Exit strategy: Canada to target tax and visa cheats by tracking departures

Hong Kong and mainland Chinese immigrants be warned. This summer, Canada is plugging gaps in its border management that have allowed some of you to practice passport and taxation fraud.

One of the more alarming facts highlighted by Canada’s ongoing crackdown on citizenship and so-called passports of convenience has been the failure of the government to know where its citizens and permanent residents are at any given time.

By this, I don’t mean a Big-Brotherish ability to track exact whereabouts. It’s far more fundamental than that: Canada currently has no way of knowing for sure if you are even in the country or not.

That’s because passport and residency-card data is collected when you enter Canada, but generally not when you exit. 

This odd situation is well known to anyone familiar with Canada’s border practices. Inky Mark, a Chinese-born former MP who sat on parliament’s immigration committee, said the situation has long troubled him. “Canada needs to keep entry and exit data, which I suggested to Liberals at least a decade ago,” said Mark, a former member of the Reform Party and Canadian Alliance. He is now a Conservative.

“I brought this up when I was vice-chair of immigration committee to deaf ears,” Mark said last month in a Twitter exchange on the subject.

Asides from any security concerns, this rather glaring loophole has presented two major opportunities for fraud – for permanent residents who untruthfully claim to be living in Canada in order to qualify for citizenship (regarded as an unpleasant duty by some Chinese immigrants), and for citizens who falsely claim to be residing  overseas in order to dodge Canadian tax obligations.

Hong Kong and Chinese immigrants are widely understood to be among the most prolific offenders in both respects – an understanding that emerges not because of racial profiling but because of the sheer number who divide their time between Canada and their former homes. In this respect, recent migration to Canada from greater China (Hong Kong in particular) has proved rather remarkable. Tens of thousands of such migrants have simply left Canada in the past couple of decades.

For instance, there are estimated to be about 295,000 Canadian passport holders currently living in Hong Kong. There are many reasons for this reverse exodus, but one is pretty clear - many dual citizens want a Canadian passport, but prefer Hong Kong’s 15 per cent income tax rate. And it’s not unreasonable to think that some would rather continue paying tax to the SAR, even if they spend more than half the year in Canada. After all, who would know?

The bad news for such fraudsters is that the loopholes that allowed this deception are being closed. 

From June 30, travellers will have their passport details scanned when they leave Canada, as well as when they arrive. A deal is already in place to share this arrival/departure data with the US. This will, for the first time, allow tax authorities in both countries to accurately track hundreds of thousands of so-called “snowbirds” – Canadians who live part of the year in the warmer climes of the US.

A data-sharing deal with China is likely when Ottawa and Beijing formally sign a new tax treaty, for which negotiations were concluded in 2012 (a separate Hong Kong-Canada tax treaty that includes provisions for data sharing went into effect on January 1, although it’s not clear whether  this data will be shared from June 30, or whether the SAR will wait for Beijing’s treaty to catch up).

Vancouver immigration lawyer Richard Kurland said Canadian-Chinese tax and immigration cheats should be on notice.

“This summer and into the fall, Canada for the first time officially will be formally tracking Canadian citizenship in the Canada Border Services Agency database, for entries and exits,” he said in an interview last month. “The databases will contain sufficient information for Canada and China to match who is in which country.” 

Although Canada has so far only confirmed details of the data-sharing with the US, it seems it won’t be much longer that Chinese-Canadian dual citizens (including those born in Hong Kong) will be able to escape the gaze of authorities, Kurland said. “From now on, insurance passports are not secret passports. That’s a game changer.”