A senior partner at KPMG introduced the country's top tax enforcement officer before he gave a speech promising tough action on offshore tax cheats — even as the Canada Revenue Agency had learned the same accounting firm had set up a tax dodge for rich Canadians via the Isle of Man.

Andrew Treusch, commissioner of the Canada Revenue Agency, vowed to crack down on tax evasion and those who hide money offshore during a Nov. 26, 2013, speech at the annual conference of the Canadian Tax Foundation, a group made up mostly of accounting and law firms.

Penny Woolford, senior partner of tax at KPMG and the newly installed chair of the foundation, told the assembled guests at the Metro Toronto Convention Centre she had the "honour" of introducing Treusch.

"Thank you, Ms. Woolford, for that kind introduction," Treusch began, before giving a 19-minute speech about how hard the the CRA was working to combat "aggressive tax planning" — which he said is against the spirit of the law — and tax evasion, which is illegal.

"Sometimes this involves moving money offshore in an attempt to hide financial transactions from tax authorities," he reminded the audience, which also included several of the CRA's own compliance enforcement officials and Department of Justice lawyers.

Court documents show that less than four weeks before Treusch made that speech, the Canada Revenue Agency privately agreed to delay a court case against KPMG — involving allegations the firm had helped wealthy Canadians hide money offshore — and move instead to out-of-court discussions.

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Dennis Howlett, executive director of Canadians for Tax Fairness, said the commissioner should have been aware of his agency's probe into KPMG's offshore dealings at the time he made his speech. "The CRA needs to be much more careful about conflict of interest," Howlett said.

The secret discussions between the government and KPMG eventually led to the CRA offering amnesty to the wealthy KPMG clients caught up in firm's Isle of Man tax dodge, an offer that promised no financial penalties nor criminal prosecutions, but required them to pay any outstanding tax plus a small amount of interest.

The government should pursue the case as a criminal matter, says Dennis Howlett of Canadians for Tax Fairness. 'Otherwise, this could drag on forever.' (CBC)

The CRA's secret deal, leaked to CBC News in a brown envelope, demanded the KPMG clients never talk about it.

In his speech before the tax industry in November 2013 — as those settlement talks were in progress — Treusch said his agency was determined to stop offshore abuse. "Our commitment is to identify such schemes in the early stages and take appropriate compliance actions. We must be vigilant against all threats to the tax base," Treusch said.

"My challenge to you as tax professionals," Treusch told the audience, including tax lawyers and accountants, "is to call out bogus schemes when you come across them."

Howlett says Treusch's public comments and the CRA's private deals are hard to reconcile.

"I don't think [Treusch] really means what he says," Howlett said. "He's doing that just for public consumption, but they're doing completely something else when it comes to negotiating sweetheart deals."

Treusch's speech came at the tail end of a three-day conference where numerous industry and government officials spoke on a variety of tax-related topics. In one panel discussion later that day, three of Treusch's senior officials joined a round-table discussion with KPMG's head of tax, Elio Luongo, and a tax lawyer.

The Canadian Tax Foundation is a non-profit tax research organization that routinely brings together a variety of industry, and government tax officials to discuss policy and legal matters. The CRA itself has a seat on the CTF board of governors.

Before she introduced Treusch, KPMG's Woolford also introduced two others on the panel.

Treusch did not respond to an email with detailed questions about his speech before publication of this story. The CRA's media relations office said a response would come next week.

There is no suggestion KPMG's Woolford was involved in any way in her firm's Isle of Man tax dodge. She declined to comment when contacted by CBC News.

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