What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather Have in Common?

What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather have in common aside from being top atheletes in their respective sports, and extreme wealth?

Tax Troubles!

Ronaldo and Messi with the Spanish Tax Authroity, and Mayweather with the IRS, which just goes to show you that no matter how much money you have, or don’t have, you still have to report income, file on time and pay your taxes!

In Ronaldo’s case, the Spanish Hacienda tax authority believes Ronaldo failed to pay €14.7 million in taxes pertaining to income earned on his “image rights” between 2011 and 2014.  The belief is that he used (and still uses) a shell company in the British Virgin Islands and Ireland, to hide at least €78m in image rights.

Ronaldo’s camp claim that he has fulfilled all his tax obligations, maintaining that the majority of his image-rights income is earned abroad and therefore not liable for Spanish tax.

How does Ronaldo’s situation differ from Lionel Messi’s tax case?
Barcelona star Lionel Messi and his father Jorge were found guilty of tax fraud in July 2016 after it was found they had hidden image-rights income from the Spanish authorities. Messi was fined €3.6m and sentenced to 21 months in prison (which was suspended) for defrauding €4.1m between 2007-09.

The Messi family had previously paid over at least €10m in back taxes and charges, long before their case made it to court.

In Messi’s case, the court determined there was a total failure to fill his tax obligations on image rights income.

A huge concern stemming from the The Supreme Court’s judgement in the Messi surrounded the role that Messi’s tax and financial advisors played and how both parties were not indicted as part of the prosecution since they there was evidence that they advised the player on how to evade taxes.

In Spain, a  guilty verdict for an aggravated tax crime means a mandatory jail time of two to six years, while conviction of the lesser offence brings a suspended sentence.  If Ronaldo admits to the details in front of the judge within two months after being accused, and pays over the amounts allegedly defrauded, his punishment could be reduced.

Messi’s 21-month prison sentence for tax fraud was reduced to a €252,000 fine, while his father’s 15-month prison sentence was reduced to a €180,000 fine.

These fines are in addition to the re-payment of the taxes originally owing plus any penalties and interest accrued to the balance.

Floyd Mayweather, and his estimated net worth of $340 million is in trouble with the IRS and has apparently filed a petition asking for a temporary reprieve from unpaid taxes from 2015 until after his fight with Conor McGregor in August.

Apparently, while he has substantial assets, those assets are restricted and primarily illiquid. The upcoming fight against McGregor, however, would provide Mayweather with enough liquid cash to pay the IRS debt from 2015 in full.

Mayweather, made $220 million alone from his 2015 fight against Manny Pacquiao. It is unclear how much he owes the IRS in taxes.  Given a 15-month lapse since the 2015 tax due date, Mayweather would owe 7.5% in penalties plus accruing interest on top of what he was already scheduled to pay.

Forbes estimated Mayweather’s net worth at $340 million in January.

 

So the moral of the story is this;

Not everyone wants to pay their taxes, and some will go to great lengths to reduce or avoid paying taxes. If that is something that you feel you must do, you have to be prepared for the consequences of your actions when and if the government comes back to you.

File on time.

Pay on time.

Don’t pay the government more than you should.

If you need help because you’re carrying a balance with the CRA and you want to discuss options, contact Goldhar Tax Solutions today!

http://www.goldhartaxsolutions.ca

@GoldharTAX

tax@goldhar.ca

Toll free 1.877.TAX.AID1, or 1.877.829.2431.

 

Lack of tax knowledge could be costing Quebecers: C.D. Howe Institute reports

I came across this article from the Montreal Gazette;

I strongly recommend that you take the time to read it.  It is brief, but very informative as it tells the story that I have been trying to tell for the past 20-plus years!  There is that there is a significant percentage of, not just Quebecers, but Canadians who leaving money on the table because they don’t understand the tax system, according to a report released by the C.D. Howe Institute last week.

The report — which bases many of its conclusions on a survey of 1,000 Quebecers — suggests that lack of knowledge is one of the reasons many people don’t take advantage of credits and savings vehicles, like RRSPs, which could reduce their tax burden.

“People might be missing out on benefits that they’re entitled to,” said Antoine Genest-Grégoire, a tax policy researcher at the Université de Sherbrooke and one of the authors of the report.

