You can report others, or be reported yourself, to the CRA for deliberate misrepresentation of income and deductions through the Informant Leads program. In addition, the Stop International Tax Evasion Program collects tax revenue lost due to illegal international tax shelters.
This initiative offers rewards for those who provide information leading to major recoveries of unpaid tax, while the Informant Leads Program supports smaller complaints.
Defining Tax Fraud
“Tax fraud is any purposeful failure to declare income you have received in the course of a year, in order to evade taxes or qualify for government-funded social benefits and systems,” notes Wes Beharrell, certified financial planner with Investors Group Financial Services in London, Ontario.
“This can come through record-free cash transactions, undeclared income, unclaimed tips and gratuities, or simply claiming tax credits or expenses to which one is not entitled,” says Beharrell. The CRA does not prosecute people who forgot to report a tax slip or deducted an ineligible expense — these are caught in the Tax Review program.
Reporting tax fraud helps keep Canada’s tax burden distributed evenly and fairly among taxpayers.
Tax Fraud Reporting
The CRA already accepts information (including anonymous tips) relating to tax fraud, and continues to do so, but rewards are not part of the existing Informant Leads program.
The Stop International Tax Evasion Program initiative targets international tax abuse, and outlines a contract relationship with the person reporting fraud: With recovery of additional federal taxes totaling $100,000 or more, a percentage of these funds is paid to the person providing the information.
The program allows for informant confidentiality but not for anonymous reporting. Funds are paid only after all appeal periods expire and if the person reporting the fraud has not been convicted elsewhere in connection with the tax evasion.
Providing Tax Fraud Information
You can report tax fraud online through regular or electronic mail, by telephone or fax, or in person at a tax office with an available enforcement officer. With the exception of the international program, all other tips and information can be offered anonymously.
Even if you do not make anonymous tips, the CRA is obligated to keep your identity private. Since any action taken by the CRA against fraudulent taxpayers is also confidential, the CRA will not inform you of any investigation, assessment or other action made as a result of your information.
The Voluntary Disclosures Program
The CRA allows for the voluntary declaration of unpaid taxes, inaccurate information, and even unfiled returns through the Voluntary Disclosures Program (VDP). The VDP allows a taxpayer to proactively correct his taxes, potentially avoiding penalties or prosecution. Use Form RC199, the Taxpayer Agreement — Voluntary Disclosures Program, to make a declaration.
You must take action before the CRA does, to qualify for any relieving provisions under such a disclosure. The declaration must be complete and not attempt to hide additional irregularities. The VDP is only used in cases where new information prevents a tax penalty.
For example, if you miss reporting a T information slip, voluntary disclosure is unnecessary, as this would only lead to a reassessment rather than punitive action.
References & Resources
- Wes Beharrell CFP, Division Director, Investors Group
- Canada Revenue Agency: Informant Leads Program
- Canada Revenue Agency: Correct Your Tax Affairs Through the Voluntary Disclosures Program