CRA Criminal Tax Investigation Lawyers
Under investigation for tax evasion or tax fraud? Our tax lawyers represent individuals and businesses facing CRA criminal investigations and tax prosecutions.
Facing a CRA Criminal Tax Investigation?
A criminal tax investigation is fundamentally different from an ordinary CRA audit.
The Canada Revenue Agency’s Criminal Investigations Program (CIP) investigates serious allegations of tax evasion, tax fraud, false refund claims, GST/HST offences, and other potential criminal violations of Canada’s tax laws.
A criminal investigation can involve interviews, search warrants, seizure of records and electronic devices, banking information, third-party evidence, forensic analysis, and eventually criminal charges.
At KR Law Firm, our tax lawyers represent individuals, business owners, corporations, and other taxpayers facing CRA criminal investigations and tax-related prosecutions. We assist clients from the early investigative stage through interactions with CRA investigators, evidence review, prosecution, and court proceedings.
What Is a CRA Criminal Tax Investigation?
CRA criminal investigations are conducted through the Criminal Investigations Program.
The program focuses on serious cases in which the CRA believes there may have been deliberate violations of Canadian tax law rather than ordinary filing mistakes or disagreements over how tax legislation should apply.
A criminal tax investigation may involve allegations such as:
- Wilfully failing to report income;
- Keeping false or misleading books and records;
- Claiming fraudulent deductions, credits, refunds, or benefits;
- Using false invoices or documentation;
- GST/HST evasion or fraudulent refund claims;
- Payroll-related tax offences;
- Offshore or international tax evasion;
- Underground-economy or cash-business activity;
- Participation in fraudulent tax schemes; or
- Conspiring with another person to evade tax.
Not every tax error or CRA reassessment is criminal. Criminal prosecution generally concerns intentional or wilful conduct rather than an ordinary disagreement over tax law.
What Types of Cases Does the CRA Criminal Investigations Program Target?
The CRA states that its Criminal Investigations Program prioritizes significant cases involving matters such as:
- Serious tax evasion involving international or offshore elements;
- Promoters of sophisticated or organized tax schemes;
- Joint investigations involving other law-enforcement agencies;
- Significant income tax evasion;
- Significant GST/HST evasion;
- Underground-economy activity;
- False refunds, benefits, or credits; and
- Other serious violations of tax legislation.
The seriousness of the alleged conduct, available evidence, amounts involved, and likelihood of prosecution can affect whether a matter is accepted for criminal investigation.
How Does a CRA Criminal Investigation Begin?
A criminal investigation can begin from several sources.
These may include:
- A referral from a CRA audit or compliance program;
- Information received through a CRA leads or informant program;
- Information from another law-enforcement agency;
- Foreign or international information-sharing;
- Third-party information;
- Publicly available information; or
- Evidence identified during another CRA investigation.
An ordinary CRA audit does not automatically become a criminal investigation.
However, where information identified during an audit creates concerns about deliberate tax evasion or fraud, the matter may be referred internally for consideration by the Criminal Investigations Program.
CRA Audit vs. Criminal Tax Investigation
Understanding whether you are dealing with an audit or a criminal investigation is extremely important.
A CRA audit is generally an administrative process used to determine whether a taxpayer has correctly reported income and complied with Canadian tax legislation.
A criminal investigation is conducted for the purpose of investigating potential offences that could result in prosecution, criminal fines, imprisonment, and a criminal record.
The legal powers available to the CRA and the taxpayer’s constitutional protections can differ significantly once the predominant purpose of an inquiry becomes criminal investigation.
If you are dealing with an ordinary audit, learn more about our CRA audit representation.
Your Rights During a CRA Criminal Investigation
Taxpayers facing a criminal investigation have important rights under Canadian law, including protections under the Canadian Charter of Rights and Freedoms.
Once an inquiry has crossed from administrative tax verification into a criminal investigation, constitutional protections against self-incrimination and unreasonable search and seizure become particularly important.
The Supreme Court of Canada has recognized that the CRA cannot use its ordinary administrative audit powers for the predominant purpose of gathering evidence for a criminal prosecution.
For this reason, taxpayers who learn that they are the subject of a criminal investigation should obtain legal advice before answering questions, providing voluntary statements, consenting to searches, or making decisions concerning potentially incriminating material.
Can the CRA Use Information From an Earlier Audit?
Potentially, yes.
Information and documents lawfully obtained during a legitimate administrative audit may, in some circumstances, later be provided to CRA criminal investigators.
However, once the predominant purpose of the CRA’s inquiry becomes determining penal liability, the CRA cannot simply continue using its administrative inspection and requirement powers as a substitute for criminal investigative procedures.
