Category Archives: Tax Fraud

The Difference between Tax Evasion and Income tax Fraud?

There is a significant difference between the concept of income tax evasion and that of an income tax fraud. A comparison can be done by drawing a parallel to the Government of Switzerland and its tax treaty with the United States of America. For example, the Swiss Government will shield its largest bank from the investigative clutches of the tax authorities in the case of a tax evasion concept while an income tax fraud will signify a person who holds a Swiss bank account for the purpose of hiding illegal wealth.

To expand the example further, Switzerland is a place with full tax jurisdiction but it is also famous for its secrecy laws in the banking sector. About five years ago, the United States Justice Department deferred the prosecution of UBS AG, the largest Swiss Bank, in exchange for the revelation by the bank of the identity of about three hundred clients who were resident of USA. The bank, ultimately, acknowledged its contribution and participation in the violation of the laws of the United States. Secrecy or no secrecy, such principles or schemes contribute in defrauding the country from where the residents store their illegal and undisclosed wealth in Swiss banks, amounting to an income tax fraud.

Even then, the deferral of the criminal prosecution did not hold back the IRS from chasing claims against the U.S. taxpayers. IRS issued summons to UBS AG Bank asking for confidential information on not one but fifty two thousand accounts with an approximate value of about fifty billion dollars in assets. The Swiss Government, as expected, refused to help with the summons by declaring that such acts violated the Swiss banking secrecy laws.

There was another quaint angle to these proceedings. The U.S.-Switzerland Tax Treaty calls for information exchange requiring respective tax authorities to share the tax information for avoiding an income tax fraud. The Treaty, however, provides that neither parties is obligated to execute administrative measures that are in conflict with their domestic regulations and legislation.

The difference between income tax evasion and income tax fraud could be explained by this incident in full. The summons from IRS to the UBS AG Bank have given rise to a legal battle on an international front that are testing the tax treaty obligations against the laws of banking secrecy. The Swiss government has drawn the line on the difference by maintaining that tax evasion cannot, by itself, be evidence of an income tax fraud.

The big conjectural question on this issue is that the UBS AG Bank has admitted being guilty to activities that resulted in the deferral of the criminal prosecution, but it holds its ground at the same time that an income tax fraud is not the same as tax evasion by not disclosing the requested confidential information.

The vital distinguishing feature of an income tax fraud is an intent by the taxpayer to defraud the government by not paying the taxes which are lawfully due. An income tax fraud is punishable by both civil and criminal penalties. The government has to show the burden of proof to determine the case of an income tax fraud by a taxpayer. Practically, if the taxpayer has a reasonable legal argument to back up why he or she has not paid the due taxes, it is likely that the taxpayer will escape criminal charges.

The Civil Consequences of Tax Evasion Canada

People have to think a thousand times before pleading guilty to tax evasion Canada because of the civil consequences they may have to face. It is a general case that tax evasion Canada is followed up by criminal charges and it is accompanied with a civil assessment or the reassessment of taxes. The CRA will be keen to get to the bottom of the reason why the taxpayer was concealing more income than he or she intended to declare.

The basis of the tax evasion Canada charge is the very failure to declare the income earned during the year. The taxes are reassessed depending on the income which is undeclared and it can bring in heavy negligence penalties.

There may be many reasons why a taxpayer may want to plead guilty to a criminal offense like tax evasion Canada. When a taxpayer seeks professional accounting and legal help, he or she is advised as a client when being charged with tax evasion Canada that it is necessary for him or her to understand that a guilty plea would bring in consequences which may include that the plea stands as prima facie or it could be a proof of facts which is equivalent to a reassessment of taxes.

It is important, therefore, for professional counselors, who are representing a taxpayer who is about to plead guilty for tax evasion Canada, to understand that the plea for guilt is actually an admission of the basic elements of the offense. This also applies to a taxpayer who has been reassessed. During a tax evasion trial, the defense may have an agreement concerning relevant facts for the sentence. At other periods, facts could be disputed and the party which is trying to rely on disputed facts will have to prove them. To give an example, a taxpayer may agree that he or she is guilty of tax evasion Canada in a particular year but at the same time, may disagree as to the amount involved of the taxes. In such cases, the defense counsel during the criminal proceedings have to take care in establishing the facts that may be agreed to. At the same time, the adviser in the civil proceedings have to assess carefully what the guilty plea may stand for and what it may not stand for.

Before understanding the reasons that contribute towards tax evasion Canada, it is important to take a look at the concept of beneficial ownership which is a common law that distinguishes the rights that a person holds with a beneficial interest in property or assets from those who hold such interests legally and in name. The common law that surrounds beneficial ownership is a little complicated but is signifies that when a person holds or owns a property like a house or securities legally, his or her name will be on that property or it will be properly disclosed. But, when a person holds a property beneficially, the said property may not be registered in his or her name and the true owner may remain obscured.

The issue of tax evasion Canada may revolve mainly somewhere around beneficial ownership of private corporations or trusts while also involving ownership of real property. This concept identifies the important roots of the tax evasion Canada problem as it could open the Pandora’s Box to money and tax laundering.

The Tax Evasion Canada Program with Whistle Blower Rewards

The 2013 CRA budget announces the CRA’s initiative to encourage Canadians to provide relevant information identifying tax evasion especially for international tax evasion. The latest changes in the `Stop International Tax Evasion Canada Program will enable the CRA to reward those individuals who have knowledge of major cases in tax non-compliance on an international level. The incentive will be as much as fifteen per cent of the income tax amount collected on account of the information that has been provided. As per the Statistics Canada Bureau, the Canadian funds in the biggest tax havens in the world have gone up to a record one hundred and seventy billion dollars.

The fifteen per cent rewards in the tax evasion Canada Program are going to apply only to those tax assessments or the reassessments on the international transactions which are over one hundred thousand dollars. So far, the federal government has been able to convict only around forty people with offshore tax cheating through the tax evasion Canada Program since the past eight years and the total amount of fines that have been levied are about seven million dollars in taxes that had been evaded.

The new changes in the tax evasion Canada program system are going to bring Canada in line with other important countries like the United States of America, Germany and the United Kingdom. The new kind of reporting criteria is going to require the banks, the co-operative societies and the credit unions along with the loan and trust companies to report to the CRA. The reporting will include all incoming or outgoing electronic fund transfers of ten thousand dollars and above. These standards will be the same as set by FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada.

Presently, individuals, corporations and trusts who are owning foreign investment properties costing more than one hundred thousand dollars have to file a Form T1135. The CRA does not have the power to reassess these people for additional tax after the normal assessment period. The relevance of the voluntary disclosure program has been increased. It will allow the taxpayers to come forward proactively to disclose any non-compliance in the past, resulting in penalties getting waived. The interest which is assessed on the tax will get reduced. The potential criminal prosecution for tax evasion Canada also gets waived.

It has to be remembered that the tax evasion Canada prosecution is a criminal one. This kind of case is prosecuted under Section 239 of the Income Tax Act. There are a couple of ways that this kind of prosecution can proceed. One is by means of a summary conviction that carries a potential penalty of a fine which is not less than fifty per cent and not more than two hundred per cent of the tax amount that was evaded. Imprisonment can also be charged for a term not exceeding two years. The second kind of prosecution is by indictment that carries a penalty of not less than one hundred per cent and not more than two hundred per cent of the tax amount which was evaded with imprisonment not exceeding a period of five years.