Principal Issues: Does the CRA intend to audit all high net worth individuals or only certain persons? At whom is the project directed, i.e. is it random, on the basis of assets, past compliances or other criteria? What are the objectives of the project and why does the CRA consider this necessary?
Position: The program follows the OECD focus group's recommendation on how a tax administration might deal with high net worth individuals. The program examines the high net worth individuals and their related entities listed in the response below.
QUESTION #14 - HIGH NET WORTH INDIVIDUALS
It appears that CRA has recently embarked on a project to audit certain high net worth individuals. We understand that an extensive questionnaire has been sent to certain persons with detailed and probing questions.
Does CRA intend to audit all high net worth individuals in Canada or only certain persons? For this purpose, how does CRA determine the persons to whom this project will be directed (e.g., is the selection random, based on the level of assets, based on past compliance, and/or other criteria)?
What are the objectives of the project and why does CRA believe this action is necessary?
CRA Response
The Organisation for Economic Co-operation and Development ("OECD") formed a 14 country focus group to study the size and environment of high net worth individuals. This study produced a number of conclusions and recommendations on how a tax administration might deal with this segment of the population.
The CRA has a program to examine high net worth individuals and their related entities. The population that is under review includes:
- Individuals who together with related economic entities have a net worth of about $50 million or more;
- The number of entities in the group is approximately 30 or more; and
- The entities in the group are not already part of the CRA's Large Files.
The CRA's approach to high net worth individuals has been to reinforce our risk assessment by conducting a comprehensive review of the entities in the related group. We previously tended to examine the entities on a one-by-one basis.
Groups that are risk-assessed and deemed to be "high risk" are referred for audit by our Large Files program. This initiative is ongoing.
Katharine Skulski
2011-040190
June 2-3, 2011