What is Tax Evasion?
Canada’s Income Tax Act contains a number of serious offences. The most serious charges are in paragraph 239(1) of the Income Tax Act.
Under this provision, it is an offence to make a false or deceptive statement in a tax return, certificate, statement or answer filed or required by the Income Tax Act.
It is an offence to destroy, alter, dispose of your books of account if that is done with the intent of avoiding tax.
It is an offence to willfully evade compliance with the Income Tax Act or the requirement to pay taxes.
It is an offence to conspire together with someone else to do any of the above.
These are the primary offences that can lead to criminal prosecution. There are also a number of important regulatory offences.
Is Tax Evasion a Criminal Offence in Canada? Can I get a Criminal record for Tax Evasion?
The answer to these questions is “yes”. An offence prosecuted under the Income Tax Act is prosecuted as if it were an offence under the Criminal Code of Canada.
Are there any Defences Available to Tax Evasion Charges?
Yes. Every case is different and an experienced tax evasion defence lawyer should assist you with your case. However, here are some defences that may apply to your case.
- Accounting – If you relied on your accountants and the accountants were negligent, you may not have the guilty mind to justify a conviction.
- Age, Infirmity – This defence will only succeed in the rarest of occasions where a disability is the actual cause of the tax evasion.
- Negligence – In extreme cases, a tax payer may be able to establish that the failure to comply with the Income Tax Act was part of an overall pattern of neglect and lack of sophistication.
- Ignorance, Mistake of Law – Again rare, in some cases it may be able to argue that aggressive tax planning that crosses the line unintentionally does not create the guilty mind required for a criminal prosecution. This is the “honest but mistaken belief” defence.
- Limitation Periods – For summary conviction offences, there may be a limitation defence.
- Estoppel – Described as “elusive” by one commentator, there may be a defence available in certain limited situations where tax found to be owing by one tax payer (such as a corporation) is then also assessed against an individual tax payer.
- Due Diligence – If the tax payer is required to file a notice or other return and places it in the hands of his or her accountant, and the accountant fails to complete the required work, a defence of due diligence may be made out in some circumstances.
- Permissive Deductions – This defence refers to situations where it turns out that the tax payor’s income was not actually underreported because there were deductions which could have been made.
- Duplicity – This defence essentially means that a tax payor cannot be charged with more than one offence in the same count on an indictment.
- R v. Kienapple – You cannot be convicted more than once for the same offence.
Is there any Other Way to Challenge my Tax Evasion Charges?
Yes. Your criminal defence lawyer may be able to advance an argument that there has been a breach of the Canadian Charter of Rights and Freedoms. In particular, your lawyer will examine whether the gathering of evidence against you violated your right against self-incrimination. The relevant sections of the Charter in these cases are 7, 8, 10, 11 and 13.
If the Court finds, as it sometimes does, that the evidence was improperly obtained by the State, s. 24 of the Charter may apply. In some cases that evidence will be excluded.
The Crown (government) also has an obligation to disclose to the accused tax payor all relevant information relevant to the defence of the charge. Failure to comply with that obligation may also lead to a Charter breach.
Similarly, excessive delay in the prosecution of the charge may lead to a remedy under the Charter. In some cases, delay will lead to a stay of the charges.
If you or someone you know is being investigated or audited for suspected tax evasion charges, you need advice from an experienced criminal defence lawyer with a practice in tax evasion defence. Richard Auger at Auger Hollingsworth is currently meeting with selective clients with criminal tax problems or prospective criminal tax problems.