A tax fraud takes place when a person or a business entity intentionally gives false information on the tax returns with a will to limit the liability of tax. A tax fraud amounts to cheating on the tax returns with an intention to avoid the payment of the full tax obligation. Illustrations of tax fraud would include claim of false deductions and claim of personal expenditure as business expense. Another example of a tax fraud would be to avoid reporting income altogether.
A tax fraud will involve a deliberate misrepresentation and omission of information on the tax returns. In Canada, the taxpayers are bound by law to file their tax returns voluntarily and to pay the correct amount of taxes based on their earnings for the year. This would include the employment and the excise taxes as well. It is against the law to fail to file your returns or to falsify and withhold information. It would be constituted as a tax fraud. The tax fraud is investigated by the Canadian Revenue Agency (CRA).
CRA has set up several offices across the nation to handle cases of suspected tax fraud. The government motivates the citizens to blow a whistle and report on any cases misrepresented by others or highlight mistakes and incomplete information on your own tax returns. In order to report a tax fraud, you have to go to the Canadian government’s Enforcement and Disclosures website of the CRA. This is done on Voluntary Disclosure Program form if you are reporting information on your own tax returns to avoid future penalties or prosecution. This is often referred to as a voluntary disclosure or tax amnesty in Canada.
Tax fraud can be committed with many other taxes apart from personal income tax. It could include sales taxes, VATs, tobacco tax, corporate taxes and motor fuel taxes. The tax fraud whistle blower law came about few years ago and it was meant to get many people involved in the battle against fraud and evasion. Sometimes, the reward is up to thirty per cent of the CRA collection as a penalty for the tax fraud but only when the income of the fraud exceeds two hundred thousand dollars.
The inspiration for the tax fraud whistle blower rule came about a decade ago when the informants were not keen to get their identity disclosed to the CRA. The government decided that a law was essential to make whistle-blowing a lucrative act so that it could convince potential whistle blowers to come forward and report a tax fraud.
The whistle-blower law is a good shield for the identification of tax fraud because the nature of tax fraud itself is concealment. The whistle blowers have become an effective method for CRA to catch up with tax fraud.
The types of tax fraud that are applicable to the whistle-blower law are the delaying in the markings of earnings or losses in order to push them to a different tax year. It could also include changing of the grant dates for stock options and various other false deductions or nefarious tax shelter schemes.