Tax Evasion

Tax evasionIllegal conduct meant to reduce or avoid tax owed. occurs when a person or a business falsifies records, hides income or inflates expenses. The Canadian Revenue Agency (CRA) has many tools at its disposal to detect this activity. If the CRA suspects revenue is not being declared, an audit may be ordered, which could be followed by tax evasion charges.

The Criminal Code does not directly address tax evasion as it is an offence under s.239 of the Income Tax Act and s.327 of the Excise Tax Act. However, tax fraudUsing deceit or false information to defraud tax authorities or the public. could be prosecuted as fraud under s.380 of the Code. Like tax evasion, tax fraud involves using deceit, falsehoods and any other fraudulent means to defraud a person or the public of money or anything else of value. 

The CRA may order an audit to verify that information provided on a tax return is correct. Generally speaking, audits are considered a civil matter and people may be ordered to pay a sum of money to the Receiver General for Canada to remedy their tax situation.

In a criminal investigation, the CRA will launch an investigation to gather evidence to determine if there has been tax evasion, tax fraud or other violations of the law. If investigators believe there has been some serious financial impropriety, they will bring that information to the Public Prosecution Service of Canada, which evaluates whether the laying of a charge is in the public interest and whether there is a high likelihood of a conviction.

According to Tax Evasion: Understanding the Consequences published by the CRA, 140 taxpayers were given more than $17 million in court-imposed fines between April 1, 2017, and March 31, 2022. Jail sentences totalling 119 years were handed down to those who attempted to avoid more than $72 million in taxes.

In the 2021-2022 fiscal year, the CRA noted that tax evasion prosecutions resulted in an 88 percent conviction rate with $3.3 million in court-imposed fines. There were more than 30 investigations ongoing as March 31, 2022, the agency noted, conducted in conjunction with other law enforcement agencies.

According to the Income Tax and Excise Tax acts, those convicted of tax evasion:

• must pay the full amount of taxes owing, plus interest and any civil penalties assessed by the CRA;
• may be fined up to 200 percent of the taxes evaded; and
• may be given a prison sentence of up to two years if the charge is treated as a summary convictionLess-serious criminal offences and up to five years if it is prosecuted as an indictable offenceA more serious type of Canadian criminal offence..

If you are convicted of fraud over $5,000 under the Code, you face a maximum sentence of up to 14 years in prison.

Tax evasion is usually prosecuted under tax statutes such as the Income Tax Act or Excise Tax Act. In some cases, Criminal Code fraud may also be relevant. This page focuses on tax-statute offences.

See the Tax Fraud page for the Criminal Code fraud offence.

Some tax-evasion offences carry minimum fines calculated as a percentage of the tax sought to be evaded. These are financial penalties, not mandatory jail terms.