The Threat of Tax Fraud in Canada

One of the most overlooked threats that is facing the financial institutions and the CRA in Canada is the threat of a tax fraud caused by identity theft. An interesting study has been done which has revealed that a significant portion of the income tax fraud in Canada has been linked to identity theft.

The government technology division that helps the CRA is seeking to share the best practices of banks in the area of identity theft and its detection and prevention. It is concentrating on the gathering of information on several red flags that are connected to tax fraud in Canada. The financial institutions can help the CRA when they spot some issues. This kind of a fraud prevention program can lead an objective to address the concerned areas of banking risks. These key areas may be about why synthetic identity detection is becoming more critical day by day and what steps are being taken to help the financial institutions in establishing more direct communication lines with the authorities and the investigators for sharing of information about the rising tax fraud in Canada trends.

The synthetic IDs are made up of several information bits that do not belong to the same individual necessarily. A person with mal-intention can pick up a valid Social Insurance Number and then use it with a separate name, address or date of birth. This person could also create an identification in the credit scene and try to get credit or loans and also attempt to open new accounts using that information which has been stolen. This could also lead to a tax fraud in Canada, but it is not very probable as the CRA is matching the name and the Social Insurance Number. The synthetics may play a minor part in the income tax fraud in Canada scene as it will be highly difficult to submit an income tax refund or return with a synthetic ID.

Apparently, the problem of tax fraud in Canada is not alone. Recently, a spate of refund tax fraud has been brought to notice from across the border in the United States where there have been cases of wrongly used stolen IDs. A gang of hackers based in Florida cheated the IRS out of over twelve million dollars’ worth of refunds by using the stolen names and the social security numbers of over five thousand dead people, taken perhaps from the Death Index. Now, the IRS has set up a computer screen to flag tax fraud in connection with the returns of the recently deceased taxpayers. This computer screen system can be a good practice for the CRA to manage the problem of tax fraud in Canada.

The rise in refundable tax credits and the sophisticated methods used by the credit card companies’ fraud elimination programs are now combining to make refund tax fraud tax fraud in Canada the hottest area currently for identity thieves. The government agency has reported that complaints regarding benefits frauds and government documents have gone up quickly in the last few years. The fact remains that there are millions and millions if not billions of dollars involved in tax refund fraud which is undetected and which has resulted from identity theft. This undetected tax fraud in Canada has also resulted in considerable unintended outlays and has made a big dent in the taxpayer’s confidence in the tax system.