By: Sheryl Smolkin
Read this article and comments at Moneyville.ca
There are groups and individuals in Canada who think they can lawfully refuse to pay taxes or file a tax return.
Some of these folks maintain that they have a “split personality” for income tax purposes: the natural person who works to earn money and the legal entity the government creates through the issuance of a social insurance number.
They argue that the legal person has to file an income tax and benefit return, but the income received belongs to the natural person, so it is not subject to Canadian income tax. In fact, Canadian courts have repeatedly and consistently rejected all arguments made in these tax protester schemes.
I couldn’t find anyone who could tell me how many people have actually fallen for this scam. However, the CRA website says “people from all demographics are involved in the tax protester movement” and they sent out a media release late last year warning Canadians not to fall for it.
If you do get involved in one of these phony protests, the potential consequences are very serious. Income taxes and interest will be re-assessed, penalties will be charged and you may even be prosecuted for tax evasion. A conviction can result in significant fines and even jail time.
For example, the courts fined an Ontario tax protester approximately $522,000, which represented 150 per cent of the federal taxes evaded. In addition, he was given a one year conditional sentence, and was ordered to pay the fine imposed prior to the end of the year; he had to remain in Ontario and surrender his passport; and he also had to perform 180 hours of community service. Another so-called Ontario “de-taxer” was recently jailed for 60 days for failure to file tax returns.
Whether you fell for the tax protestor scheme or you haven’t been completely honest on previous tax returns, you can voluntarily come forward. You may not be penalized or prosecuted if you make a valid disclosure before becoming aware of any compliance action taken against you by CRA. All you will have to pay is the taxes owing, plus interest. More information about the Voluntary Disclosure Program is available here.
When somebody tries to sell you something that sounds too good to be true, it usually is. Before considering any dubious method of tax evasion, seek advice from your financial advisor, a trusted and knowledgeable tax professional or CRA.