“It can take various forms, people can simply not know about the existence of the credit … sometimes, they know it exists but they don’t know how to use it or they find it too complicated.”

Survey participants were asked a series of questions about how the tax system works and the average score was just 55%.

It wasn’t just tax credits that left participants stumped. Respondents scored poorly on questions about progressivity — the idea that people with higher incomes pay a higher tax rate, a core principle of the Canadian income tax system.

While almost 90% of respondents knew that income tax rates differ based on how much people make, many struggled with the concept of bracketing — when different segments of an individual’s income are taxed at different rates.

“We hear a lot of people thinking that once you reach the top income brackets, you essentially pay close to 50% of your income in taxes,” Genest-Grégoire says, when in reality, it’s only the income above the cut-off for the highest tax bracket that’s taxed at the highest tax rate.

Only 26% of survey respondents were able to answer a question about that correctly.

While survey respondents generally had a good sense of whether they pay sales tax on everyday purchases, like groceries, prepared food and clothing, there were some exceptions.

For example, Quebec provincial sales tax doesn’t apply to books, a decision made to encourage literacy and support book publishers in the province. Only 21% of survey respondents knew that.

The result, Genest-Grégoire said, is that the public policy objectives of the tax exemption are unlikely to be realized.

The lack of tax literacy doesn’t just affect individuals pocketbooks, Genest-Grégoire said.
“People who don’t understand taxes tend to have lower trust in the tax system.  The Canadian tax system, even though you’re obligated by law to produce a tax return, works on trust.  The government doesn’t audit everyone,” he said. This lack of trust “makes tax avoidance, tax evasion more probable.”

Genest-Grégoire said the provincial and federal revenue agencies have taken steps to put more information online, but the system itself remains complex. One solution would be to make benefits that are currently provided through the tax system more accessible and for government to automatically enrol people, as is already the case with many benefits for children.

Warren Orlans, a former CRA Collections Employee turned Taxpayer Advocate has been saying for over a decade that the CRA needs to continue putting out information on the Internet, however it needs to be available in many different formats in order to be most effectively accessed by Canadians everywhere.  “Not everyone learns the same way, so having a concept explained in text, showing steps, and possibly with an example and even with little videos would expose the greatest number of Canadians to the message at once.”

“Every day, I deal with Canadian taxpayers and corporations of all sizes as they try to understand and interpret the CRA.  My 11-year’s experience at the CRA and 10-years outside the CRA have afforded me the ability to diagnose and resolve even the most complex of tax matters”, Orlans said.

If you need help understanding the CRA, or interpreting their letters or actions, contact the best, at inTAXicating – a member of Goldhar TAX Solutions.  http://www.goldhartaxsolutions.ca.  Email: tax@goldhar.ca.  Or call us at 647.812.0181, or Toll Free at 1.877.TAX.AID1.

Toronto-based, Canada-wide tax experts.

 

Changes to the CRA’s RC59 Business Authorization Form

The Canada Revenue Agency has announced to tax preparers and representatives that if they wish to have online access to a business client’s tax information after May 15, 2017 they will have to complete the authorization request in the Represent a Client section on the CRA web site.

In order to do this, tax representatives have to log into Represent a Client and select “Review and update” from the Welcome page.  They then select “Authorization request” at the bottom of the “Manage clients” tab and follow the instructions.

Once the request is complete, tax representatives will need to print the signature page for their client to sign. Once it is signed, a scanned copy of the document may be sent to the CRA using its submit documents feature.

Using this method will allow tax professionals to gain access to their business clients’ information in five days or less instead of the 15 days it currently takes with form RC59.

If, however, you still prefer your current process, you can still use form RC59 to request access to your business clients’ information by telephone or mail.

And if you need to have authorization in less that 5 days, you should reach out to us here at Goldhar TAX, because with almost 11-years’ experience working in the CRA’s Collections department, we know how to get that authorization in the hands of someone in minutes!

Follow us on Twitter @inTAXicating and @GoldharTAX

Follow us on Facebook at http://www.facebook.com/intaxicating

Follow us at our website; http://www.goldhartaxsolutions.ca

Send us an email: tax@goldhar.ca

Or leave us a comment anywhere else!

