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Tax men turning up the heat on companies

roberto adrian

Facing swelling budget deficits, tax authorities around the world are pursuing companies with more audits, criminal charges, tough new laws and stricter disclosure, according to a new report by global accounting firm Ernst & Young.

"A new era has begun," concludes the report, based on interviews with more than 600 executives and audit committee members in 18 countries. "It's no surprise when you look at the deficit situation in these countries," said E&Y national tax adviser Fred O'Riordan.

Tax authorities everywhere, including the Canada Revenue Agency, are taking a harder line with companies. Fifty-seven per cent of respondents said they are seeing more aggressive and more frequent tax audits. The response from Canadian companies was almost identical at 56 per cent. And most of the respondents – 77 per cent – expect conditions to worsen in the next five years.

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During the depths of the 2008 financial crisis, governments slashed taxes to jump start their economies. Now, governments are doing whatever they can to recover lost revenues. "It was only a matter of time before they began scrutinizing taxpayers more closely in pursuit of funds," the report said.

Governments are using tactics such as cross-border information sharing agreements and international tax audits. The United States and Australia are leading the way but many other countries are moving in that direction, E&Y said. "Tax authorities are collaborating a lot more than they did in the past," Mr. O'Riordan said.

The United States is also leading the world in its pursuit of individual tax cheats with a series of measures aimed at stopping Americans from hiding cash offshore.

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