Provisions historically used against terrorist financiers or money launderers could prompt more voluntary disclosures
Recently, the Canada Revenue Agency (CRA) made a precedent-setting move: it invoked legislation that allows the confiscation of property obtained from proceeds of crime in a tax-evasion case.
The agency seized six rental properties from Chi Van Ho and Thanh Ha Thi Nguyen, an Ottawa couple who own several rental properties. The two stand accused of concealing over $3 million in income from January 2008 to December 2013, effectively dodging $523,532 in federal taxes.
“The schemes included appropriating funds from multiple corporations under their control for personal purposes, appropriating corporate rental income and manipulation of supplier invoices,” the CRA said when it announced its decision.
Prior to the CRA’s decision, those seizure-of-property provisions had only been used in cases where terrorist financing or money laundering was suspected.
“I can say that this is indeed the first time, but I can promise you that this is not the last time that we [will use] those provisions of the Criminal Code to restrain or seize assets that tax evaders have acquired through their illegal behaviours,” Stéphane Bonin of CRA's criminal investigations division told CBC News.
With the CRA now emboldened to exercise proceeds-of-crime powers in serious tax-evasion cases, other scofflaws have been put on notice. “People who might have done some tax evasion already will see it as a game-changer,” said Marc Tassé, a professor with the University of Ottawa's Telfer School of Management.
Speaking to CBC News, Tassé said the measure isn’t just applicable to domestic properties. For instance, should the CRA suspect that an individual bought a yacht or a vacation home outside Canada from money they gained through offshore tax evasion, the agency could freeze or seize those assets.
Those who dishonestly declare corporate bankruptcy in order to avoid paying taxes may also face consequences.
“If they were to file for bankruptcy, the government wouldn't be able to recover anything,” Tassé said. “But on the other hand, if [the government is] using proceeds-of-crime provisions of the Criminal Code, then at that point they are able to seize it immediately so it protects the assets.”
He said the prospect of a stiffer penalty could prompt people who made omissions or mistakes in their tax filings to participate in the CRA’s voluntary disclosure program. Under the program, those who come clean on their own have a chance to be spared from prosecution and penalties.
“Disclosures that are made before the CRA launches an enforcement action such as an audit or criminal investigation may only result in you having to pay taxes owed plus interest,” the agency said when it announced its sanctions against Ho and Nguyen.