The distinction between the audit stage and criminal-investigation stage can therefore become an important issue in a tax prosecution.
What Investigative Powers Can Be Used?
Depending on the circumstances and applicable judicial authorization, CRA criminal investigators may:
- Interview taxpayers and witnesses;
- Obtain banking and financial information;
- Review accounting and tax records;
- Analyze electronic records and communications;
- Work with other law-enforcement agencies;
- Obtain search warrants;
- Search homes, businesses, offices, or other locations where authorized;
- Seize documents and electronic devices;
- Conduct forensic analysis of seized evidence; and
- Prepare an investigative report for potential prosecution.
CRA Search Warrants
A search warrant is one of the most serious developments in a criminal tax investigation.
CRA investigators may seek judicial authorization to search locations where they believe evidence of a tax offence may be found.
A search can involve the seizure of:
- Business records;
- Accounting files;
- Computers;
- Phones;
- Email or electronic records;
- Banking documents;
- Contracts and invoices;
- Corporate records; and
- Other potentially relevant evidence.
If CRA investigators arrive with a search warrant, the warrant should be reviewed carefully and legal counsel should be contacted as soon as possible.
Interviews and Statements to CRA Investigators
Statements made during a criminal investigation can become important evidence.
Before participating in an interview with CRA criminal investigators, a taxpayer should understand:
- Whether the person is being investigated or interviewed as a witness;
- The nature of the suspected offence;
- The potential consequences of answering questions;
- The person’s Charter rights;
- Whether documents or information are being requested voluntarily or under legal authority; and
- Whether legal counsel should be present.
Providing inaccurate or misleading information to investigators can create additional problems. At the same time, a person under criminal investigation should not make potentially self-incriminating statements without understanding the legal implications.
What Happens After the CRA Completes Its Investigation?
If CRA investigators believe the evidence supports prosecution, they may prepare an investigation report and refer the matter to the Public Prosecution Service of Canada (PPSC).
The PPSC is independent from the CRA.
Federal prosecutors review the evidence and determine whether criminal prosecution should proceed.
If charges are pursued:
- Charges may be laid;
- The accused will be required to appear in court;
- The prosecution must provide disclosure of its case;
- The accused can challenge the prosecution’s evidence;
- Pre-trial motions may be brought where appropriate; and
- The matter may ultimately proceed to trial or another resolution.
The Crown bears the burden of proving the offence beyond a reasonable doubt.
Tax Evasion Offences Under the Income Tax Act
Section 239 of the Income Tax Act creates several criminal offences relating to deliberate tax non-compliance.
These can include knowingly or wilfully:
- Making false or deceptive statements in a return, certificate, statement, or answer;
- Destroying, altering, mutilating, hiding, or otherwise disposing of records to evade tax;
- Making false or deceptive entries in books or records;
- Omitting material information from books or records;
- Evading or attempting to evade compliance with the Income Tax Act;
- Evading or attempting to evade payment of tax; or
- Conspiring with another person to commit a tax offence.
Penalties for Income Tax Evasion
The consequences of a criminal conviction can be serious.
For many offences under section 239 of the Income Tax Act, a person prosecuted by summary conviction may face:
- A fine generally ranging from 50% to 200% of the tax sought to be evaded; and
- Imprisonment for up to two years.
Where the Attorney General elects to proceed by indictment, a conviction may result in:
- A fine generally ranging from 100% to 200% of the tax sought to be evaded; and
- Imprisonment for up to five years.
The taxpayer may also remain responsible for the underlying tax, interest, and other amounts that continue to be legally payable.
Tax Fraud and Other Criminal Charges
Tax-related conduct can sometimes result in charges beyond the specific tax-evasion offences in the Income Tax Act or Excise Tax Act.
Depending on the allegations, prosecutors may consider offences involving:
- Fraud;
- False documents;
- Forgery-related conduct;
- Conspiracy;
- Money laundering;
- Possession of proceeds of crime; or
- Other offences arising from the alleged scheme.
CRA states that a conviction for fraud can carry substantially greater imprisonment exposure than a tax-evasion conviction alone.
GST/HST Criminal Investigations
Serious GST/HST non-compliance can also result in criminal investigation.
Potential allegations may involve:
- False GST/HST returns;
- Fraudulent input tax credit claims;
- False refund claims;
- Fabricated invoices;
- Unreported taxable sales;
- Participation in carousel or invoice schemes;
- Intentional concealment of business activity; or
- Other deliberate GST/HST evasion.
Criminal GST/HST offences can lead to prosecution under the Excise Tax Act and, depending on the facts, other federal criminal legislation.
Offshore Income and International Tax Investigations
CRA identifies significant tax-evasion matters involving international elements as an enforcement priority.
