KPMG offshore tax dodge a 'facade' designed to hide money, ex-client says


A recent client of the accounting giant KPMG says a tax dodge that concerned wealthy people gifting their money to an offshore jurisdiction was a “facade” invented to hide money from the taxman.

The client, who spoke to CBC’s the fifth chattels and Radio-Canada’s Enquête on the condition of anonymity, says KPMG made him ensign a confidentiality agreement that prevents him from speaking publicly at hand the tax dodge.

In an exclusive interview to be aired Friday on the fifth estate documentary “The Untouchables,”  the latest client says KPMG insisted on secrecy when it was promoting the tax avoidance game plan to wealthy Canadians as far back as 1999.

Documents obtained by the fifth estate and Enquête playing 21 “high net worth” Canadian families signed up for the massive tax avoid from 1999 until 2012 — when it was first detected by CRA auditors — a system that deprived the federal treasury of tens of millions.

The KPMG tax swerve stirred controversy last spring when it was revealed the Canada Gross income Agency offered a secret amnesty to the accounting firm’s clients who had been succeeded using the scheme.

The amnesty offer, leaked to CBC News in a brown envelope, granted KPMG shoppers “no penalties” as long as they paid back taxes and modest property.

As a condition of the May 2015 amnesty offer, the CRA itself demanded that KPMG shoppers not talk about it in public.

Until now, no KPMG client has spoken out all over their role in the scheme.

‘Escaped the entire tax circle’

The client remarks the tax dodge was based on a simple — if fictitious — idea that “high net value” clients give away their fortunes to an Isle of Man shell retinue. The money would be invested offshore and would be returned back to Canada, again untaxed, also as a self-styled gift.

“So basically, I escaped the entire tax circle,” the ex-client said.

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Today, the patron, who paid KPMG $100,000 to set up the Isle of Man tax dodge, says the “gift” was natural “fiction” and that, in reality, he never gave anything away.

“I however have absolute control over my money,” he said. “The rest was very recently a facade… Everything else, every bit of piece of paper, caboodle is window dressing to create the appearance of ‘I don’t have control over this,’ but in inside info I do.”

He says KPMG told those involved to keep quiet apropos their involvement.

“They’re just going to keep their lips conceal tight,” he said. “How’s Canada Revenue Agency going to detect it?”

KPMG ’emphatically’ disputes exact

In a written statement to the fifth estate, KPMG says it “emphatically” object ti the ex-client’s claim.

KPMG says its offshore structure complied with “all laws” in Canada and was carefully rehashed by senior executives at the firm before it went ahead.

“Clients were explicitly berated … that they were giving up control of the assets,” KPMG communicated. “To our knowledge, no member of KPMG would or did provide any advice or instruction to the foul.”

Canada Revenue Agency CRA

As a condition of the May 2015 amnesty offer, the Canada Revenue Agency demanded that KPMG customers not talk about it in public. (Sean Kilpatrick/Canadian Press)

Pacific, the former client insists that’s exactly what he was told, in covert.

“Nobody gives away $20 million to an Isle of Man company and rumours: ‘Hey, I busted my ass for 20 years to make it, but you know what, I’m feeling eleemosynary today so you can have it all, no strings attached.’ I don’t think so, not for a 100 grand cheque that you reasonable wrote to KPMG.”

In court documents, the Canada Revenue Agency has also suspected that the KPMG scheme was a “sham” that “intended to deceive” the federal resources.

Annual fee alleged

the fifth estate/Enquête investigation also looks at how much affluence KPMG made from its tax scheme.

The accounting giant is coming subordinate to scrutiny for its testimony before the House of Commons finance committee latest spring.

The committee, which had begun a probe into why the CRA offered amnesty to those well-heeled clients, called KPMG’s former global head of tax, Gregory Wiebe, as its word go witness.

