CRA frowns on taxpayers making false statements and evading taxes

On Aug. 13, Brian Ball and Bluewater Environmental (Western Canada) Inc. of Sarnia, Ont., pleaded guilty in the Ontario Court of Justice to 10 counts of making false statements on income tax returns and five counts of GST evasion. In total, the fines were just shy of $170,000, or 50% of the income taxes and GST evaded, adding considerably to Ball's and Bluewater's tax bills.

From 2004-2008, Ball, the president of Bluewater, diverted funds from Bluewater, including GST that Bluewater had collected, to his personal account, using them to pay credit card bills, insurance, vehicle repairs and debit card purchases. He did not account for any of these funds in his or the company's income tax filings with the Canada Revenue Agency (CRA). Over the four-year period, Ball failed to report $197,499 of personal income taxes, $97,667 in federal taxes and failed to remit $44,305 in GST for Bluewater.

In levying its fines, the Acting Assistant Commissioner of the Ontario Region of the CRA stated: "Canadian taxpayers must have confidence in the fairness of the tax system.î In order to maintain that confidence, tax evaders must be held accountable.

As a result, Ball and Bluewater had to repay all the taxes owing, plus interest and penalties. They were also fined 50% of the amount owing, almost $170,000. It could have been worse, however. The court could have fined them up to 200% of the taxes evaded and imposed a jail term not exceeding five years.

Voluntary Disclosure. If you have previously filed incomplete or incorrect information with the CRA, there is a way you can avoid liability. The CRA offers a Voluntary Disclosure Program (VDP) which allows taxpayers the opportunity to complete or correct previous information. You can only escape penalty or prosecution if you make a valid disclosure, however.

Four conditions must be satisfied if the CRA is to consider your disclosure valid. The disclosure must be:

ï voluntary,

ï complete,

ï involve the application or potential application of a penalty, and,

ï generally include information that is more than one year overdue.

If the CRA accepts your disclosure, it may, under subsection 220(3.1) of the Income Tax Act, cancel or waive penalties or interest otherwise payable. The VDP, however, is an administrative program and, as a result, there is no appeal to the Tax Court if you disagree with the CRA's assessment of your disclosure. You may request a second-level review within the CRA; if your disclosure is again deemed invalid, you can then apply to the Federal Court for judicial review on the basis that the decision is unreasonable. But that is a high threshold to meet.

To make a disclosure, complete form RC199, Taxpayer Agreement ó Voluntary Disclosures Program. RC199 allows you to make a "no-nameî disclosure. In order to do this, however, you must provide the first three characters of your postal code so the CRA can ensure appropriate administrative attention.