The Canada Revenue Agency is increasing its efforts to audit and prosecute promoters of tax evasion schemes.
It says tax protesters not only fail to report their own earnings, but they often also conspire to counsel and promote their tax schemes to others.
The CRA puts forward the following arguments:
People can’t be defined as two individuals for tax purposes: one common false arguments tax protester promoters use is the natural versus legal person argument; they define the natural person as the individual performing the labour required to earn income, and the legal person as the legal entity that the federal government creates by issuing a social insurance number.
They apparently allege only the legal person has to file an income tax return, and that their earned income is not subject to Canadian income tax.
All tax protester arguments have been rejected by Canadian courts: the CRA has had great success in bringing tax protesters to justice, and reminds those participating in schemes that they result in penalties and potential prosecution.
For more information on convictions, go to www.cra.gc.ca/convictions.
Most importantly, evaders can correct their mistakes: Under the Voluntary Disclosures Program, they may be able to avoid being penalized or prosecuted if they make a full disclosure before any audit or criminal investigation is started. They’d only have to pay the taxes owing, plus interest.
Advisors could potentially help their clients avoid scammers and protesters by offering tax planning services or referrals. Though Canada has a high compliance rate, clients with complex taxes or cross-border taxes, for instance, need to ensure all bases are covered.
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Cope with inter-jurisdictional tax problems