Canadian tax evasion may lead to imprisonment of up to 2 years
The Canada Revenue Agency (CRA) operates a dedicated unit known as the Criminal Investigations Program. This division is responsible for investigating tax fraud, tax evasion, and other tax-related offences. When appropriate, it refers tax evasion cases to the Public Prosecution Service of Canada (PPSC), typically focusing on cases with a high likelihood of conviction.
Tax evasion generally involves the illegal breach of legal obligations to avoid paying taxes. More specific definitions are provided in sections 238 and 239 of the Income Tax Act and section 327 of the Excise Tax Act (ETA).
Under section 239(1) of the Income Tax Act, a person commits an offence if he:
(a) Make false or misleading statements in a tax return,
certificate, or document submitted to the CRA;
(b) Destroy, alter, hide, or dispose of records to evade tax
obligations;
(c) Falsify or omit entries in taxpayer records;
(d) Willfully evade, or attempt to evade, compliance with the
Income Tax Act; or
(e) Conspire with others to commit any of the above offences.
A person convicted of such offences on summary conviction may face a fine of up to 200% of the evaded tax and/or imprisonment for up to two years. Subsection 239(2) allows for prosecution by indictment, which can lead to a prison sentence of up to five years. Corresponding provisions under subsections 327(1) and (2) of the ETA mirror those in the Income Tax Act.
Additionally, subsection 238(1) of the Income Tax Act stipulates that failure to file or submit required tax returns constitutes an offence, punishable on summary conviction by a fine of up to $25,000 and/or up to one year in prison.
In cases involving serious or deliberate tax fraud, the offender may also be charged under section 380 of the Criminal Code, which carries a maximum penalty of 14 years' imprisonment.
In the U.S., UBS to Pay $511 Million to settle tax evasion case involving hidden offshore accounts
Swiss bank UBS Group AG has agreed to pay $511 million to settle a U.S. Justice Department criminal investigation into Credit Suisse, the bank UBS acquired in 2023. The probe revealed that Credit Suisse assisted wealthy Americans in evading taxes on over $4 billion held in at least 475 offshore accounts. This settlement comes more than a decade after Credit Suisse had pledged to end such practices.
In this latest case, Credit Suisse admitted to conspiring to help affluent clients file false U.S. tax returns between 2010 and 2021, and to repeatedly failing to fully disclose offshore accounts to U.S. authorities. The settlement follows a 2023 U.S. Senate Finance Committee report, which concluded that Credit Suisse had violated the terms of a 2014 plea agreement with the U.S. government.
UBS emphasized that it played no role in the misconduct, which took place prior to its $3.2 billion acquisition of Credit Suisse in a Swiss government-brokered deal aimed at preventing a broader banking crisis.
Canadian voluntary disclosure application
The Voluntary Disclosures Program (VDP) is a policy established by the Canada Revenue Agency (CRA) that allows non-compliant Canadian taxpayers to voluntarily return to compliance with their tax obligations. Through this program, taxpayers can correct previously filed returns, submit unfiled returns for past years, or disclose information that was not previously reported to the CRA up to the most recent ten years.
The VDP offers two programs – the general program and the limited program, and both will waive off any criminal liability if accepted. The Limited Relief stream is reserved for intentional tax non-compliance as well as for corporations with gross revenue exceeding $250 million. The General Program is reserved for everyone else, which offers 100% penalty relief and 50% interest relief (except for the most recent three years).
Pro tax tips – Tax evasion is a serious offence
Tax evasion is a serious criminal offence that can lead to significant fines and imprisonment. However, if the Canada Revenue Agency (CRA) is not yet aware of any false statements or omissions in a taxpayer's filings, the individual may be eligible to make a voluntary disclosure through the CRA's Voluntary Disclosures Program.
However, acceptance into the Voluntary Disclosures Program (VDP) ultimately depends on the discretion of the designated CRA officer reviewing the application. In other words, it is the CRA representative who determines whether all program requirements have been met and whether your application will be approved.
Our experienced Canadian tax lawyers provide comprehensive preparation and submission services for VDP applications, carefully addressing each eligibility criterion to ensure full compliance. This meticulous approach maximizes our clients' chances of being accepted into the general VDP.
FAQ:
What is the penalty for tax evasion?
When convicted of tax evasion:
- You must still pay the full amount of taxes owing, plus interest and any civil penalties assessed by the CRA
- You may be fined up to 200% of the taxes evaded
- You may be imposed a jail term of up to five years
Being convicted of tax fraud carries a sentence of up to 14 years in prison.
What is the voluntary disclosure application?
The Voluntary Disclosures Program grants relief on a case-by-case basis to taxpayers and registrants who voluntarily come forward to fix errors or omissions in their tax filings before the CRA knows or contacts them about it.
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.
