In a new audit approach CRA has been reviewing the records of
Canadian casinos and sending proposed tax assessments amounting to
multi millions of dollars to Canadian gamblers on the basis of
unreported income. This new audit methodology is a variation of a
net worth assessment, appears to be flawed and results in grossly
inflated proposed gambler income tax assessments. Furthermore CRA
is threatening to charge gross negligence penalties to those
gamblers based on the artificially high tax assessment amounts.
Tax evasion charges for tax fraud are also a strong possibility
when CRA alleges unreported income of such magnitude. Our Canadian
tax law firm is fighting CRA on these files.
CRA has approached Canadian casinos and has audited their
records for large gamers. They produce a report that purports to
show amounts in cash, chips and cheques that were used by large
gamblers to fund their wagers. If reported taxable income of the
casino players does not exceed the CRA wagering calculation from
the casino records then CRA proposes to issue a tax assessment to
the gamblers for the difference. However the reports produced by
CRA are not an accurate record of the actual wagering conducted.
For example if a Canadian gambler exchanges $10,000 for chips, then
wagers and loses $2,000, deposits the remaining $8,000 with the
casino and then withdraws the $8,000 as chips on a subsequent day,
every stage of the funds flow is added as a separate transaction.
So what is in effect $10,000 used to gamble in the casino ends up
as high as $26,000 in the CRA casino gambler tax funds analysis.
This is clearly wrong but is the approach the tax auditors are
taking. CRA also has the ability to apply to court for a Jeopardy
Collection Order , on an ex parte basis, that is to say without
notifying the gambler or his or her Canadian tax lawyer
representative, to seize funds and assets of the gamer, on the
basis that CRA's ability to collect the tax owing is at
This is not a case of CRA alleging unreported casino income or
unreported gambling income. What CRA is saying is that the volume
of what they say is funds gambled in the casino is larger than the
amounts reported from other sources in the tax return of the
gambler. Therefore CRA says there is unreported income.
Our experienced Toronto tax lawyers can provide you with
immediate advice if you have received a letter from CRA threatening
you with a large tax assessment based on their review of casino
records. You need to respond right away to any such proposed tax
assessment based on a casino
tax audit of your gaming records before CRA issues a tax
assessment and proceeds to collect the taxes they say are
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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