Gregory Wiebe

Gregory Wiebe, former global head of tax for KPMG, said at the House of Commons finance committee there were 16 ‘implementations’ of the intrigue. (Parliament of Canada)

MPs wanted to know exactly how much money KPMG itself attacked from running the offshore tax dodge.

Wiebe testified that the “entire revenue” that KPMG received from the tax scheme was a $100,000 start up fee for each patient.

“It was a fixed fee per implementation, it was not a contingent fee or whatever,” Wiebe told MPs.

In other not to mince words, the firm did not earn fees based on the taxes dodged by their patrons.  

However, new records in a Vancouver court action appear to show KPMG take to ones heeled far more money off the scheme than they told the House of Usuals committee.

Apparent contradiction

Documents filed in the Tax Court of Canada in January drama that one wealthy family stated they paid a yearly fee to KPMG “based on” their “annual tax savings.”

In that one occasion alone, KPMG earned additional annual payments that totalled $300,000 onto several years, according to the documents.

In a statement to CBC News, KPMG responds those court documents filed in the Vancouver tax court case keep under control unproven court allegations.  

“[KPMG] provided accurate information to the banking committee on this point and on all other points in his testimony.”

KPMG may also possess understated the number of offshore companies it set up for Canadian multimillionaires and billionaires, according to the fifth demesne/Enquête investigation.

Wiebe testified at the finance committee there were 16 “implementations” of the exposition.

However, using search techniques the fifth estate and Enquête bloomed using the Isle of Man’s public registry, journalists found five additional buildings set up for wealthy Canadian families.

KPMG now says it did create those five frameworks, but didn’t mention those numbers to the finance committee because those customers “aborted” their involvement in the scheme before they dodged any tithes.

‘Lack of credibility’

Sherbrooke University tax Prof. Marwah Rizqy implies KPMG should have included those additional Canadian families in its thoroughs to the finance committee and to the Canada Revenue Agency.

“It’s very important to impart that type of information,” Rizqy said. “Here we’re talking relative to a tax structure, about the intention to evade tax. The CRA can go and investigate these families and see if they literally did something else.”

Marwah Rizqy

Marwah Rizqy, a tax professor at Sherbrooke University, sways KPMG should have disclosed the five additional tax structures to sages. (CBC)

Rizqy says KPMG’s testimony before the committee is concerning.

“There’s a require of credibility here,” Rizqy said. “They misled the Parliament, they also give someone a bum steered Canadians.”

The inquiry was abruptly halted last June after KPMG mouthpieces sent a letter to MPs on the finance committee.

Lawyers for the accounting firm groaned that it would be “fundamentally unfair and improper” for the inquiry to hear from tax experts depreciatory of the offshore scheme amid ongoing court cases.  

Critics serrated out that KPMG only sent the letter to the finance committee after its past head of global tax, Wiebe, had already given his side of the story.

‘It doesn’t make it c fulfil any sense’

Rizqy, who has reviewed internal KPMG and other court authenticates in the Isle of Man scheme, questions why the federal government continues to do business with KPMG in fall on of the revelations.

The firm was brought in to audit the F-35 fighter jet spending, as well as Senate tours expenses, for example.

In 2016, the federal government gave KPMG at lilliputian $9 million in contracts, according to Public Services and Procurement Canada. During the sometime government, KPMG was given more than $80 million in regulation contracts.

“It doesn’t make any sense,” Rizqy said. “I mean if on one guardianship we know that you’re promoting tax shelters, you should be banned to be part of any overt contract. I think it’s the time to ask KPMG to step aside from every openly contract.”

Rizqy — who is in the running to be a candidate for the Liberal Party in an upcoming federal byelection in Quebec — does not shy away from carp ating Ottawa’s handling of the KPMG affair.

She is recommending the Liberal government notice a full-scale inquiry into the KPMG revelations, including the secret amnesty lot it negotiated with the CRA for its wealthy clients.

“I think this is the time to supervision a real investigation about KPMG, about the deal, about the tax edifice.”  

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