Tax Evasion vs Tax Fraud in 2019: Main Difference, Penalties and Jail Sentences
Tax fraud and tax evasion charges in Canada are treated with considerable severity. Recent studies estimate that the CRA (Canada Revenue Agency) misses out on over $50 billion in unpaid taxes every year. Alarming still is the fact that this estimate does not include offshore tax fraud.
If you are facing tax fraud or tax evasion charges in Toronto, or if you are anxious that you may be reported for tax fraud, we strongly recommend that you contact an affordable criminal defence lawyer before you make your next move.
Is Tax Fraud the Same as Tax Evasion?
Tax fraud and tax evasion are two sides of the same coin, but they aren’t synonymous or interchangeable. Tax avoidance, on the other hand, is more of a legal loophole.
Let’s explore these three terms more closely.
What is Tax Fraud?
If you knowingly provide false information on your tax return, you may be guilty of tax fraud. Tax fraud can occur when a taxpayer:
– overstates their expenditures
– neglects to mention their total earnings
– neglects to file a tax return
– claims to reside in one province while actually living somewhere else
This is characterized by a deliberate and knowing misrepresentation in order to pay less tax than is actually owed.
What is Tax Evasion?
Many taxpayers reduce the amount of tax owed through legal means, something that is totally acceptable as far as the CRA is concerned. However, if a taxpayer uses deceitful tactics to conceal or understate their income, or claim deductions that they are not entitled to, then he/she may be guilty of tax evasion.
What is Tax Avoidance?
Tax avoidance is the use of legal loopholes to reduce the amount of tax that one owes. This is something that is totally acceptable to the CRA. Tax evasion pertains to using illegal measures to reduce the amount of tax that is owed by, for example, creating false transactions to elevate one’s expenses over what they are in reality.
Legal Repercussions of Tax Fraud, Tax Evasion and Tax Avoidance
Some of the most burning questions pertaining to tax fraud are, “Can you go to jail for tax fraud or tax evasion in Canada?” and “What is the penalty for tax fraud or tax evasion?”
If you are convicted of tax fraud or tax evasion in Canada, you may be subject to court-ordered fines and jail time, both of which will be reflected on your permanent criminal record.
Interest, Fines and Possible Jail Time
Taxpayers who are convicted of tax fraud or tax evasion will have to pay the full amount of tax that is outstanding as well as any additional interest and civil penalties.
For a Summary Conviction:
Where the Crown proceeds summarily against a taxpayer who has been convicted of tax fraud or tax evasion, the individual also faces two years in prison and must pay anywhere from 50% to 200% of the evaded taxes.
For an Indictment:
Where the Crown proceeds by indictment against a taxpayer who has been convicted of tax fraud or tax evasion, the individual also faces up to 14 years in prison and must pay anywhere from 100 to 200% of the evaded taxes.
The penalty for tax evasion lies anywhere between $1,000 to $25,000.
They’re Always Watching: The CRA’s “Snitch Line” is an Anonymous Tax Fraud Informant Program
The CRA has established a “snitch line” for people to provide anonymous tips relating to tax fraud and tax evasion. Because the snitch line promises total anonymity, it isn’t possible to know who exactly reports these tax frauds or how many people are part of the program. While there is no monetary reward for informants who report minor tax misdemeanours, this is changeable if the information provided to the CRA unveils a tax evasion scam that exceeds $100,000.
By using this line, anyone can report by phone or email. Armed with this information, the CRA will assess the suspect’s tax returns and filing history. If the allegations are found to be valid, the CRA may take the following measures:
– Levies a penalty or fine
– Takes action to collect the outstanding debt
– Initiates a criminal prosecution through the court system
Facing Tax Fraud Charges?
Objecting to a CRA Audit is Time-Sensitive. You Only Have 90 Days to Act on an Appeal!
Tax fraud cases usually involve a large volume of financial documentation that should be carefully assessed. Contact John Erickson; an experienced and qualified criminal defence lawyer in Toronto who has 20 years of experience defending individuals charged with tax evasion.