Compliance: evasion, fraud and tax offences

The CRA operates a number of programs to deal with suspected cases of tax evasion, fraud, and other tax offences, as well as non-compliance with Canada's tax laws by those who earn income from illegal activities.

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Canada's tax system is based on self-assessment. The CRA's compliance activities help preserve public confidence in the fairness and integrity of those systems. Our programs reflect the CRA's mandate to use responsible enforcement to promote awareness of and compliance with the laws we administer.

 

Combatting tax crimes

Combatting tax evasion and other serious tax crimes is important on many levels. The quality of life that Canadians enjoy is largely supported by the taxes we pay. Revenues collected are fundamental in supporting essential programs and services such as health care, childcare, education, and infrastructure projects that benefit all Canadians.

 

Tax evasion explained

Tax evasion occurs when an individual or business intentionally ignores Canada's tax laws. This includes falsifying records and claims, purposely not reporting income, or inflating expenses.

 

Consequences of tax evasion

Tax evasion is a crime with serious consequences. Tax evaders face prosecution in criminal court, including court fines and/or jail time in addition to having to pay taxes owing, as well as interest and penalties. Under the Income Tax Act and the Excise Tax Act, individuals convicted of tax evasion can face court fines ranging from 50% to 200% of the taxes evaded, and up to five years in prison.

 

In some cases, an individual may be charged with fraud under section 380 of the Criminal Code, which carries a prison term of up to 14 years on conviction. Court convictions are published in local, regional, and national media to draw attention to the consequences of tax evasion and fraud. The CRA will also publicize criminal convictions and other high-profile enforcement actions through enforcement notifications. In addition, the fingerprints of individuals charged with, or convicted of, tax evasion are kept in the Canadian Police Information Centre (CPIC) and are available to all domestic law enforcement agencies. Foreign law enforcement agencies with links to the CPIC system may consider such an individual as not admissible to their country. This could limit an individual's foreign travel.

 

Protecting the tax system

The Canada Revenue Agency's (CRA) Criminal Investigations Program (CIP) investigates significant cases of tax evasion, fraud and other serious violations of tax laws and where appropriate refers cases to Public Prosecution Service of Canada for criminal prosecution.

The CIP focuses on the most serious cases that meet one or more of the following criteria:

• significant cases of tax evasion with an international element

• promoters of sophisticated and organized tax schemes aimed at defrauding the government

• joint investigations with other enforcement agencies, including cases of tax evasion involving money laundering and terrorist financing

• significant cases involving income tax and/or GST/HST tax evasion including the underground economy

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The CRA works closely with the Royal Canadian Mounted Police (RCMP), provincial and local police, and other law enforcement agencies on tax cases to crack down on tax cheats and maintain the integrity of the tax system. In addition, the CRA shares knowledge and expertise with domestic and international partners. This information helps to identify new schemes and challenge those who deliberately evade their taxes. Our intelligence gathering capabilities enhances our ability to identify and address global tax evasion.

 

Distinguishing an audit from a criminal investigation

An audit is the verification of information provided by taxpayers to the CRA. When an audit is conducted, it is to determine a tax liability and taxpayers may be ordered to pay sums of money to the Receiver General of Canada to correct their tax affairs. Audits are considered a civil matter, and they relate to tax avoidance.

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In a criminal investigation, the Crown has to demonstrate that the taxpayer intentionally contravened Canadian tax laws in order to evade taxes. This has to be proven beyond a reasonable doubt. If convicted of tax evasion, a taxpayer may face both court fines and imprisonment, in addition to paying the taxes they tried to evade, penalties and interest owing.

 

The criminal investigation process

CRA's criminal investigations of tax evasion and fraud are complex and require a significant amount of time to complete. That amount of time depends on a multitude of factors that may be unique to each case.