Canada’s laws against tax evasion and tax fraud are tough.
If you’re investigated by the Canada Revenue Agency (CRA) and accused of a crime in Ontario, the experience can be intimidating and stressful, and the potential penalties severe.
It’s important to seek legal counsel at this time, preferably from lawyers with in-depth knowledge and experience of the tax system.
The Friedman Mansour LLP legal team is ready to defend you against tax evasion and fraud charges and we can often negotiate a deal in your best interests with the CRA.
How is tax evasion or tax fraud committed?
It is possible to commit the crime of tax evasion or tax fraud without even realizing it.
In fact, it is quite common for individuals to be surprised that their actions (or lack of action) constitute a crime.
Most people are aware of the term “tax evasion” and that it carries serious consequences. However, the difference between legitimate tax practices and criminal conduct is often very marginal and genuine mistakes do happen.
People may not necessarily be aware that the following actions are considered to be criminal activity:
- Not filing a tax return at all
- Filing a tax return that contains deceptive statements
- Failing to disclose relevant information to the CRA
If you are investigated and found to have behaved in any of these ways, you may be charged with a crime.
What are the penalties for tax evasion and fraud?
There are severe penalties for a conviction for tax evasion or tax fraud as set out in the Criminal Code of Canada as well as the Income Tax Act and the Excise Tax Act.
- A lifelong criminal record
- Fines of between 50% and 200% of the tax owing
- Jail time of up to five years
These criminal tax penalties are in addition to civil penalties. Compounding interest is also charged on the tax owed.
What is a tax evasion search warrant?
Being accused of tax evasion can be an intimidating experience.
A tax evasion search warrant can be executed without warning by CRA investigators.
The first you will know about it is when a team of investigators shows up at your home with police, armed with a search warrant.
If you’re lucky, you will first receive advance warning in the shape of a letter explaining that you are under investigation by the CRA. However, this is not always the case.
The tax evasion search warrant is obtained from a judge and allows a search of the home and business premises (if applicable) as well as the offices of your accountant.
The investigators will seize both hard copy records and computers/storage devices. These will be impounded and you will lose access to them for weeks or even months on end, while the team investigates the alleged tax fraud.
This can cause major disruption to a business, so part of our initial role as your tax lawyers will be to secure the release of these records as soon as possible.
If you are aware that you are under investigation by the CRA, it is advisable to make copies of all critical business records and computer files. Find a secure place to keep them offsite in a place that is not accessible by the CRA.
What is taxpayer protection in Canada for a tax and fraud investigation?
As a taxpayer under investigation in Canada, you must be careful about what you say and do. Your words or actions may harm your defence in the case of charges being brought against you.
Fortunately, you are protected by the lawyer-client relationship in Canada. Anything you say to your lawyer is confidential.
Remember that this is not the case with your accountant. There is no such confidentiality or protection afforded. Anything you say to your accountant can be used against you.
An accountant’s records are not subject to privilege either. Their files will be seized during a CRA investigation against you.
How do you avoid a criminal charge with tax evasion?
There are ways to avoid a criminal charge even if you have committed tax fraud or evasion.
Firstly, the CRA operates a voluntary disclosures program. If you contact the CRA and correct a previous tax return or other income tax obligation before they contact you, you will not be prosecuted.
We can submit a voluntary disclosure application on your behalf and you will not be charged with criminal tax evasion or need to pay any tax penalties.
If it is too late and you have already been placed under investigation, you can still avoid a criminal charge.
However, fraud cases are generally complex and few people have the ability to defend themselves against the might of the Canadian Revenue Agency.
With the help of an experienced tax lawyer, you can avoid the harshest consequences.
What should you do next?
The lawyers at Friedman Mansour LLP in Ottawa have considerable experience of working with the Canada Revenue Agency.
We take the approach of negotiation for a deal that is in your best interests. The CRA prefers to settle like this and receive the tax owing without litigation.
In this way, you can prevent prosecution and evade the most serious consequences of your actions.
Sometimes, we can arrange for clients to simply pay the amount of tax owing and that is the end of the matter.
If you have received a letter from the CRA or are concerned about an upcoming investigation, contact us for a free consultation.
We will consider your case and be able to offer advice and guidance on how best to proceed.