Canadian Taxation

Make it look like an accident

Published On January 10, 2014 | By Joseph (Ken) | Personal tax


I’m not a huge fan of Jamie Golombrek’s writing at the Financial Post and here’s an example as to why.

What does it take to be jailed in Canada for a tax offence?

“Under our tax system, Canadians can land in jail for a variety of tax offences but the chances of actually going to prison are very small and may become even more unlikely if the Canada Revenue Agency acts on its plan to cut auditors in 2015. Judging from the list of those imprisoned for running afoul of the CRA, your evasion must be pretty egregious to land in the slammer.”

Jamie is making the argument that jail time for a tax offence is fairly unlikely due to:

1) Few occurrences of jail time “While there were dozens of successful convictions in 2013, there appear to only be 15 cases in which taxpayers were actually sentenced to jail time in 2013.”

2) Your evasion must be significant “The CRA found that during the years under review, nearly $6-million was not remitted.” and “he filed fraudulent GST/HST returns thus receiving nearly $10-million in unwarranted refunds” 

Yet at the end of his article he states “So if you’re getting a bit nervous because you haven’t filed a return for a few years – don’t panic. You won’t face jail time right away as the CRA will not lay charges for failure to file a return until you have received a formal demand from the CRA to file which you proceed to ignore.”

Is Jamie now stating that you may face jail time if you ignore a formal demand from the CRA to file?

“If you haven’t filed returns for prior years or haven’t reported all of your income, you can voluntarily correct your tax affairs by coming forward under the CRA’s Voluntary Disclosures Program. The trick is to make the disclosure before you become aware of any compliance action being initiated by the CRA against you and you could avoid penalties, prosecution and even jail.”

Wait, is Jamie now is implying you can face fail time even if you’ve filed your returns, if you haven’t reported all your income.

It’s just bad writing.  

It’s possible that the CRA wants the fear of jail time to exist, as a way of motivating taxpayers to file accurately, but it’s HIGHLY unlikely.  

The cost to prosecute and enforce jail time is significant and it’s not done carelessly, it is done when the evasion is so significant as to be reckless.

In all other cases, significant penalties that are enforced relentlessly is more than enough to ensure taxpayer honestly.

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About The Author

Joseph (Ken)
(Ken) is a Registered Public Accountant with over 25 years of public practice experience in the accounting profession. Ken specializes in accounting information systems, taxation and financial reporting.

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