How we combat tax evasion and avoidance
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How we combat tax evasion and avoidance
We actively pursue businesses and individuals that engage in tax non-compliance or other tax crimes in Canada and abroad.
Background
We know that most taxpayers comply with their tax obligations. However, there are those who knowingly challenge and test the limits of Canada’s self-assessment tax system by not complying with their tax obligations to evade or avoid paying the taxes they owe. Using a risk-based approach, we take action against those with the highest risk of non-compliance.
Tax evasion and avoidance often revolves around secrecy and hiding assets, transactions, income, and wealth.
Tax evasion is when an individual or business falsifies records and claims, hides income, or inflates expenses to intentionally avoid complying with Canada’s tax laws.
Tax evasion, unlike tax avoidance, has criminal consequences. A criminal investigation may result in prosecution, court imposed fines, jail time, and a criminal record.
Learn more: Tax evasion
What is tax avoidance
Tax avoidance is when tax planning reduces taxes in a way that is inconsistent with the overall spirit of the law. Our interpretation of the term tax avoidance includes all unacceptable and aggressive tax planning.
By investing time and resources in collaboration with domestic and international partners, technological advancements, and data gathering, we have advanced our efforts to make sure everyone pays the taxes they owe. These measures help us target those who are non-compliant and attempt to side-step reporting obligations or push or exceed the legal limits of tax planning to evade or avoid taxes.
We ensure tax compliance
Taxes support government services and programs. They also support economic development within Canada through investments in several areas, such as infrastructure and employment. As such, ensuring that everyone pays the taxes they owe through compliance activities is crucial for all Canadians.
Over the last few years, results from our compliance activities have improved as shown by their fiscal impact.
Fiscal impact reflects the contribution to the federal government’s and provincial government’s treasury as a result of conducting audits and examinations on Canadian and non-resident taxpayers in line with the Income Tax Act, Excise Tax Act, and other legislation administered by us.
Fiscal impact consists of federal and provincial assessed tax (participating provinces only), federal and provincial reduced tax refunds, interest and penalties, and the present value of future federal assessable tax from compliance activities.
Fiscal impact does not account for the impact of appeals reversals and uncollected amounts.
We are proud to deliver key services and programs and to support economic development through our compliance activities.
Fiscal impact from compliance activities:
- 2023-2024: $15.3B
- 2022-2023: $14.3B
- 2021-2022: $13.2B
- 2020-2021: $12.2B
- 2019-2020: $12.7B
We share data and exchange information
We co-operate with tax administrations from other countries by sharing data and tax information. Sharing data and exchanging information with tax administrations from other countries is essential to protect the integrity of Canada's tax base and maintain Canadian taxpayer’s confidence in our self-assessment system.
We protect all data that we exchange with other tax administrations. For example, information exchanged under a tax treaty, agreement, or convention is confidential and must be used only for the purposes stated in the relevant international legal instrument.
Canada’s treaty network helps us obtain and exchange information to combat tax evasion and avoidance.
International exchanges under legal instruments:
- 2023-2024: 853
- 2022-2023: 1,063
- 2021-2022: 1,093
- 2020-2021: 682
- 2019-2020: 963
The CRS is a global standard for the automatic exchange of financial account information between tax administrations annually. Canada and over 100 other jurisdictions have implemented the CRS. It is an important tool for promoting tax compliance, and combatting international tax evasion and avoidance. It helps to ensure that taxpayers report their income from all sources and appropriately disclose their offshore assets and holdings.
Records exchanged under the CRS:
- 2023-2024: 3.79M
- 2022-2023: 3.12M
- 2021-2022: 3.22M
- 2020-2021: 1.84M
- 2019-2020: 2.73M
Canada – United States Intergovernmental Agreement
Canada and the United States (US) have an intergovernmental agreement related to the US Foreign Account Tax Compliance Act for the annual, automatic exchange of financial account information between tax administrations. Similar to the CRS, this agreement is an important tool to promote tax compliance, combat international tax evasion and avoidance. It helps to ensure that taxpayers report their income from all sources and appropriately disclose their US-based assets.
Country-by-country reporting
Country-by-country reporting is a collaborative approach that allows countries to share revenue and profit information on their large multinational enterprises. It helps us better assess the risks of whether these companies are paying the right amount of tax in each country.
