Tax Fraud Archives

Tax Alert: Tax cheating software?

The Canada Revenue Agency has released a Tax Alert warning businesses against using tax cheating software.

According to the CRA, electronic sales suppression software is currently being marketed and sold to Canadian businesses allowing business to hide income and evade taxes. CRA reminds Canadian businesses that tax evasion is against the law and could result in severe penalties.

"Electronic sales suppression software is designed to work with point-of-sale systems and electronic cash registers. Businesses use the software to delete a portion of sales from their computer records to evade payment of income and sales taxes. In some cases, restaurant owners who suppressed sales using this software have collected taxes from patrons and not remitted them to the CRA as required by law.

The CRA has over 5,000 employees dedicated to finding unreported business income and ensuring that the proper amount of taxes is paid, even when sales records are missing.

The CRA is working to identify those who develop, sell, or use the software. Businesses that have used electronic sales suppression software are suspected of having hidden thousands of transactions and millions of dollars in sales. Once caught, these tax cheaters will face penalties, court fines, and possibly even jail. They will also have to pay the taxes they tried to evade, plus interest.

Although customers may not notice if a business is using electronic sales suppression software, they can do their part to ensure tax compliance by always requesting a copy of their receipt. Businesses which evade taxes are placing an unfair burden on the individuals and other businesses that accurately report their income and pay the taxes they owe."

For more information on this CRA Tax Alert, please see:
http://www.cra-arc.gc.ca/nwsrm/lrts/2008/l081210-eng.html

Tax Alert Warning: Investing in schemes that promise you tax-free withdrawals from RRSPs and RRIFs could result in you losing your retirement savings

According to a tax alert issued by the Canada Revenue Agency, the CRA is finding an increasing number of questionable Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) tax-free withdrawal schemes. As such, the CRA is warning Canadians that "investing in such schemes could result in you losing your entire retirement savings to unscrupulous promoters and in a reassessment of your tax returns."

Stats and Facts
- To date, the CRA has reassessed over 3,100 taxpayers who participated in these schemes resulting in additional taxable income of approximately $144 million.
- Audits of another 1,800 taxpayers with $84 million in RRSP and RRIF investments are currently underway.
- Audits on other arrangements are about to begin.

Questionable RRSP/RRIF schemes
Taxpayers should avoid schemes that promise the following:

- Withdrawal of funds from an RRSP or RRIF without paying tax. Promoters often promise to return part of the taxpayer's investment by offshore debit or credit cards, offshore bank accounts, or loan-back arrangements;
- Immediate access to assets in “locked-in” RRSPs or RRIFs;
- Income tax deductions of three or more times the amount invested in an RRSP;
- Unrealistic returns on investments.

For more information on this tax alert, please see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071129-e.html

Tax Alert: Email Fraud Alert

The Canada Revenue Agency is warning Canadians about email fraud. According to the CRA, "numerous individuals are receiving emails that are falsely identified as coming from the Canada Revenue Agency (CRA) confirming the registration of a complaint case. This email is not from the CRA." The fraudalent emails pertain to complaints made to the CRA by individuals about identity theft.

The web links within the fraudulent email contain harmful software. If you receive this email, you should delete it. The CRA has already notified the proper authorities of this illegal activity.

A copy of the fraudulent email, which identifies individuals by name, is included on the CRA web site to help you better identify the scam.

For more information, including a sample of the fraudalent email, please see:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a071119-e.html

$8.1 million GST scam involving businessman and phantom cars

According to a Canada Revenue Agency news release, a BC man was sentenced by the Supreme Court of British Columbia after being convicted on seven counts of Goods and Services Tax (GST) fraud and failure to remit GST. He was sentenced to two years less a day in prison and fined $6.9 million.

According to the CRA, an investigation found that as a Director an automative dealership, the man received or attempted to receive $8.1 million in GST refunds as part of an auto export scam. Over 1,600 brand new vehicles were claimed to have been purchased at cost plus GST from an unrelated company. According to the CRA, "the key to the scam was that the vehicles did not actually exist; the transactions were created on paper only."

The company would then “re-sell” the fictitious vehicles back to the other company without charging GST, claiming they were destined for export, filing GST returns requesting credits for the amount of GST paid for the purchase of the vehicles. These returns resulted in sizable refunds.

"When people or corporations are convicted of tax evasion, in addition to any fines imposed by the courts, they are still obligated to pay the full amount of federal and provincial taxes owing, plus interest and any civil penalties that may be assessed by the CRA."

For more information, please see the full news release at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/august/nr070828-e.html

CRA Alert: Don't get involved in illegal tax filing!

The Canada Revenue Agency has issued an alert to inform Canadians that if the refund sounds too good to be true, maybe it is!

"If you hear about a tax preparer offering larger refunds than other preparers, don't be fooled! While most preparers provide excellent service to tax filers, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients.

Remember that even if someone else prepares your tax return, you're the one responsible for all the information on the return."

For more information on this alert, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070109-e.html

CRA Alert: Don’t be fooled by unsolicited e-mails or phone calls!

The Canada Revenue Agency (CRA) is warning the public to beware of a number of scams in which individuals falsely identify themselves as officials from the CRA or the Department of Finance Canada. The scams are circulating by both e-mail and telephone.

According to the CRA website, "There are many versions of the scam, but the general concept remains the same: the victim receives an unsolicited phone call from an individual claiming to be a government official or an e-mail from a legitimate-sounding generic e-mail account that appears to come from a government organization." The individual asks the victim to send money in order to receive a lottery winning or tax refund.

The CRA reminds Canadians, "Do not, under any circumstances, respond to any unsolicited e-mail or telephone call asking you for money or confidential banking information. Instead, immediately contact your local police department or the Royal Canadian Mounted Police."

For more information on these e-mail and telephone scams, and for tips on avoiding being a victim of these scams, please see the CRA website at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070104-e.html

CRA takes measures to prevent sale of illegal cigarettes

The Canada Revenue Agency strengthens its measures to prevent the sale of illegal tobacco products

The Canada Revenue Agency announced that in cooperation with the Royal Canadian Mounted Police (RCMP) and Revenu Québec, the CRA has launched an awareness campaign on the effects of the sale of illegal tobacco products. The campaign reflects the federal government's desire to combat non-compliance with tobacco tax legislation.

"Tobacco contraband activities result in a major loss in revenue, both federally and provincially, and compromise fiscal integrity and government initiatives" according to John McCallum, Minister of National Revenue.

The February 2005 federal budget allocated eight million dollars to the CRA over five years to implement key initiatives at three different stages of the tobacco production and distribution system: enhancements to the stamping and marking regime for manufactured tobacco products, increased audit activities for tobacco manufacturers, and increased monitoring and tracking of raw leaf tobacco.

For the full news release, visit the CRA's web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/sep/nr050927-e.html

$500k fine and 2 years for GST fraud

Today the Canada Revenue Agency issued a news release citing a case of GST tax fraud in British Columbia.

The news release stated that Rolf Van Nuys and Valley Heavy Equipment Inc. pleaded guilty to 14 counts of GST fraud in Abbotsford Provincial Court. The Abbotsford businessman was sentenced to two years and six months in jail. He and the company were fined $501,830.

More information is available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/feb/0202vancouver-e.html

The CRA also reported a near $350,000 fine to a London travel agency director for tax evasion. According to the CRA web site, Walter T. Whale, director of 556032 Ontario Limited (operating as Travelsource Network) was fined $254,060 for failing to remit $127,030 in GST, and fined $7,760 for evading the payment of federal corporate income taxes for the taxation years of 1995 to 1999.

More information is available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/prosecutions/on/0202london-e.html