CATCHING THE CROOKS
How the CRA’s Criminal Investigations Program brings tax cheats to justice
Tax evasion is a very serious offence, which is why the Canada Revenue Agency (CRA) uses all the resources at its disposal to discover, prosecute and publicize incidents involving those who evade paying their fair share.
Tax revenues are needed to provide the basic services all Canadians enjoy, and when the wealthy attempt to hide their assets, they force those with less at their disposal to contribute more. As part of its compliance continuum, the CRA administers a Criminal Investigations Program (CIP), which gives the federal agency additional tools to bring offenders to justice.
Cases that involve significant tax evasion — such as those with an international element, tax schemes aimed at defrauding the government, as well as those involving money laundering, terrorist financing or the underground economy — are met with serious fines, a criminal record, jail time and announcement in public media across the country.
“The CRA is committed to ensuring a tax system that is responsive and fair to all Canadians,” explained Lisa Anawati, the deputy assistant commissioner of the International, Large Business, and Investigations Branch of the CRA. “That is why the agency has the resources in place to stop those who are using illegal tax schemes to hide their wealth and place an unfair burden on all other taxpayers.”
Under the Income Tax Act and the Excise Tax Act, Canadian tax evaders can face court fines of between 50 and 200 per cent of the taxes evaded, as well as up to five years in jail. Those who are charged with fraud under Section 380 of the Criminal Code, however, could face jail time of up to 14 years.
Furthermore, convictions by the CRA are published in local, regional and national media to increase the awareness of the agency’s efforts to combat tax evasion at home and abroad, educate Canadians on tax schemes so that they can avoid them and deter tax evasion by showcasing the consequences of noncompliance.
“As a service-based agency, we take our role seriously and aim to keep the public informed of the actions we are taking to combat tax evasion,” explained Anawati. “An effective way of deterring Canadians from hiding their assets offshore has been publishing criminal convictions on our web page and in local media.”
Canadians who think they can hide their assets from the CRA in foreign bank accounts or offshore holding companies should think again. The CRA recently adjusted its strategy to focus on exposing these complex international tax evasion and aggressive tax avoidance efforts.
While the CRA works closely with local, provincial and federal law enforcement agencies, the organization also has strong relationships with international organizations such as the Organization for Economic Cooperation and Development (OECD), and participates in information exchanges internationally.
“It shouldn’t come as a surprise, in the globalized world that we live in today, that tax evasion is increasingly becoming an international concern that requires much co-operation,” Anawati said. “At the CRA, we are working with our partners and networks of partners to share information, which is helping us track down those individuals, corporations and entities that are trying to divert their assets to not pay what they owe. And we are getting results.”
For example, during the five-year period between April 1, 2011, and March 31, 2016, the CRA’s criminal investigations resulted in the conviction of 42 Canadian taxpayers for tax evasion with links to money and assets held offshore. In total, the $34 million in evaded taxes resulted in court fines of $12 million and 734 months of jail time.
In addition, the CRA has commenced several audits and criminal investigations in relation to the recent Panama Papers information leak.
For the same period, total domestic and offshore-related criminal convictions have resulted in 508 convictions involving approximately $120 million in evaded federal taxes, leading to $40 million in court fines and 2,930 months of jail time.
“Cheating on your taxes benefits no one,” Anawati said. “You can face serious consequences, including penalties, a criminal record, heavy court fines and jail terms. It’s just not worth it!”
Fighting international tax evasion is a full-time effort, which is why Diane Lebouthillier, minister of national revenue, announced an investment of $444 million into the CRA, dedicated to cracking down on tax cheats. The CRA is currently conducting audits of more than 820 Canadian taxpayers and pursuing more than 20 criminal investigations in relation to offshore activities. It is these efforts that ensure a level playing field for all Canadians.