Phil Snel, Maclean's Photo You could leave a trail for the taxman when you try to access your money in an offshore tax haven, like the Caymans.

Fuelled by books like Alex Doulis's Take the Money and Run! and a glut of imitators with the words "tax haven" in their titles, the notion seems to be based on the perception the average Joe should be able to get away with what he thinks the rich are doing.

To be sure, anyone can open an "offshore" account with a foreign bank. You can do that on vacation in the Bahamas merely by walking into any bank, including the big Canadian branches operating in the Caribbean.

"It's perfectly legal to open up an offshore bank account," says Tom Boleantu, president of Calgary-based Expatriate Group Inc. "But you have to file taxes on worldwide income as a Canadian resident."

The group's Web site (www.expat.ca) provides information on setting up offshore accounts but also clarifies that it "does not assist nor condone tax evasion or money laundering."

Evidently part of the fantasy of the offshore bank account is the mistaken belief you can conveniently "forget" to report any interest or capital gains generated by the offshore account, and that the Canada Customs and Revenue Agency will be none the wiser.

If you believe the offshore havens will veil your activities under the cloak of secrecy they once were reputed to have, you're likely to be nabbed for tax evasion.

We are now in a world of globalization and technology, and use of credit and debit cards leaves an audit trail clear enough for any determined tax collector to put two and two together. Over the past year, most of the popular tax havens have begun to cave in to the disclosure demands of tax-hungry Western democracies.

David Lesperance, legal counsel to Hamilton, Ont.-based Global Relocation Consultants S.A., refers to offshore bank accounts and international business corporations as merely the bricks to build an audit-proof tax structure.

"Without a properly designed house, they're useless. You'll pay just as much tax on your bank account with Barclays in the Caymans as with a Royal Bank account around the corner."

In February, the United Kingdom said it will report non-resident tax accounts to countries with which it has a tax treaty. That includes Canada, Mr. Lesperance says.

The pressure on traditional tax havens to, in effect, renege on earlier "privacy" obligations to offshore clients is coming from two international initiatives: the Organization for Economic Co-operation and Development and the Financial Action Task Force. Much of this, Mr. Lesperance says, was set up under the guise of eradicating money laundering by drug smugglers. Most big-name reputable financial institutions are complying. When it comes to choosing between "protecting" a small individual holder of a bank account and paying a $50,000-a-day fine, which would you choose?

If you still wish to pursue the fantasy, that may leave the Fly by Night Bank of Lower Slobovia or some similarly fictitious scam artists. In which case, your problems may soon be worse than paying tax on interest: You could end up losing your entire principal.

Even if you could find a rock-solid foreign bank that looked the other way when the tax authorities came calling, there remains the problem of how to access the money. Suppose you were "successful" in diverting under-the-table cash deals to an offshore bank account that now generates undeclared income. What do you do when you want access to those funds? If you've been issued a major credit card, you may be out of luck again. Mr. Lesperance says the Internal Revenue Service in the U.S., Inland Revenue in the U.K. and the CCRA have won a court order to get access to all MasterCard and American Express accounts in the Caymans, Bahamas and British Virgin Islands. The next thing you know the taxman is knocking on your door, wondering how you were able to afford a $10,000 spending spree on your new Barclays Visa card.

Once upon a time it may not have been cost-efficient for governments to go after the little guy, but now it is, Mr. Lesperance says.

The Web site (www.quatloos. com/newsltr) describes how offshore banks used to offer "secret" accounts for U.S. citizens, which were believed to be effective in hiding money from the IRS. They offered offshore credit or debit cards that let U.S. citizens access the account from anywhere in the world, and use the cards to purchase goods without leaving a record. But today, the site says, "offshore credit cards have suddenly become a huge tax trap that will send literally thousands of U.S. citizens to jail for tax evasion, and will net tens of billions in back taxes, penalties and interest to Uncle Sam."

It used to be that the big banks in the Caribbean -- including Royal Bank of Canada -- were doing nothing wrong under the laws of the countries in which they operated. They were not required to co-operate with tax authorities or to inform them whose accounts offshore credit cards were linked to.

But the laws changed last summer, when the OECD and the FATF released their blacklists of offshore tax havens. These nations were warned that if they did not co-operate with tax authorities in the U.S. and Europe, they would suffer severe retaliatory measures, including trade embargoes. The IRS then imposed requirements that required U.S. banks to file a Suspicious Activity Report whenever money was transferred to one of the tax havens on the blacklists.

With all those tourism dollars at stake, the Bahamas, Caymans and Antigua quickly capitulated.

The heightened risks of going offshore were outlined last June at the Ontario Securities Commission's Web site (www.osc.gov. on.ca). Its Investor Alert section notes that offshore jurisdictions with lower levels of regulation and securities laws mean less protection for investors.

Which doesn't mean the average tax-weary Canadian can do nothing. If you have a lot of active non-Canadian source business income or have an electronic business selling services around the world, there may be bona fide corporate structures and offshore trusts that may lighten the load in a way that's still acceptable to tax authorities.

Alternatively, you could "take the money and run," by permanently leaving the country -- selling your home here, severing all other ties to Canada, collapsing your registered retirement savings plan and paying a withholding tax of 15% to 25%. But that's another article.

jchevreau@nationalpost.com