A number of Ontario taxpayers recently felt the brunt of the
taxman, receiving jail time and significant fines following
convictions for tax fraud and evasion.
When taxpayers are convicted of tax evasion, they may be liable
for the full amount of taxes owing, plus interest and any penalties
that may be assessed by the CRA In addition, the court may levy a
fine of up to 200% of the taxes evaded and impose a jail term of up
to five years.
Not so charitable: A tax preparer, David
Ajise, and a charity director, Eto Ekpenyong Eto, were convicted of
fraud when they participated in a scheme that generated over $5
million in fraudulent charitable donations for the 2003 to 2005 tax
years. The scheme involved preparing fraudulent charitable donation
receipts for individuals to claim on their tax returns. The
fraudulent receipts resulted in taxes evaded totalling $1,413,166.
At sentencing, the tax preparer received a 30 month jail term. The
charity director was given a conditional sentence of two (2) years
less a day following a guilty plea.
Payroll profiteers: Deborah Dieckmann was
sentenced to four years in jail and fined $1.3 million for tax
fraud for failure to remit collected CRA payroll deductions and
income tax deductions. Her father, George Salmon, who was also
involved in the scheme and knowingly used her payroll services to
avoid the proper remittances, was sentenced to two years less a day
and fined $397,758. During the years in question (2003 to 2006)
approximately $5.8 million was not properly remitted to the CRA.
Dieckmann and Salmon will receive an additional five and three
years in jail, respectively, if they fail to pay their ordered
fines within one year of their release from jail.
Cross-border shopping: Najam Mahmood, the
owner of a company that provided courses on foreign currency
exchange trading, was found guilty of four counts of evading
personal income tax and four counts of failing to remit GST. He was
sentenced to one year in jail and a fine of $687,000 for having
evaded federal income taxes of $475,000. Mahmood transferred more
than $200,000 to his U.S. bank account and directed his students to
wire payments to the same account. Mahmood did not file returns for
the years from 2003 to 2006 and failed to report $3.1 million of
income, thus evading $358,600 in income taxes. He also failed to
register his business for the purpose of collecting GST. He
collected $116,412 in GST from clients and never remitted any of
the funds to the CRA.
If you or your corporation, partnership or trust has: omitted to
file required income tax or information returns; incorrectly
reported taxable income; obtained or claimed inappropriate refunds
or credits; or otherwise failed to comply with your tax
obligations, you can still come forward voluntarily to correct your
tax affairs. Taxpayers who voluntarily come forward to report
non-compliance, before the CRA commences any enforcement action
against them or related persons, may be eligible for relief under
the CRA's voluntary disclosures
("VD") program. Taxpayers whose VDs are
accepted by the CRA must pay the tax and a potentially reduced
amount of interest, while avoiding being subjected to onerous civil
penalties and potential prosecution.
In light of the CRA's new initiatives to crack down on
international tax evasion and aggressive tax avoidance, including
the recently implemented "offshore tax informant
program", the risk of detection is greater than ever. As a
result, there is no time like the present for non-compliant
taxpayers to proactively come forward under the CRA's VD
program to avoid the risk of serious penalties and prosecution.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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