Criminal investigations may involve allegations concerning:
- Unreported offshore accounts;
- Foreign corporations or trusts;
- Unreported foreign income;
- Offshore property or investments;
- International transfers of funds;
- False ownership arrangements;
- Foreign entities allegedly used to conceal income; or
- Cross-border tax schemes.
International investigations may involve information received through foreign tax authorities, law-enforcement cooperation, financial institutions, or other sources.
What Is the Role of Intent in a Tax Evasion Case?
Criminal tax evasion generally requires proof of deliberate or wilful conduct.
An incorrect tax return does not automatically establish criminal tax evasion.
Depending on the charge, important issues may include:
- What the taxpayer knew;
- Whether information was intentionally concealed;
- Whether false records were knowingly created;
- Whether the taxpayer relied on professional advice;
- Whether the conduct resulted from negligence, misunderstanding, or mistake rather than deliberate evasion;
- The taxpayer’s communications and conduct; and
- Whether the prosecution can establish the required mental element beyond a reasonable doubt.
The distinction between an incorrect tax position and intentional criminal conduct can be central to the defence.
Can the Voluntary Disclosures Program Prevent Criminal Prosecution?
Potentially, but timing is critical.
Under the CRA’s current Voluntary Disclosures Program, an eligible taxpayer who receives VDP relief is protected from referral for criminal prosecution regarding the information disclosed.
However, taxpayers who are already under an audit or investigation concerning the information being disclosed are generally not eligible for the program.
The VDP should therefore not be treated as a solution after a criminal investigation has already begun.
A taxpayer who discovers serious historical non-compliance before an audit or investigation begins should obtain advice promptly about whether a voluntary disclosure may be available.
Learn more about our Voluntary Disclosures Program services.
Should You Make a Voluntary Disclosure Before the CRA Contacts You?
Where a taxpayer discovers past non-compliance and the CRA has not begun an audit or investigation concerning that issue, a VDP application may provide significant protection.
Under the current VDP framework, eligible applications can receive penalty and interest relief and protection against criminal prosecution concerning the disclosed information.
Some taxpayers who have already received certain CRA compliance communications may still qualify for partial VDP relief, provided they are not already under audit or investigation concerning the disclosure.
Because eligibility can change once CRA enforcement activity begins, legal advice should be obtained before making contact with the CRA.
Can a Criminal Investigation and Civil Tax Assessment Happen at the Same Time?
Yes.
A taxpayer can face both criminal and civil tax consequences arising from the same underlying conduct.
The CRA may assess or reassess taxes owing while criminal investigators separately investigate potential offences.
This can create overlapping issues involving:
- Tax assessments and reassessments;
- Civil penalties;
- Interest;
- Notices of Objection;
- Tax Court proceedings;
- Criminal charges; and
- Collection activity.
The strategy for the civil tax dispute should be coordinated carefully with the criminal defence because evidence or statements made in one proceeding may affect another.
CRA Objections During a Criminal Tax Matter
If the CRA issues an assessment or reassessment arising from the same facts as a criminal investigation, the taxpayer may also need to preserve objection rights.
The deadline to challenge an assessment continues to matter even where criminal proceedings are ongoing.
The civil tax dispute and criminal prosecution are legally distinct, although they may involve overlapping evidence.
Learn more about our CRA tax objection services.
Tax Court Proceedings and Criminal Prosecutions Are Different
The Tax Court of Canada generally determines civil disputes concerning tax assessments.
Criminal tax prosecutions are not ordinary Tax Court appeals.
Criminal charges are prosecuted through the criminal justice system, while the underlying assessment may separately be challenged through CRA Appeals and, where appropriate, the Tax Court of Canada.
Learn more about our Tax Court appeal representation.
How Our Tax Lawyers Assist With Criminal Tax Investigations
1. Assess the Investigation and Immediate Risk
We review CRA correspondence, investigator communications, audit history, search warrants, document requests, charges, and other information to determine the stage and seriousness of the matter.
2. Advise on Communications With CRA Investigators
We advise clients before interviews or communications with investigators and can communicate with CRA officials on the client’s behalf where appropriate.
3. Protect Charter and Procedural Rights
We assess whether the CRA’s investigative conduct complied with applicable constitutional and statutory requirements, including issues involving searches, seizures, compelled information, and statements.
4. Review Search Warrants and Seized Evidence
Where a search has occurred, we review the warrant, the scope of the search, seized materials, and related investigative procedures.
5. Review Disclosure and the Crown’s Evidence
Once charges are laid, we review prosecution disclosure, financial records, witness evidence, expert material, electronic evidence, and the theory of the alleged offence.