Learn more: Country-by-Country Reporting
We collaborate internationally
Through the Forum on Tax Administration (FTA) of the Organisation for Economic Co-operation and Development (OECD), over 50 commissioners from various tax administrations work together to share best practices and emerging trends, deal with international risks, and improve compliance and the overall delivery of tax administration.
Our commissioner is currently the FTA chair. The FTA is the only commissioner-level organization in the world that focuses on issues of mutual interest to all tax administrations. It harnesses the collective expertise of its members to address issues of common interest and concern. As a group, the FTA works together to put in place global standards that help to ensure greater tax certainty, transparency, and fairness, as well as to prevent tax evasion and avoidance. These standards help create a global level playing field in tax administration.
We are a member of the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) network, which brings together over 40 of the world's national tax administrations to find ways to collaborate on a spectrum of international tax risks. The JITSIC network offers an effective and well-established platform to allow its members to cooperate on individual cases, as well as share their experience, resources, and expertise to combat the issues they face in common.
For example, when the International Consortium of Investigative Journalists released information in 2021, known as the Pandora Papers, the strong partnerships established through the JITSIC network ensured that members were well positioned to collaborate and share information as needed. The JITSIC network has a number of ongoing work programs that include groups dedicated to:
- pooling resources and sharing intelligence associated with data leaks
- collaborating to address tax issues associated with the wealthy population
- addressing risks associated with crypto-assets
However, like tax administrations, the JITSIC network operates under strict rules designed to protect the confidentiality of information and the confidence of taxpayers. As a result, much of the work of the JITSIC network is not always visible to the public.
Joint Chiefs of Global Tax Enforcement
The Joint Chiefs of Global Tax Enforcement, known as the J5, is a powerful multicountry, operational alliance that leads the fight against international tax crime. The J5 is dedicated to combatting transnational tax crime and money laundering through increased enforcement collaboration.
The J5 was formed in June 2018 in response to a call to action from the OECD for countries to do more to combat the enablers of tax crime. The J5 brings together leaders of tax enforcement authorities that face common threats from the following five countries:
- The Australian Taxation Office
- The Canada Revenue Agency
- The Fiscale Inlichtingen - en Opsporingsdienst from the Netherlands
- His Majesty’s Revenue & Customs from the United Kingdom
- The Internal Revenue Service (IRS) Criminal Investigation from the United States
Learn more: The CRA’s international collaboration to combat tax evasion – Joint Chiefs of Global Tax Enforcement
Exchange of taxpayer-specific rulings
As part of the OECD’s Base Erosion and Profit Shifting (BEPS) project, Canada has committed to the spontaneous exchange of information on tax rulings with certain countries. In the context of the BEPS project, countries agreed to exchange information on the following types of rulings:
- Cross-border rulings related to preferential regimes (for Canada this would include international shipping and certain foreign life insurance operations of a Canadian company)
- Cross-border rulings related to transfer pricing legislation
- Cross-border rulings providing a downward adjustment not directly reflected in the taxpayers’ accounts
- Permanent establishment rulings
- Related party conduit rulings
If an income tax technical interpretations or advance income tax rulings falls into one of the types of rulings above, a summary of its contents may be exchanged with the resident countries of the immediate parent company, the ultimate parent company and other parties as needed. As such, taxpayers making a rulings request must include sufficient information to allow us to identify the relevant parties for such exchanges.
Learn more: OECD’s BEPS project.
Access to international electronic funds transfers
Since January 2015, certain financial intermediaries, including banks, have been required to report to us detailed financial transaction information about international electronic funds transfers (EFTs) of $10,000 or more that enter or leave Canada. This information helps us identify taxpayers who may be participating in aggressive tax avoidance or who may be attempting to conceal income and assets offshore.
For the period of April 2016 to March 2020, we completed reviews of all reported EFTs that were associated with jurisdictions or financial institutions of concern, otherwise known as the Jurisdiction of Concern project. Generally, jurisdictions or financial institutions of concern are usually those that operate in countries that have low or no effective tax rate or have banking secrecy or confidentiality laws that provide for anonymity.
Intelligence derived from this project has been integrated into our risk assessment processes. Currently, we can automatically match and integrate the EFT data with other information in our internal systems, allowing for improved risk assessment. This allows us to identify the highest-risk taxpayers across multiple jurisdictions and financial institutions.
We use the EFT data to assess risk and identify taxpayers with potential offshore non-compliance issues.
We act on offshore data leaks
Offshore data leaks can contain useful information about offshore activities of taxpayers. We review this information to identify income and assets that were not disclosed for tax purposes.
