Canada’s wealthiest individuals have been put under a microscope. The Canada Revenue Agency (CRA) has launched a project dubbed the “Postal Code Project” that is targeting taxpayers residing in affluent neighbourhoods across Canada.

The Postal Code Project will be an in-depth analysis, using postal-codes in high-priced neighbourhoods, as an indicator of a taxpayer’s lifestyle.  The goal of this Project is to conduct taxpayer reviews based on an indication that a taxpayer may be richer than is disclosed through his or her income tax filings; with the intention of discovering evidence of undeclared wealth. Details of this initiative were obtained by CBC News under an Access to Information request and reveal that the “residence focused approach to audit” is intended to further the Government’s stated priority of ensuring “that those who are wealthy pay the tax they owe”.

As part of the Project the CRA will:

• Conduct a targeted audit of income tax filings address by address
• Conduct in-person assessments
• Conduct in-person interviews with taxpayers
• Look into lifestyle (such as boats, cars, houses)
• Send letters and notices

Not only is this an innovative approach on the part of the CRA, this initiative is intended to indicate to the Canadian public that the CRA is committed to its fairness objective, especially after such leaks such as the Panama Papers and Paradise Papers, targeting those who shelter income in offshore accounts and entities. The briefing memo obtained by the CBC states that the Project is intended to serve “demonstrate to the public that the CRA is actively working towards its fairness objective, which speaks to our integrity as an organization”.

According to the CRA, it has initiated a review of 1,150 households in 5 targeted neighbourhoods across Canada and have directly contacted 33 taxpayers.

The Federal Government, the Minister of Finance and the CRA have come under recent scrutiny as a consequence of the controversial proposed tax changes targeting small businesses , the Minister of Finance’s conflict of interest woes, as well as the recent report from the Auditor General regarding CRA’s abysmal service standards and bad advice.  It is a well-established principle of tax law that taxpayers are entitled to arrange their affairs to minimize tax. There are many valid and legal strategies which can be implemented by Canadian taxpayers through effective tax planning. If you have a tax or estate planning question, please contact tax lawyer to arrange a consultation.

Devry Smith Frank LLP is a full service law firm with many experienced lawyers in every area of practice. If you are in need of a Tax lawyer, please take a look at our tax law practice page or contact.  For more information, please contact us directly at 416-449-1400.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”