Question
Can the CRA provide an update on the activities of the Transfer Pricing Review Committee (TPRC), the Joint International Tax Shelter Information Centre (JITSIC), and the GAAR Committee?
Response
JITSIC was established on April 23, 2004 as a means to increase collaboration and coordinate information about abusive tax transactions. Currently participating in this initiative are the tax administrations of Canada, the United States, the United Kingdom, Australia, and Japan. (China participated as an observer for a six‑month term in 2008, and Korea is currently participating as an observer for a one-year term.)
The member countries exchange information about specific abusive transactions and their promoters and investors within the framework of each country’s existing bilateral tax treaties. This allows each country to carry out its abusive tax transaction enforcement activities more effectively and efficiently.
JITSIC has played a significant role in addressing offshore and tax haven non-compliant activities, which have resulted in specific audit action undertaken by the CRA or one of its JITSIC partners. Examples of the types of issues involved in these audit actions include taxpayers identified as holding offshore credit cards; promoters and tax shelters; and financial products that generate large foreign tax credits for multinational corporations.
A total of 228 cases were referred to the TPRC from its inception to the fall of 2009—192 penalty referrals under subsection 247(3), 3 qualified cost contribution agreement referrals, and 33 recharacterization referrals under paragraph 247(2)(b). On average, the TPRC has penalized 54 percent of all referrals.
As of November 2009, the GAAR Committee had reviewed approximately 900 submissions, and had agreed that GAAR applied to 70 percent of them. Of these, GAAR was the primary assessing position half the time.