However, it is important to highlight that holding an offshore bank account or offshore assets does not necessarily mean a taxpayer has comitted any tax wrongdoing.
Although we can gain useful information from offshore data leaks, we do not depend on these leaks to combat offshore non-compliance. Through specialized audit programs and advancements, such as electronic funds transfers (EFTs), the CRS, and our Offshore Tax Informant Program, we are well positioned to ensure wealthy taxpayers pay the taxes they owe.
Audits resulting from data leaks can be complex and lengthy. As such, the final amount of taxes and penalties owing linked to data leak audits can take years to complete.
Every data leak poses its own unique challenges and gives us many lessons to manage future leaks.
The Panama Papers were released in 2016, which included approximately 11.5 million documents held by the Panamanian law firm Mossack Fonseca.
Analyzing the Panama Papers was complicated by the lack of financial information found in the data leak and the fact that some taxpayers created complex tax structures to purposely hide their assets. Our initial information gathering, data analysis, and risk assessment of the data leak took over three years to complete. From the data leak, we identified over 900 individuals, corporations, and trusts with a potential connection to Canada. Over 60% of taxpayers identified were found to be compliant with their Canadian tax filing and reporting obligations.
As of March 2024:
- We have completed over 310 taxpayer audits linked to the Panama Papers, resulting in more than $83 million in federal taxes and penalties
- We have another 130 ongoing audits
In addition to conducting audits, we investigate individuals and businesses involved in suspected cases of tax evasion and other tax crimes, both domestically and internationally. This work is carried out in the Criminal Investigations Program.
As of March 2024:
- We have conducted six criminal investigations of tax evasion related to the Panama Papers:
- We discontinued three cases at the investigation stage
- We have three currently ongoing, no criminal charges have been laid
Paradise Papers
The International Consortium of Investigative Journalists released the Paradise Papers in 2017, which included over 13.4 million confidential electronic documents about offshore investments.
Since the release of the Paradise Papers, we have identified approximately 2,790 individuals, corporations, and trusts with a potential connection to Canada. Over 80% of taxpayers identified were found to be compliant with their Canadian tax filing and reporting obligations.
As of March 2024:
- We have completed approximately 35 taxpayer audits linked to the Paradise Papers, resulting in assessments of more than $6.8 million in federal taxes and penalties
- We have also completed audits of approximately 40 economic groups linked to the Paradise Papers in its existing large business audit program
- We have approximately another 35 audits that are ongoing
Pandora Papers
The International Consortium of Investigative Journalists released the Pandora Papers in two datasets, one in December 2021 and the other in May 2022. These datasets included almost 12 million documents that revealed hidden wealth, tax avoidance and, in some cases, money laundering.
As of March 2024:
- We are identifying taxpayers with a potential connection to Canada who pose a risk of tax non-compliance
- We have linked over 430 taxpayers to this data leak and risk assessment and compliance actions are ongoing
- We have over 15 ongoing audits
Additionally, we are working with our international partners to pool resources and share information.
We use compliance and legal tools
One of the our top priorities is to protect the integrity and fairness of Canada’s tax system by addressing tax avoidance on all levels.
Focusing resources on the highest risk files means we identify and combat wealthy individuals, corporations, and entities who try to avoid paying their taxes.
These taxpayers have the resources to hire tax experts and create complex structures that include individuals, trusts, partnerships, and corporations. Some of these taxpayers may use these experts and structures to avoid paying the taxes they owe. For these specific tax structures, we conduct group audits instead of auditing a single taxpayer at a time.
Through international alliances, enhanced audit coverage, extensive data sources, and advanced analytical approaches, we have the ability to detect and combat the most serious instances of non-compliance by taxpayers.
Risk based audits
We continue to use tools, such as enhanced business intelligence and advanced data analytics, to improve the risk assessments of individuals and businesses. For example, every year we use electronic tools to conduct risk assessments of the corporate tax returns of all large businesses. This improves our ability to identify high-risk transactions and allows us to focus our audit resources in the areas of highest risk of non-compliance.
Legal tools
Through a variety of effective legal tools, we pursue taxpayers that knowingly challenge and test the limits of Canada’s self-assessment tax system. By taking high complexity cases to the courts, including the Supreme Court of Canada, we send a strong message that we won’t back down in our efforts to uncover and identify remedies for tax loopholes that may be exploited by taxpayers.