6. Develop the Defence Strategy
Depending on the circumstances, defence issues may involve:
- Lack of criminal intent;
- Reasonable reliance on professional advice;
- Incorrect assumptions about the taxpayer’s knowledge;
- Problems with CRA calculations;
- Charter violations;
- Search-and-seizure issues;
- Admissibility of statements or documents;
- Weaknesses in witness evidence; or
- Whether the prosecution can prove each element beyond a reasonable doubt.
7. Represent Clients in Criminal Proceedings
Where charges have been laid, we can advise on the prosecution process and provide representation in relation to the tax charges and associated proceedings within the scope of our retainer.
What Should You Do If the CRA Contacts You About a Criminal Investigation?
If you learn that you are the subject of a CRA criminal investigation:
- Do not destroy, alter, conceal, or fabricate records;
- Do not provide false or misleading information;
- Do not assume the matter is merely a routine audit;
- Keep copies of CRA correspondence and documents provided to you;
- Record relevant dates, names, and communications;
- Obtain legal advice before participating in a voluntary interview or making potentially incriminating statements; and
- Seek immediate advice if a search warrant has been executed or charges have been laid.
Why Work With KR Law Firm on a Criminal Tax Matter?
Criminal tax matters combine complex tax law, evidence, procedure, and potential criminal consequences.
- Tax-Focused Representation: We understand the underlying income tax, GST/HST, and CRA compliance issues that can lead to criminal investigations.
- Early Investigation Strategy: We assess the matter before charges are laid where possible and advise clients on interactions with CRA investigators.
- Coordination of Civil and Criminal Issues: We consider how audits, reassessments, objections, collections, and criminal proceedings may interact.
- Evidence and Charter Analysis: We assess search warrants, investigative evidence, statements, and potential constitutional issues.
- Confidential Legal Advice: Communications between clients and their lawyers are generally protected by solicitor-client privilege, subject to applicable law.
Frequently Asked Questions About CRA Criminal Tax Investigations
Does every CRA audit involve a criminal investigation?
No. Most CRA audits are administrative. A criminal investigation generally arises where the CRA suspects serious and deliberate violations of Canada’s tax laws.
How do I know if CRA Criminal Investigations is involved?
You may be contacted by a CRA criminal investigator, receive requests or cautions associated with an investigation, be asked to participate in an interview, or become subject to a search warrant. Sometimes an investigation also develops from an earlier audit.
Can the CRA search my home or business?
CRA criminal investigators may obtain judicial authorization to conduct searches and seize evidence where the legal requirements for a warrant are satisfied.
Do I have to speak to CRA criminal investigators?
The answer depends on the circumstances and the legal authority being exercised. A person who is the subject of a criminal investigation should obtain legal advice before participating in a voluntary interview or making potentially incriminating statements.
What is the maximum penalty for income tax evasion?
Under section 239 of the Income Tax Act, offences prosecuted by indictment can result in fines generally ranging from 100% to 200% of the tax sought to be evaded and imprisonment for up to five years.
Do I still have to pay the tax if I am convicted?
Yes. A criminal prosecution does not ordinarily eliminate the underlying tax liability. Tax, interest, and other legally payable amounts may remain owing in addition to criminal consequences.
Can a tax mistake result in criminal charges?
An innocent error does not automatically amount to tax evasion. Criminal tax offences generally require proof of deliberate or wilful conduct. The prosecution must prove the required elements beyond a reasonable doubt.
Can the Voluntary Disclosures Program protect me from prosecution?
An eligible VDP application can provide protection from criminal prosecution concerning the disclosed information. However, taxpayers already under audit or investigation concerning that information are generally not eligible.
Can I file a Notice of Objection while a criminal investigation is happening?
Potentially, yes. A civil assessment and a criminal investigation are separate matters. If an assessment or reassessment has been issued, applicable objection deadlines should still be reviewed carefully.
Who decides whether criminal tax charges are prosecuted?
CRA investigators gather evidence and may refer the case to the Public Prosecution Service of Canada. The PPSC independently assesses whether prosecution should proceed.
Can CRA audit powers be used to build a criminal case?
CRA may use ordinary audit powers for genuine tax-administration purposes, and information lawfully obtained during an audit can sometimes later be shared with investigators. However, once the predominant purpose of the inquiry becomes criminal investigation, important Charter restrictions apply to the use of administrative compulsion.
Speak With a Lawyer About a CRA Criminal Tax Investigation
If you have been contacted by CRA criminal investigators, served with a search warrant, questioned about suspected tax evasion, or charged with a tax offence, obtaining legal advice promptly can be important.
KR Law Firm can assess the investigation, review the underlying tax issues and available evidence, advise on your rights, and develop a strategy for the civil and criminal aspects of the matter.
Contact KR Law Firm to Book a Free Consultation with one of our tax lawyers.