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New CRA tool unlikely to deter tax evaders: Rotfleisch

The Canada Revenue Agency’s (CRA) recent decision to start using the Criminal Code proceeds-of-crime provision to seize the assets of those charged with tax evasion likely has more to do with raising revenues than with general deterrence, Canadian tax lawyer David J. Rotfleisch tells AdvocateDaily.com.

As CBC News reports, the agency recently used the proceeds-of-crime provisions of the Criminal Code for the first time, to freeze the assets of individuals charged with tax evasion. In the case in question, a couple who own a number of rental properties is accused of under-reporting their income between 2008 and 2013 by $3.1 million and evading more than $500,000 in taxes.

They were charged in October, and the CRA has seized or restrained six rental properties and an automobile.

CBC News reports the proceeds-of-crime provisions can also be used to seize property located outside of Canada.

Rotfleisch, founding tax lawyer with Rotfleisch & Samulovitch Professional Corporation explains that tax evasion was not previously an offence to which the proceeds-of-crime provisions were applicable. 

“This is a new tool in the CRA arsenal to use against tax evaders.”

At the same time, Rotfleisch notes that there are a number of potential problems with its use.

Tax evasion has, as part of the penalty, jail time plus a fine of between 100 to 200 per cent of the tax evaded. So monetary forfeiture is an inherent part of the sentencing for someone convicted of tax evasion. By also working under the proceeds-of-crime forfeiture provisions of the Criminal Code, there is an absolute double jeopardy requiring duplicate payments for the same offence," he says.

In terms of whether the CRA’s new approach will ultimately reduce tax evasion, however, Rotfleisch says the initiative has “nothing to do with general deterrence and everything to do with raising revenues.”

“There is a potential jail term of five years for tax evasion. I don't think that funds forfeiture will make any difference to anyone contemplating tax evasion," he says.

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