CRA Tax Evasion Prosecutions
Latest CRA Tax Evasion Statistics – Toronto Tax Lawyer Analysis
The latest information about Canadian income tax evasion prosecutions was released in late January 2016 in the 2014-2015 CRA Annual Report to Parliament. CRA provides this annual report to the Canadian parliament pursuant to the Canada Revenue Agency Act. This report provides details of its activities over the past year. Included are figures and information about tax evasion and tax fraud prosecutions undertaken during the period.
Tax evasion is an offence under subsection 239(1) of the Income Tax Act and carries penalties of a fine of between 50% to 200% of the tax and a jail term of up to 2 years. The penalties are doubled and imprisonment can be for up to 5 years if the tax prosecution is carried out by indictment under subsection 239(2). There are also offences for failure to file tax returns under subsection 238 (1) with fines ranging from $1,000 to $25,000 and jail time of up to 12 months. Note that if multiple years of tax returns are unfiled the penalties if convicted apply for each year. Our Toronto tax lawyers are usually able to negotiate the minimum $1,000 penalty for one year by having the Canadian taxpayer comply with the filing requirement prior to the court date.
The CRA report indicates that 95 individuals and businesses received criminal convictions for tax evasion. Of those 34 individuals received prison sentences amounting to a total of 57 years in jail or about 18 months each on average. Furthermore the courts awarded $9.7 million in criminal fines in addition to the jail terms. Finally, the Canada Public Prosecution Service tax evasion conviction rate was 96%, but remember that many cases are settled by Toronto tax lawyers before trial.
It is important to remember that in 2014 Canadian Parliament amended the Income Tax Act, the Excise Tax Act, and the Excise Act, 2001 to permit CRA to share relevant Canadian taxpayer information with Canadian law enforcement officials when there are reasonable grounds to believe the information contains evidence of a listed serious criminal offence within the mandate of those specific Canadian law enforcement agencies. Prior to these changes CRA was required to keep all information confidential. The amendments are consistent with recommendations from the Organisation for Economic Co‐operation and Development’s (OECD) Committee on Fiscal Affairs. CRA states that sharing information under these new provisions is strictly governed by new operating procedures, which came into effect on March 31, 2015, and will be administered by the Criminal Investigations Program given its expertise in deciding whether reasonable grounds exist to prove a serious crime has taken place. Despite this statement to Parliament, news reports emerged in late January 2016 that the Canadian Security Intelligence Service (CSIS) repeatedly obtained Canadian taxpayer information from CRA without presenting a court-approved warrant for the data. Taxpayers have the right to expect privacy and this is specifically provided for in right 3 of the Taxpayer Bill of Rights. Furthermore CRA told The Canadian Press that the employee who handed over the sensitive data is no longer employed by CRA. Ironically CRA refused to disclose whether the employee was fired or left voluntarily, citing privacy reasons. Finally it is not even clear if the Canadian taxpayers whose information was released were even notified of the improper sharing.