By Ryan M. Prendergast

CRA Releases Publication Warning Public About Tax Schemes

The Canada Revenue Agency (“CRA”) released a new webpage highlighting the risks associated with tax schemes that promise to reduce taxes, and provides guidance on recognizing and avoiding them. The “promoters” of these schemes often make false statements to aid clients in evading taxes while benefiting financially. The guidance warns against fraudulent practices, such as promising significant tax reductions, often marketed as financial products or business opportunities. These schemes are typically promoted through various channels and may include free information sessions, promising substantial returns on small investments.

To protect oneself from falling victim to tax schemes, the document advises seeking professional and independent advice, being cautious of overly optimistic claims, and ensuring a complete understanding of the tax return, as you are ultimately responsible for the information on your tax return.

The CRA is taking action to combat tax schemes by increasing audits of promoters, improving information gathering, educating taxpayers on how to recognize such schemes, and investing in its Promoter Compliance Centre. Those who participate in or promote these schemes face severe consequences, including penalties, court fines, and potential jail time. Participants may also be subject to additional taxes on top of the fees paid to the promoter. The CRA can impose third-party penalties on preparers, promoters, and others intentionally involved in filing false statements or omitting information from tax returns, leading to significant financial consequences. The CRA also investigates and prosecutes those who promote and advise tax evasion, and convicted taxpayers must repay taxes owed, plus interest and civil penalties. Courts may impose fines of up to 200% of the evaded taxes and jail terms of up to five years. The CRA publicly shares information on individuals, corporations, and trusts convicted of tax evasion.

Charities and donors should be aware of these schemes and review the CRA’s webpage, especially concerning common elements of tax schemes to avoid becoming involved in them.

​Read the October 2023 Charity & NFP Law Update