News Article

Taxpayers pay the price of hoodwinking the CRA

Posted: April 25, 2012

The Canada Revenue Agency (CRA) takes the obligations of Canadian taxpayers to pay their taxes honestly and fairly very seriously. As three recent cases show, the CRA is becoming increasingly diligent in its pursuit of that goal ó and the courts equally as conscientious.

ï Two British Columbia men, Sikander Singh Bath and Manjit Singh Khangura, were given jail terms of four and a half years and three years, respectively. Their crime: fraudulent GST rebates. Over a period of three years, the two filed false GST refunds that totaled more than $11 million. Bath was charged with six counts of fraud and Khangura three.

Their scheme took place between August 1994 and August 1997 and involved 13 fictitious companies. Although the companies claimed to be in the lumber business ó and claimed and received GST refunds accordingly ó the court found the companies did no real business to support the GST refunds.

Earlier this year, a co-accused, Paramjit Gill, pleaded guilty to three charges of fraud related to the activities totaling almost $3 million. He was sentenced to two years less a day for his part in the scheme. (Judges often hand down this sentence because it relieves the courts of placing those offenders usually seen as less culpable in a federal penitentiary.)

ï Colwood, B.C., contractor Brian Mark Buchan was convicted of tax evasion on April 16 and fined $28,000. The CRA showed that Buchan failed to report almost $190,000 in business income from self-employment for the taxations years 2004-2006, thus evading $25,432 in federal income taxes. The CRA identified the amount of unreported income by reviewing the T5018 Statement of Contract Payments forms of some of Buchan's larger customers and using other investigative tactics.

ï Earlier this month, Ontario resident Wallace Dove was fined $59,388 and given a nine-month conditional sentence, including four and a half months under house arrest, and 12 months probation. Dove pleaded guilty to creating false documents in order to obtain false refunds from the CRA.

The case revolves around a CRA notice that stated Dove was liable for $118,777. Dove altered the notice to say that $118,777 had been withheld from him, and the CRA owed him a $118,777-refund. During a subsequent audit, the fraud was revealed and Dove was charged. His fine was half the amount of his attempted fraud.

Individuals convicted of tax evasion must repay the full amount of taxes owing, plus interest and any civil penalties that may be assessed by the CRA. Additionally, the court may fine them up to 200% of the taxes evaded and impose a jail term of up to five years.

Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.