Yes, you can be jailed for tax evasion in Canada. The consequences range from hefty fines to prison terms, depending on the extent of the offence.
“The income tax created more criminals than any other single act of government,” said U.S. senator and presidential candidate Barry Goldwater in the 1960s. While we do not believe this sentiment holds true in Canada, the complexities of the Canadian tax code make it easy for people to slip up while filing their tax returns and become a potential target of the Canada Revenue Agency’s (CRA) enforcement efforts. Whether purposeful or by accident, some Canadians evade taxes, and willful tax evasion is a criminal offence.
If the CRA starts questioning your return and you don’t have immediate answers for it, we recommend seeking advice from a tax accountant. Should the CRA accuse you of tax evasion, or if CRA enforcement officers show up at your house with a search warrant, we recommend that you immediately contact a competent criminal fraud defence lawyer , such as those at the Greater Toronto law firm Mass Tsang. A criminal conviction on tax evasion charges carries significant monetary penalties and, in some cases, a prison term. Read on to learn how criminal tax evasion is prosecuted under Canada’s Income Tax Act, Excise Tax Act, and Criminal Code and whether the charges could result in a prison sentence.
The Public Prosecution Service of Canada (PPSC) addresses most cases of suspected tax evasion under Section 238(1) and Section 239 of the Income Tax Act. Section 238(1) primarily covers taxpayers who fail to file or make a return. However, before taking any enforcement action, the CRA typically encourages non-filers to voluntarily file their taxes by sending them notifications about their overdue returns. When a taxpayer continuously ignores such messages, the CRA will usually lay charges under this section of the Act. Failure to file taxes is a summary conviction offence that carries fines of between $1,000 and $25,000 and a prison term of up to 12 months. Those convicted must also file their overdue returns and pay unpaid taxes, interest, and penalties.
Section 239 of the Act covers tax filers who try to evade paying the actual taxes due or claim tax credits or refunds they are not entitled to. Taxpayer activities subject to prosecution under this section of the Act include:
The PPSC typically charges tax evasion under Section 239 as a summary conviction offence, though it can be charged on indictment if approved by the Attorney General of Canada. The summary conviction penalties for a conviction include a fine of between 50% and 200% of tax amounts evaded or false credits/refunds claimed and a prison sentence of up to two years. If charged on indictment, the maximum prison term rises to five years. Offenders must also repay evaded amounts or unwarranted credits/refunds, with interest and penalties.
Tax evasion under the Excise Tax Act is covered by Section 327 of the legislation. Language in this section is nearly identical to the language used to cover tax evasion under the Income Tax Act, and the penalties upon conviction are the same. Business owners and managers who are required to collect and report excise taxes are the most likely to face excise tax evasion charges. Excise taxes are specialty taxes imposed on the production, sale, or consumption of specific goods and services, like fuel, tobacco, alcohol, luxury vehicles, cannabis, and insurance premiums, to name a few.
Offenders convicted of tax evasion under these acts rarely get sentenced to prison, as the CRA primarily focuses on recouping withheld tax amounts. That said, imprisonment is at the presiding judge’s discretion, and may be imposed upon sentencing, especially if the willful evasion was egregious. If especially egregious, suspected tax evaders could also face criminal fraud charges under the Criminal Code.
Can you be jailed for tax evasion in Canada?
Yes, tax evasion can lead to imprisonment in Canada, with penalties varying from fines to up to 14 years in jail, depending on the amount evaded and the severity of the case.
While the PPSC prosecutes tax evasion under the income and excise tax legislation, provincial Crown prosecutors can also charge offenders with criminal fraud when warranted by the severity of the evasion. In general, the Crown is likely to pursue Criminal Code fraud charges on tax evasion cases involving:
Section 380 (1) of Canada’s Criminal Code defines fraud as: “[e]very one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service.” Thus, anyone who commits tax evasion — excepting evasion by failing to file — could be subject to criminal fraud prosecution.
The penalties for a conviction depend on the amount of taxes fraudulently evaded. For amounts below $5,000, the maximum sentence is two years imprisonment if prosecuted as either an indictable or summary conviction offence. Amounts above $5,000 subject the offender to indictable offence prosecution, with a maximum penalty of 14 years imprisonment.
The Greater Toronto Area criminal defence lawyers of Mass Tsang have more than 30 years of tax evasion and fraud defence experience and have successfully defended hundreds of GTA clients against such charges. If the PPSC has charged you with tax evasion or you’re facing related criminal fraud charges from the provincial Crown, turn to our experts to mount a robust criminal defence. For a free consultation on your tax evasion or criminal fraud charges, contact us today .
