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Tax evasion and tax fraud

Region: Ontario Answer # 7604

Tax evasion and tax fraud are serious offences that have severe legal consequences in Canada. If you have been charged with a criminal offence such as tax evasion or tax fraud, it is important to hire an experienced criminal defence lawyer as soon as possible.

Tax evasion involves intentionally evading the payment of taxes by concealing or misrepresenting income, assets, or deductions on tax returns.

Tax fraud refers to the deliberate act of providing false information or making false statements on tax returns to evade taxes.

Common methods of tax evasion and tax fraud

Common methods of tax invasion and tax fraud include:

  • Failing to report income accurately: Individuals may attempt to hide or underreport their income in various ways, such as through cash transactions, offshore accounts, or under-the-table payments.
  • Inflating expenses: Individuals may overstate their business expenses or claim personal expenses as business-related to reduce their taxable income.
  • Falsifying records: A method employed by tax evaders and fraudsters to manipulate their tax obligations. This is done by falsifying documents, such as receipts or invoices, to support false deductions or inflate expenses.
  • Engaging in tax avoidance schemes: This involves exploiting loopholes in tax laws to minimize tax liabilities.

What are the legal consequences of tax evasion and tax fraud?

Offences for tax evasion and tax fraud are dealt with in Canada’s Income Tax Act, Excise Tax Act, and the Criminal Code.

Income Tax Act

The most common offences found under the Income Tax Act are found in sections 238(1) and 239(1).

Under 238(1) every person who has failed to file or make a return as and when required by or under this Act or a regulation is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to a fine of not less than $1,000 and not more than $25,000; imprisonment for up-to 12 months, or both.

And under 239(1), every person who has

(a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation,

(b) to evade payment of a tax imposed by this Act, destroyed, altered, mutilated, secreted or otherwise disposed of the records or books of account of a taxpayer,

(c) made, or assented to or acquiesced in the making of, false or deceptive entries, or omitted, or assented to or acquiesced in the omission, to enter a material particular, in records or books of account of a taxpayer,

(d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act, or

(e) conspired with any person to commit an offence described in paragraphs 239(1)(a) to 239(1)(d),

      • and are convicted of a summary offence, faces the maximum penalty of a fine of not less than 50%, and not more than 200%, of the amount of the tax that was sought to be evaded, imprisonment for up-to two years, or both.
      • and are convicted of an indictable offence, faces a maximum fine of 200% of the value of the fraud and/or a five-year prison term.

The Canada Tax Act also grants authorities the power to seize assets to recover unpaid taxes.

Excise Tax Act

Under section 326(1) of the Excise Tax Act, a person who fails to make a return or refuses to comply with the requirement to provide information is subject fines of up to $25,000 and imprisonment of up to 12 months.

Criminal Code

Tax fraud offences are found under section 380 of the Criminal Code:

Fraud 

  • 380(1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,
    • (a)is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; or
    • (b)is guilty
      • (i)of an indictable offence and is liable to imprisonment for a term not exceeding two years, or
      • (ii)of an offence punishable on summary conviction,

where the value of the subject-matter of the offence does not exceed five thousand dollars.

Minimum punishment 

(1.1) When a person is prosecuted on indictment and convicted of one or more offences referred to in subsection (1), the court that imposes the sentence shall impose a minimum punishment of imprisonment for a term of two years if the total value of the subject-matter of the offences exceeds one million dollars.

The role of the Canada Revenue Agency (CRA)

The Canada Revenue Agency (CRA):

  • Is responsible for enforcing tax laws and detecting tax evasion and tax fraud, and
  • conducts audits and investigations to ensure compliance with tax laws.

Cooperating with the CRA is crucial in resolving tax issues and avoiding legal consequences. Voluntary disclosure allows individuals to come forward and correct inaccurate or incomplete tax information without facing penalties or prosecution. For more information on the role of Canada Revenue Agency and tax evasion and tax fraud audits and investigations, view other Answers under “Audits and Investigations by CRA” in the Tax Law section of Legal Line.

Importance of legal counsel

Seeking legal counsel is essential when facing charges of tax evasion or tax fraud. This section emphasizes the importance of hiring experienced tax lawyers who can provide guidance, protect individuals’ rights, and navigate the complex legal processes involved in defending against these charges.

Get help

To erase your criminal record, call toll-free 1-888-808-3628 or learn more at Pardon Partners. It’s easier than you think.

If you have been charged with a criminal offence, it is important to hire an experienced criminal defence lawyer as soon as possible. Contact our preferred criminal defence expert, Calvin Barry Criminal Lawyers for a free consultation at 416-938-5858 .


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