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CRA has a Criminal Investigation Program (CIP)

CRA has a Criminal Investigation Program (Referred to as “CIP”).

Steven Harper began his get tough on crime program in 2006 by creating the Public Prosecution Service of Canada (“PPSC.”)

Currently CRA is too focused on small cases of which 25% are rejected due to sloppy investigations by CRA staff.

Canada is less likely to give jail sentences than the USA. 16% versus 81%.

Tax evasion cases have high conviction rate. According to CRA 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. However statistics are easily manipulated. But for sure …. for a myriad of reasons, CRA collects a lot of money from convicted tax evaders.

Common Tax Offences

239(1) of the Income Tax Act (“ITA”) or subsection 327(1) of the Excise Tax Act (“ETA”):

Making false or deceptive statements in a return.

Willfully, evaded or attempted to evade compliance with the Acts or evaded payment of taxes imposed by these Acts.

Penalties On Conviction.

There are two ways that criminal charges could proceed.

1. Crown proceeds summarily (less serious):

A fine of 50% to 200% of “tax sought to be evaded”; or fine and imprisonment for a term not exceeding 2 years.

2. 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.

According to the Income Tax Act Section 243/ and the Excise Tax Act Section 331, the court can not go below the minimum fine/imprisonment.

Once a tax payer catches the attention of CRA investigations suspicious mind there is a standard Chronology of steps to a Tax Prosecution.

1. There is an Audit by Verification and Enforcement Division. At this stage CRA will often will take the position that it is still just an audit. But beware… if the auditor is from Verification and Enforcement, you are in trouble if you don’t get professional help.

2. The auditors obtain evidence of potential evasion by Taxpayer.

3. They look for a guilty mind (Actus Reus) and the alleged act of committing the crime.

4. They look for intent (Men Rea) to commit the offence.

5. Intent and criminal act must be proven “beyond a reasonable doubt.”

6. There is a much higher burden of proof than for civil tax appeals, in which the Minister must only meet the civil standard of “balance of probabilities”.

7. Auditors have the power of assumptions in civil matters but there are no “assumptions” in criminal matters. Each element of the offence must be proven beyond a reasonable doubt.

Once criminal intent or act is established, there is a Chronology of steps to a Tax Prosecution

1. There is a Referral to Investigations.

2. There is a Verification and Enforcement Division referral to Special Investigations.

3. The Taxpayer is usually unaware of referral.

4. If not the referral is not rejected by screening, file is accepted for a preliminary investigation.

5. Upon preliminary review, the file may be accepted for a “full scale investigation.”

6. This should happen within 60 days of referral.

7. Taxpayer’s charter rights apply upon the referral to CRA Special Investigations Unit.

8. Obtaining and Securing Evidence.

9. A Search warrant (Section 487.1 Criminal Code (“CC”), Section 231.3 ITA, Section 290 ETA) is obtained, of which there needs to be a Judicial pre-authorization,obtained under section 487 of the Criminal Code.

It must include what Information to Obtain. There needs to be 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.

Once the search warrant has been issued by a judge, the CRA will normally attend at the place(s) set out in the warrant normally within a few days of the warrant being issued.

The officers from CRA Special Investigations will usually be accompanied by RCMP officers/City Police.

10. Production orders (CC 487.012 or 487.013).

11. Obtaining evidence seized by other law enforcement agencies (CC 490.15).

12. Surveillance.

13. Judicial Review of Solicitor and Client Privilege Claims.

14. Documents seized at Taxpayer’s home or business.

15. Documents seized at Taxpayer’s accounting advisors office.

16. Documents seized at Taxpayer’s legal counsel.

17. Chronology of a Tax Prosecution

18. Forensic Audit and Document Examination

19. CRA completes forensic audit of Taxpayer.

20. Where necessary forensic document examiners will analyze evidence.

21. Computer Search and Evidence Recovery (CSER) Officers analyze digital evidence seized.

22. Interviews of Taxpayer and Third Parties

23. Preparation of the Prosecution Report.

24. Reassessment of Taxpayer, including penalties.

25. Letter to Justice recommending charges be laid.

26. Justice reviews the report and exercises prosecutorial discretion.

27. The Public Prosecutor Services of Canada (PPSC) decides to proceed.

28. Information is laid, and summons is issued and served upon the accused.

29. The accused appears and Crown enters election as to whether it will proceed by (a) summary conviction or (b) indictment.

30. If indictable, the accused would plea and elect a mode of trial.

31. Accused enters plea: guilty or not guilty.

32. The case is scheduled for Trial.

33. The Crown will provide “disclosure” to the Defense.

34. Matter will proceed to trial.

35. There will be either an Acquittal or Conviction.

36. If there is a conviction, there will then be a Sentencing.

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