Taxation and the Criminal Law
Chad J. Brown
Presentation Overview
1.
2.
3.
4.
History of CRA’s Criminal Investigation Program (“CIP”).
Offences and Penalties Overview.
Typical Offenders.
File Chronology.
CRA’s Criminal Investigation Program
• Federal government mandate to be “tough on
crime” created the Public Prosecution Service of
Canada (“PPSC”) in 2006.
• 2011 Report critical of Canada Revenue Agency
(“CRA”)/PPSC performance:
•
•
•
•
Too focused on small cases
25% of cases rejected due to poor investigations
Fines go unpaid
Only 16% of offenders incarcerated versus 81% in the USA
• 1200 convictions and 5000 audits in four years
generated $428 million dollars.
CRA’s Criminal Investigation Program
• Tax evasion cases have high conviction rate.
• 98% of tax evasion charges prosecuted by the
CRA in 2006-2007 resulted in convictions.
• The CRA’s conviction rate has never fallen below
94% in the past five years.
-Canada Revenue Agency’s Annual Report to Parliament 2006/2007
• Impaired driving (79%), assaults/violence (52%)
and property cases (65%).
-Alberta Summit on Justice 1999.
Common Offences
• 239(1) of the Income Tax Act (“ITA”) or
subsection 327(1) of the Excise Tax Act
(“ETA”):
– Paragraph (a): making false or deceptive
statements in a return.
– Paragraph (d): wilfully, in any manner, evaded or
attempted to evade compliance with this Act or
payment of taxes imposed by this Act.
• The Kienapple Principle.
Common Offences
Failure to file a return or failure to comply with an
obligation
Failure to make books and records available
Court order for compliance
False or deceptive statements
Destruction of records
False entries
Omission from records
Wilful evasion
False refund or rebate
Conspiracy
Communicating information
Failure to pay/collect/remit
General offence
Officers of corporations
Income Tax
Act
238(1)
Excise Tax
Act
326(1)
238(2)
238(2)
239(1)(a)
239(1)(b)
239(1)(c)
239(1)(c)
239(1)(d)
239(1.1)
239(1)(e)
239(2.2)
326(2)
326(2)
327(1)(a)
327(1)(b)(I)
327(1)(b)(ii)
327(1)(b)(ii)
327(1)(c)
327(1)(d)
327(1)(e)
328
329(1)
329(2)
330
242
Penalties On Conviction
• Crown proceeds summarily (less serious):
– Fine of 50% to 200% of “tax sought to be evaded”; OR.
– Fine and Imprisonment for a term not exceeding 2 years.
• Crown proceeds by indictment (more serious):
– Fine of 100% to 200% of “tax sought to be evaded.”
– AND imprisonment for a term not exceeding 5 years.
• ITA 243/ETA 331:
– Court CANNOT go below the minimum fine/imprisonment.
Chronology of a Tax Prosecution
• Audit by Verification and Enforcement Division
– Obtains evidence of potential evasion by Taxpayer.
• Actus Reus (the guilty act): the act of committing the crime.
• Men Rea (the guilty mind): the intention to commit the offence.
Must be proven “beyond a reasonable doubt.”
– Much higher burden than civil tax appeals, in which the
Minister must only meet the civil standard of “balance of
probabilities”.
– No “assumptions” in criminal matters. Each element of
the offence must be proven beyond a reasonable doubt.
Chronology of a Tax Prosecution
• T134 - Referral to Investigations
– Verification and Enforcement Division refers matter to
Special Investigations.
– Taxpayer unaware of referral.
– If not rejected, file is accepted for a preliminary
investigation.
– Upon preliminary review, file may be accepted for a
“full scale investigation”.
– This should happen within 60 days of referral.
– Taxpayer’s charter rights arguably apply upon the
referral to CRA Special Investigations Unit.
– See R. v. Jarvis, [2002] S.C.J. 76 (S.C.C.).
Chronology of a Tax Prosecution
• Obtaining and Securing Evidence
– Search warrant (Section 487.1 Criminal Code
(“CC”), Section 231.3 ITA, Section 290 ETA).
– Production orders (CC 487.012 or 487.013).
– Obtaining evidence seized by other law
enforcement agencies (CC 490.15).
– Informed voluntary consent.
– Surveillance.
Chronology of a Tax Prosecution
• Judicial Review of Solicitor and Client Privilege
Claims.
– Documents seized at Taxpayer’s home or business.
– Documents seized at Taxpayer’s accounting
advisors office.
– Documents seized at Taxpayer’s legal counsel.
Chronology of a Tax Prosecution
• Forensic Audit and Document Examination
– CRA completes forensic audit of Taxpayer.
– Where necessary forensic document examiners
will analyze evidence.
• Computer Search and Evidence Recovery
(CSER) Officers analyze digital evidence seized.
• Interviews of Taxpayer and Third Parties
Chronology of a Tax Prosecution
• Preparation of the Prosecution Report.
• Reassessment of Taxpayer, including penalties.
• Letter to Justice recommending charges be
laid.
• Justice reviews the report and exercises
prosecutorial discretion.
Chronology of a Tax Prosecution
• If the PPSC decides to lay an information, the
following then takes place:
1.
2.
3.
Information is laid, and summons is issued and served
upon the accused.
Accused appears and Crown enters election as to whether
it will proceed by (a) summary conviction or (b) indictment.
If indictable:
a)
b)
4.
If summary conviction:
a)
5.
6.
Accused would plea and elect mode of trial, and
Preliminary inquiry may be set and heard. Subsequent to
inquiry will usually be remanded for trial.
Accused enters plea: guilty or not guilty. Scheduled for Trial.
The Crown will provide “disclosure” to the Defence (R. v.
Stinchcombe). Very large files with electronic disclosure.
Matter will proceed to trial, which will result in:
a)
b)
Acquittal, or
Conviction and Sentencing.
What is a Search Warrant?
• Judicial pre-authorization.
• Obtained under section 487 of the CC.
• Information to Obtain.
– reasonable grounds to believe that there is, in a
particular building or place, anything that, there
are reasonable grounds to believe, will afford
evidence that an offence has been committed.
Executing a Search Warrant
• Once the search warrant has been issued by a
judge, the CRA will normally attend at the
place(s) set out in the warrant.
– This will normally occur within a few days of the
warrant being issued.
– The officers from CRA Special Investigations will
usually be accompanied by RCMP officers/City
Police.
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