Yes, tax evasion is a criminal offence in Canada. If you are convicted of tax evasion, you could face a significant fine and even a jail sentence.
What is tax evasion?
Tax evasion is when you deliberately ignore or break Canada’s tax laws, with the intention of paying less tax. For example, you could inflate your expenses. Or you could falsify your financial records or not disclose certain income, such as overseas assets.
What is the difference between tax avoidance and tax evasion?
Tax evasion is not the same as tax avoidance, although there is a very fine line between the two. Tax avoidance is when you take action to minimise tax, rather than deliberately break the rules (as with tax evasion).
Tax avoidance is not a criminal offence. It does not break letter of the law, but it does ‘contravene the object and spirit of the law’. This is a confusing definition, but basically means you have bent the rules in a way that Parliament did not intend.
However, you may still be investigated by the Canada Revenue Agency (CRA) for tax avoidance. If your actions amount to aggressive tax planning, or cross the line into tax evasion, you could be penalised.
Penalties for tax evasion
If the CRA investigates you for tax evasion and has grounds to believe you are guilty, it has two options available. Either, the CRA can begin civil proceedings against you in a tax court. If the court finds in the CRA’s favour, you will have to repay the tax owed plus interest.
Or, the CRA could choose to lay criminal charges. This is possible under the Income Tax Act. This action is usually taken in cases where there is extensive tax evasion, and against tax protesters.
If you are convicted of tax evasion, you could be asked to repay the tax owed plus interest. You may also face a fine of up to 200% of the taxes owed, and up to five years in jail. If your actions amount to fraud, the penalties are more severe.
When do you need a tax lawyer?
If you are being investigated for tax evasion, please contact us straight away. We can assess the situation and provide practical, legal advice. As specialists in this area of the law, we can suggest the best way forward in your case.
It does not matter whether you are an individual accused of inflating your expenses, or a big corporation accused of large scale tax evasion – we can help you.