

At the same time, the Coopers secretly received millions of dollars from offshore investments of their family wealth, which KPMG called a tax-free “gift.”

The agency stated in its court documents that at some point, the CRA observed that Peter Cooper’s “lifestyle was not supported by his reported income.”

Deception “part of the plan”

When CRA auditors discovered the confidential Isle of Man plan in 2010, all of KPMG and Coopers seemed to come to an abrupt end.

In 2012, in addition to having to pay taxes and interest, the Coopers were fined nearly US$4 million for what the CRA called “serious negligence”. The agency stated that KPMG’s plan is a “scam” and that “deception is part of the plan”, that is, not to declare income in Canada, but to label the money as a tax-free gift.

However, the documents submitted to the Federal Court show that although the CRA discovered the KPMG offshore plan, the Cooper family continued to use it for several years without the tax official’s awareness.

KPMG said in a statement that its Isle of Man taxation plan “fully complies with all applicable tax laws.” (Canadian Broadcasting Corporation)

“It is expected that they will still be compliant after the 2012 reassessment; however, according to their own statements, they chose not to do so,” the CRA said in court documents.

Court documents show that the Cooper family finally admitted at the end of 2015-after abandoning KPMG’s in-house lawyers as their legal counsel-that they continued to fail to report hundreds of thousands of dollars in investment income from the Isle of Man between 2011 and 2014 .

“I’m not surprised,” Howlet said. “The rich can play that game…how far can you slide across the line without getting caught.”

The Cooper family seeks pardon and punishment

Court documents show that the Coopers joined the CRA and hope to be eligible to participate in the so-called Voluntary Disclosure Program or VDP. The program was established by the CRA to provide amnesty for those who voluntarily stand up, declare previously unreported income and agree to a tax refund.

The documents show that the CRA rejected the Cooper family’s VDP application, saying it was not voluntary because they were audited by the Isle of Man plan during the 2002-2010 tax year.

The Coopers appealed the CRA’s decision in court, but eventually withdrew the lawsuit, instead focusing on the tax agency’s decision to impose a gross negligence fine of $4 million on its undeclared income before 2010.

Dennis Howlett, former head of Canadian tax fair affairs, said that the latest disclosures of the KPMG tax plan show that the rich are playing the game of “how far can you cross the line without getting caught”. (Canadian Broadcasting Corporation)

CRA finally agreed to a secret Out-of-court settlement with Coopers 2019. It is unclear whether the agency agrees to provide the Victorian family with an amnesty for the punishment they seek.

CRA stated that it will not discuss specific cases.

In an interview in 2015, Marshall Cooper told CBC/Radio-Canada to talk to KPMG’s lawyers, who provided him with accounting and legal advice from the “first day”.

“I was attracted by this, and I don’t think I should do it in the first place,” he said.

After the CRA discovered that they were using the Isle of Man plan, KPMG did not answer questions about the advice it provided to the Cooper family on the grounds that the client kept it confidential.

In an email response to CBC, the accounting firm stated that their tax plan “fully complies with all applicable tax laws” and was implemented by a Canadian law firm and another law firm on the Isle of Man. Review. KPMG also stated that the CRA settled “the vast majority” of tax cases out of court.

KPMG tax partner Greg Wiebe testified before the Finance Committee of the House of Commons in 2016. (ParlVu)

André Lareau, a tax law professor at Laval University, said that the problems behind the Cooper case should be fully disclosed in public forums.

He told CBC/Radio Canada: “This was originally a perfect case that could be prosecuted in court.” “There should be a trial, and there should be as many taxpayers in question as there are accounting firms.”

According to publicly available Isle of Man company records and Canadian court documents, KPMG stated that the last time it implemented its tax plan was after 2003, it continued to participate in and profited from its offshore plan.

The CRA filed with the Federal Court in the Cooper case stated that there are additional annual fees based on the amount of tax evasion by the family each year.

Last month, KPMG’s new tax director Lucy Iacovelli also testified on the Isle of Man plan by the Financial Commission.

“The last time we provided it was in 2003,” she testified. “After that, we have no management structure.”

As chairman of the Finance Committee, Liberal MP Wayne Easter blocked his testimony at the 2016 KPMG tax avoidance hearing. (Canadian Broadcasting Corporation)

KPMG has stated that it participated in another “implementation” on behalf of clients who hired the accounting firm in 2007.

CBC/Radio-Canada discovered that two other companies were established on the Isle of Man in 2009, Semanque and Carluc, which have similar attributes to Coopers’ shell company, including the articles of incorporation and a company director. KPMG did not specifically target the two companies, nor did it specify their purpose.

In addition to Coopers’ shell company, CBC/Radio Canada also learned that after the CRA discovered the plan in 2010, several KPMG Isle of Man shell companies remained active for many years. A company called Parrhesia was formally dissolved earlier this year.

Although CBC/Radio-Canada has been able to Identify the nine true owners of more than two dozen shell companies helped by KPMG, Most multi-millionaires and Billionaire Canadian Whether it involves tax evasion is still unknown.

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