Tax Dodgers–U.S. & Canada

Tax dodgers — U.S. Canada

May 05, 2008
Diane Francis
Financial Post

Read this and weep

If you sent off your taxes last week as most of us did, read this but only if you are sitting down.

I have not written about this for several years but research and sources report that a combination of tax evasion and immigration fraud are as big as ever because Ottawa continues to be so badly managed by civil servants and politicians.

Heres a binational example involving double-dipping in the U.S. and Canada — which illustrates loopholes that anyone can drive an RV through.

This involves a young, educated landed immigrant from India who pretends to live in Canada as a resident but works in Manhattan where he makes $300,000 a year. (See example below of American fraud.)

That is illegal because:
1) He cannot be a resident of both countries at the same time and 2) he must declare his U.S. income if he is a resident of Canada which he is not doing. He does this because by not informing Canada he is working in the U.S. he keeps his Canadian residency clock ticking to qualify for citizenship and, more importantly, to be able to use Canadas health care system, in this case Ontarios.

2) He also must declare his U.S. income as a resident of Canada and pay the difference in Canada, which is higher. Taxes are higher here in large measure because of the cost of health care to people like him and his older parents.

3) Ergo, by defrauding Canada, he gets Canadian-style entitlements without paying the higher taxation to cover the cost of them. He also defrauds Ottawa by pretending he is fulfilling the residency requirement for citizenship when he isnt.

This not an isolated instance and there is an industry of consultants telling them how to in return for fees.

In this particular case, this young man maintains the appearance of residency in Canada by setting up a local bank account, subscribing to a publication or two, then renting an address (sometimes fictitiously from conspirators like relatives or immigration consultants). His accomplices, in this case his parents, alert him about mail, send on government cheques or tell him about other communications.

Its fraud and heres why it works:

— Border crossings, and passports are no longer stamped which means that fraudsters like this man can claim residency without living here in order to get citizenship and entitlements.For scammers who live in Europe and Asia its also easy. They avoid leaving tracks by driving across the U.S. border unrecorded, then taking flights home. They return the same way. This widespread residency-fraud has been going on since the early 1990s when I first wrote columns about this immigration fraud and incorporated them into a book Underground Nation, now out of print.

— The other problem is that immigration and taxation officials do not share information or match up identities or even social insurance/passport numbers. Legislation must change to allow this.

— There is no coordination between immigration authorities in the U.S. and Canada aimed at stopping this type of double-dipping and tax evasion.

(This allows Americans, or U.S. immigrants, to get welfare payments or other entitlements, come up to Canada and declare refugee status and collect money from jurisdictions — sometimes many states or provinces — in both countries. Refugee files take years to clear in Canada so they collect money here and back in the U.S.)

Obviously, governments can and should close these loopholes and build firewalls around our system from such frauds.

Good news is that this case, and several others reported to me, are going to be reported to the appropriate authorities for investigation.