Expected Changes to CRA’s VDP: Preview

On June 9th, 2017, the Canada Revenue Agency (CRA) launched a 60-day online consultation with Canadians on the Voluntary Disclosure Program (VDP), in which the CRA is seeking input from the public to ensure that the program is more “responsive, innovative and fairer for all Canadians”.

One of the key asks by the CRA is this question; “We are asking you – when should the VDP apply? Should it apply only to those who knowingly choose to not pay their taxes or also to those who make mistakes on their returns?”

Based on that question, many organizations have been putting out materials stating that the CRA is changing the program and that it is already been decided, however that is not the case, yet, as the consultation period has not even ended.

What Is Voluntary Disclosure?

The Voluntary Disclosures Program (VDP) gives Canadian taxpayers a chance to change a tax return they have previously filed or file a return that should have filed and by making these changes through the VDP, the Canada Revenue Agency (CRA) may give relief from prosecution and penalties.

By applying to the CRA under the VDP, a Canadian taxpayer might only pay the taxes owing plus interest.

The disclosure MUST meet all four of the following conditions to be valid;
1. A penalty would apply
2. It is voluntary, which means it is made before the CRA takes any compliance action against you
3. the information is at least one year overdue
4. it includes all the relevant information – meaning it is full and complete.

Anyone can use the VDP, including individuals, businesses, employers, payers, trusts and estates, whether a resident or a non-resident of Canada.

Why Changes to the VDP?

When the CRA found out that there were Canadian taxpayers hiding money offshore, they began to consider whether the current VDP was fair for all Canadians. Should a taxpayer who forgets to include an income source be granted the same relief as a taxpayer hiding money overseas and failing to disclose that income in order to reduce the amount of taxes they would have to pay in Canada?

The answer clearly is no, it’s not fair, and the CRA wants to change the program to make it easier for actual errors and omissions to be fixed, while making it much more difficult to allow tax evaders to utilize the program to avoid prosecution.

The most meaningful change expected in the VDP is the introduction of a two-track system:
1) the General Program, and
2) the Limited Program.

The Limited Program would limit the availability of the program in certain circumstances or where there is a “major non-compliance” as such relief for penalty and partial interest relief could be seen as “overly generous.”
Under the General Program, taxpayers who qualify for the VDP will not be charged penalties or referred for criminal prosecution with respect to the disclosure, and may be entitled to partial relief for any interest in respect of assessments preceding the three most recent years of returns required to be filed.

Whereas under the Limited Program, applications that disclose “major non-compliance” will not receive the same level of relief as they would under the current VDP. Taxpayers will not be referred for criminal prosecution and will not be charged a gross negligence penalty with respect to the disclosure, however, other penalties will be charged as applicable such as a late filing penalty, a failure to remit penalty, an instalment penalty or an omission penalty. Additionally, no interest relief will be provided.

What Might Constitute “Major Non-Compliance?”

Major non-compliance might look like this:
• Taxpayers who undertook active efforts to avoid detection through the use of offshore vehicles or other means
• Large dollar amounts being disclosed
• Multiple years of non-compliance
• A sophisticated taxpayer, or use of sophisticated tax avoidance techniques under the advice of a sophisticated professional, and
• The disclosure is made the CRA has released information aimed at cracking down on taxpayers failing to disclose all their income

The determination of whether an application should be processed under the Limited Program will be made on a case by case basis.

Other Considerations
While determining the status of an application to the VDP, the CRA will also consider;
• If they will require payment in full of the estimated taxes owing as a condition of acceptance
• If transfer pricing cases and applications from corporations with gross revenue in excess of $250 million qualify
• If applications that disclose income from the proceeds of crime will be allowed access to the program

The CRA will continue to cancel VDP applications if they learn that the disclosure was not full and complete, or if was intentionally inaccurate.

The release of the changes to the CRA’s VDP will be announced in the fall, and the above is speculation as to what the new program will look like. If you, or anyone you know has failed to fully or accurately disclosure income, it’s best for them to speak to a professional now, especially before there are changes to the program which might disqualify them.
We, at Goldhar TAX Solutions, are always available to discuss the CRA’s VDP and you can find us at http://www.goldhartaxsolutions.ca, or send us an email to tax@goldhar.ca