A number of Ontario taxpayers recently felt the brunt of the taxman, receiving jail time and significant fines following convictions for tax fraud and evasion. 

When taxpayers are convicted of tax evasion, they may be liable for the full amount of taxes owing, plus interest and any penalties that may be assessed by the CRA In addition, the court may levy a fine of up to 200% of the taxes evaded and impose a jail term of up to five years.

Recent Cases

  • Not so charitable: A tax preparer, David Ajise, and a charity director, Eto Ekpenyong Eto, were convicted of fraud when they participated in a scheme that generated over $5 million in fraudulent charitable donations for the 2003 to 2005 tax years. The scheme involved preparing fraudulent charitable donation receipts for individuals to claim on their tax returns. The fraudulent receipts resulted in taxes evaded totalling $1,413,166. At sentencing, the tax preparer received a 30 month jail term. The charity director was given a conditional sentence of two (2) years less a day following a guilty plea. 
  • Payroll profiteers: Deborah Dieckmann was sentenced to four years in jail and fined $1.3 million for tax fraud for failure to remit collected CRA payroll deductions and income tax deductions. Her father, George Salmon, who was also involved in the scheme and knowingly used her payroll services to avoid the proper remittances, was sentenced to two years less a day and fined $397,758. During the years in question (2003 to 2006) approximately $5.8 million was not properly remitted to the CRA. Dieckmann and Salmon will receive an additional five and three years in jail, respectively, if they fail to pay their ordered fines within one year of their release from jail. 
  • Cross-border shopping: Najam Mahmood, the owner of a company that provided courses on foreign currency exchange trading, was found guilty of four counts of evading personal income tax and four counts of failing to remit GST. He was sentenced to one year in jail and a fine of $687,000 for having evaded federal income taxes of $475,000. Mahmood transferred more than $200,000 to his U.S. bank account and directed his students to wire payments to the same account. Mahmood did not file returns for the years from 2003 to 2006 and failed to report $3.1 million of income, thus evading $358,600 in income taxes. He also failed to register his business for the purpose of collecting GST. He collected $116,412 in GST from clients and never remitted any of the funds to the CRA. 

Information on other convictions can be found on the CRA website at www.cra.gc.ca/convictions.

Voluntary Disclosure

If you or your corporation, partnership or trust has: omitted to file required income tax or information returns; incorrectly reported taxable income; obtained or claimed inappropriate refunds or credits; or otherwise failed to comply with your tax obligations, you can still come forward voluntarily to correct your tax affairs. Taxpayers who voluntarily come forward to report non-compliance, before the CRA commences any enforcement action against them or related persons, may be eligible for relief under the CRA’s voluntary disclosures (“VD”) program. Taxpayers whose VDs are accepted by the CRA must pay the tax and a potentially reduced amount of interest, while avoiding being subjected to onerous civil penalties and potential prosecution.

In light of the CRA’s new initiatives to crack down on international tax evasion and aggressive tax avoidance, including the recently implemented “offshore tax informant program”, the risk of detection is greater than ever. As a result, there is no time like the present for non-compliant taxpayers to proactively come forward under the CRA’s VD program to avoid the risk of serious penalties and prosecution.