Tax Prosecutions

The CRA can request business records, including banking records, where a CRA assessment or investigation suggests that a business may have unreported income. The CRA may also seek banking records relating to an individual’s spouse where legally authorized.

Tax-related offences are governed by the Income Tax Act, Excise Tax Act, and the Criminal Code. If convicted under the Income Tax Act, one can face substantial fines, as well as imprisonment in circumstances provided by law.

Under the Income Tax Act, the CRA generally has a four-year normal reassessment period. However, this rule does not necessarily apply where the CRA alleges that a false statement or fraud was made. In certain circumstances, the CRA can assess beyond the normal reassessment period where there is a misrepresentation attributable to neglect, carelessness, wilful blindness, or fraud.

Defences for tax prosecution depend on the specific allegations but may include lack of intent, showing the accused did not knowingly commit the offence. Errors or omissions may be argued as honest mistakes rather than deliberate acts of evasion. If the accused acted based on professional advice, they could rely on evidence of professional guidance depending on the circumstances. Procedural violations, such as an investigation that breaches the accused’s Charter rights, may also lead to evidence being excluded. Each case requires a detailed analysis of the facts and circumstances to determine the appropriate defence strategy.

Individuals convicted of tax evasion can face serious penalties, ranging from fines to imprisonment. The applicable fines and penalties depend on the offence and circumstances of the case. In the most serious cases, an individual may be charged with fraud under the Criminal Code. If convicted, this offence can carry a jail term of up to 14 years.

As a Canadian resident receiving taxable income, you are generally required to file an income tax return each year. If you have several years of outstanding returns, the CRA can issue a Notice of Assessment. These assessments can result in taxes owing, along with applicable interest and penalties. The CRA may also determine income based on information available to it where required returns have not been filed.

The Canada Revenue Agency operates a regular compliance program.

It is an offence under the Income Tax Act to make or participate in making false or deceptive statements or entries in certain circumstances. The penalties can include substantial fines and potentially imprisonment, depending on the offence and applicable provisions.

Tax prosecutions deal with both criminal and quasi-criminal (regulatory) offences. Tax evasion, filing a false or misleading statement, or failure to file are among the offences that may be investigated or prosecuted by the CRA. These offences should be taken extremely seriously.

An accusation of a tax offence can be overwhelming and daunting. However, not every alleged wrongdoing in relation to tax is intentional or criminal because tax laws are complex. There are several possible defences that individuals and businesses can consider, depending on the specifics of their case. These options can provide clarity in an otherwise uncertain situation.

Honest Mistake or No Intent

A potential defence in tax offence cases is demonstrating that the alleged issue resulted from an honest mistake or misunderstanding. Many tax offences require proof of a particular mental element, meaning the prosecution must establish the required intent or knowledge. If errors in your tax filings were unintentional, such as forgetting to report certain income or misclassifying a deduction, you may be able to argue that there was no fraudulent intent, depending on the offence charged.

Reliance on Professional Advice

Another potential defence may arise where a taxpayer relied upon the advice of a professional accountant or taxation advisor. If you provided all necessary and correct information to a competent professional and acted in good faith based on the advice given, this evidence may be relevant to your defence. This can demonstrate that you acted diligently and sought professional advice, although the legal effect of that reliance depends on the specific offence and circumstances.

Insufficient Evidence

The onus of proof rests with the prosecution, which generally has to prove the elements of a criminal offence beyond a reasonable doubt. If the evidence against you is incomplete or weak, or does not establish the required elements of the offence, your defence may emphasize these shortcomings. The sufficiency and reliability of the evidence can be important issues in defending a tax prosecution.

Procedural Errors by Tax Authorities

Tax authorities must follow applicable legal procedures when investigating. If your rights were violated, such as through an unlawful search and seizure of documents or a breach of other legal protections, these procedural issues may be used to challenge the evidence or proceedings. Protection of rights is integral to a fair administration of justice, and the circumstances of any alleged violation must be carefully examined.

Misapplication of Deductions or Expenses

Tax disputes can arise due to disagreements involving deductions or claimed expenses. If the issue is a legitimate misunderstanding rather than deliberate misrepresentation, you can provide documentation that explains your position. This may help demonstrate that the issue resulted from an error or misunderstanding rather than an intentional tax offence.

Unawareness of the Actions of Others

In cases involving companies or partnerships, you may be implicated in other people’s alleged tax wrongdoing without knowing that the conduct was occurring. For instance, a partner or employee may have acted fraudulently. Depending on the offence charged, evidence that you did not know about or participate in the conduct may be relevant to establishing that the required elements of the offence have not been proven against you.

Duress

If you were forced or threatened to commit a tax offence, duress may be relevant depending on the circumstances and the applicable law. Coercion may take the form of threats or pressure from a business associate, employer, or another party. Evidence that you acted under duress and had no reasonable alternative may be considered as part of the defence of the case.