Canada’s laws against tax evasion and tax fraud are tough.
If you are investigated by the Canada Revenue Agency (CRA) and accused of a tax crime, the experience can be intimidating and stressful, and the potential penalties severe.
It is important to seek legal counsel at this time, preferably from lawyers with in-depth knowledge and experience of the tax system.
The team at Friedman Mansour LLP is ready to defend you against tax evasion and fraud charges.
How is tax evasion or tax fraud committed?
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 can be considered criminal conduct:
- 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 intentionally engaged in these acts , 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 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 are lucky, you will first receive advance warning in the form 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 counsel will be to secure the release of these records as soon as possible.
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, if we are successful, you will not be charged with criminal tax evasion or need to pay any tax penalties.
If it is too late and you are already under investigation, you may still be able to avoid a criminal charge.
One of our lawyers will be happy to assist you with all criminal tax related matters.
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