In the announcement, the Ministry was unambiguous in stating that the purpose of the registry is “to crack down on tax fraud and close loopholes.” According to the Ministry news release, the BC housing market was not fair because homebuyers “were in competition with fraudsters with illicit cash.” To remedy this, the information compelled by LOTA will be made available to “tax and law authorities to investigate and crack down on illegal activity.” In the Ministry’s own language, the registry is “designed to crack down on tax fraud and close loopholes.”
Coincidentally, on the same day, the federal government released its Fall Economic Statement 2020. In that statement, the federal government announced that it will spend an additional $606 million dollars, on top of the $350 million committed in 2016, to target “international tax evasion and aggressive tax avoidance.” The money will be used to “focus on individuals who avoid taxes by hiding income and assets offshore… and strengthen [the CRA’s] ability to fight tax crimes such as money laundering and terrorist financing by upgrading tools and increasing international cooperation.”
Therefore, whether intended or not, the provincial LOTA registry and the proposed federal spending go hand in glove to enhance the ability of the authorities to investigate and prosecute tax evasion.
The LOTA registry raises many compliance issues. What information needs to be provided, when and by whom? Notably, the legislation also contains enforcement measures for non-compliance which include significant penalties.
It has received surprisingly little attention but, as part of the compliance and enforcement regime, LOTA gives enforcement officers the authority to enter premises where records are kept and inspect records. There is a corresponding duty to cooperate with inspection and, because LOTA contains enforcement measures for non-compliance, a record holder could be subject to significant penalties for non-compliance.
LOTA clearly and specifically contemplates that records might be in the possession of a lawyer. Therefore, law offices would be well advised to familiarize themselves with this legislation and have measures in place, in advance, for understanding how LOTA intersects with lawyers’ professional duties to their clients. This may engage complicated issues about solicitor-client privilege.
Finally, given the clear statement by the Ministry that the compelled information will be used to investigate and prosecute tax evasion, it will be important for lawyers who are advising in this area to have a clear understanding of the risks that a particular client might face. Competent advice will have to based on an understanding of these risks and the legal issues surrounding the compulsion of information through the operation of LOTA.