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Last updated: June 10 2025
Tax Evasion & The Consequences
Geoff Currier
Canadians pride themselves on being an honest people. We pay our taxes. That is, almost all of us pay our taxes. But there is a small percentage of individuals and businesses who are guilty of tax evasion. While most of us pay up, there will always be a percentage looking to cheat the government. Tax and financial advisory professionals are highly trained to advise against this and explain the consequences.
How Tax Evasion Occurs. As we’ve written before in the Knowledge Bureau Report, some evade paying taxes because their income is derived from illegal activities such as the drug trade, illegal tobacco sales or human trafficking. Others may be looking for ways to under-report income or over-inflate expenses or tax credits in an effort to avoid paying. CRA takes all of those cases seriously and has hired extra staff in order to catch tax cheaters.
Protect Yourself: It can’t be stressed enough, as someone who is preparing tax returns, that you ensure that your clients are giving you all of their pertinent information and that you specifically ask them if there is anything they are not telling you or that any of the information you have received from them is inaccurate. Your signature, via your efile number, will be going on 
their tax returns.
One of the consequences of filing fraudulent returns or having too many errors is that an efile licence can be revoked. When this happens all efile licences held by the individual or company are revoked. They are difficult to get back once revoked.
A Serious Offence: Tax evasion is defined by CRA as falsifying records and claims, purposely failing to report income, inflating expenses and claiming a fraudulent refund or benefit. It is an offence under section 380 of the Criminal Code. This also includes co-called tax protesters- those who declare that they are outright refusing to pay their taxes. Catching tax cheats is a challenge but this is not to imply that a client should try to get away with not paying taxes.
If caught and convicted of tax fraud, the penalties can be severe, including having to pay the taxes evaded, up to 200% penalty of the amount owed and even jail time of up to five years. Then there are the administrative penalties ( like late filing and gross negligence) plus interest on top of this. Once a person has a criminal record and has been fingerprinted, international travel can become restricted. That record will almost certainly impact any future employment opportunities.
If you have a client who is being audited, this doesn’t mean they are facing possible criminal charges. The CRA views audits as a way to determine if there has been tax avoidance.
However, the CRA says “In a criminal investigation, the CRA investigators gather evidence to determine whether there has been tax evasion, tax fraud and/or other serious violations of tax laws.”
The burden of proof is with the Crown, in the case of tax evasion, which must show beyond a reasonable doubt that there was a deliberate and wilful effort to evade paying taxes. It is relatively rare for a Canadian to be convicted of tax evasion but it does happen.
Some Statistics: Between 2019 and 2024 there were 135 convictions with a total of $25.1 million in fines imposed: 58 individuals received jail time totalling 108 years. CRA determined that these cases represented some $44 million in federal tax evaded.
Considering these figures cover a five year span the number of Canadians convicted of tax evasion is small. Nevertheless, it is incumbent on every tax professional to do everything in their power to ensure that the tax return filed on behalf of their clients is honest and that its accuracy cannot be challenged in a court of law.
Where You Can Report Tax Fraud: CRA has set up two websites to allow people to report suspected tax fraud. The first is for businesses and individuals and the second is specifically for those suspected of offshore tax fraud.
Stay tuned weekly to Knowledge Bureau Report for continuing coverage of breaking tax and economic news and tune in to a new podcast- Real Tax News You Can Use with Evelyn Jacks: podcast@knowledgebureaureport.com