We also work diligently with our partners in the Department of Finance Canada and the Department of Justice Canada to evaluate and propose new and enhanced tax legislation and policy that will help us close tax loopholes used by tax promoters and advisors to help their clients avoid paying the appropriate amount of taxes.
The General anti-avoidance rule (GAAR) is a legal tool used by us to distinguish legitimate tax planning from abusive tax avoidance. The GAAR tries to balance protecting the tax base with a taxpayer’s need for certainty when planning their affairs.
Since 1988, we have invoked the GAAR when a taxpayer attempts to circumvent or exploit the intent of Canada’s tax rules and avoid paying the taxes they owe. The GAAR’s purpose is to deny tax benefits to taxpayers that are not in accordance with the object, spirit or purpose of the Income Tax Act and Excise Tax Act, even if they comply with a literal reading of the legislation.
Cases reviewed for application of the GAAR (cumulative):
- 2023-2024: 2,294
- 2022-2023: 2,029
- 2021-2022: 1,831
- 2020-2021: 1,694
- 2019-2020: 1,608
Cases in which the GAAR was applied:
- 2023-2024: 85%
- 2022-2023: 83%
- 2021-2022: 81%
- 2020-2021: 81%
- 2019-2020: 80%
Note: The actual number of taxpayers whose tax returns were reassessed as a result is much greater than these numbers because many tax avoidance schemes involved multiple partners, related parties, or groups of investors.
Learn more:
Unnamed persons requirement
We have expanded our information sources by better leveraging ongoing audits findings and third-party data as intelligence that help to support the use of unnamed persons requirements (UPRs) aimed at identifying additional non-compliant taxpayers.
To better detect activity in new and emerging sectors, such as crypto-asset and platform economy activities, we have increased our use of information from third parties. UPRs are a legal tool used to gather information from third parties (such as, crypto-asset intermediaries facilitating crypto-asset transactions) to identify taxpayers and registrants involved in crypto-asset activities and other digital economy environments. As a result, we are better leveraging audits findings and third-party data to obtain authorization from the courts to use UPRs in identifying non-compliant taxpayers and addressing non-compliance. A UPR must be authorized by a federal court before we can serve it on a third party.
We also use the information obtained through UPRs to identify beneficial owners of offshore entities, offshore bank and investment accounts.
In addition, we issue UPRs to property developers and builders that have information about buyers involved in an assignment sale. This information is used to identify taxpayers who may not be reporting income tax or GST/HST.
Learn more: Unnamed persons requirements in real estate
Compliance orders
We may seek a compliance order from the Federal Court of Canada under the Income Tax Act or the Excise Tax Act when a taxpayer or third-party fails to comply with a request or requirement for information.
We enlist the Department of Justice to seek a compliance order where the information requested is not being provided. A judge must be satisfied that the taxpayer or third party was required under legislation to give the information that is being requested, that they failed to give the information in question, and be assured it is not subject to solicitor-client or litigation privilege.
Failure or refusal to comply with a court imposed compliance order could result in the taxpayer being found in contempt of court and, potentially, result in a fine or both a fine and jail time.
Non-compliance in the real estate sector
The real estate sector is one of the many sectors that is addressed through our risk-based method. We enhance our comprehension of non-compliance behaviour in the real estate sector through experience and the use of third-party data, such as data obtained through UPRs. This results in a greater number of audits and non-audit compliance interventions.
Learn more: How the CRA addresses non-compliance in the real estate sector web page.
Legislative changes
Legislative changes have been implemented to close tax loopholes. These changes allow us to work better with international partners and strengthen tax enforcement to stop multinational enterprises (MNEs) from avoiding paying the taxes they owe in Canada. For example, Canada has taken action on the measures agreed to as minimum standards under the OECD BEPS project to combat international tax avoidance, such as the following:
- Ratifying the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (that is, the Multilateral Instrument) and reduce opportunities for tax avoidance by MNEs
- Supporting the OECD’s two-pillar solution for international tax reform by enacting the Global Minimum Tax Act to make sure that large MNEs pay the taxes they owe wherever they do business
- Enhancing Canada's mandatory disclosure rules to protect the integrity of the tax system
- Implementing the excessive interest and financing expenses limitation rules for large corporations and trusts to make sure they pay the taxes they owe and to align Canada with other jurisdictions
- Implementing the hybrid mismatch rules to make sure MNEs do not obtain an unfair advantage by using these types of cross-border tax arrangements
We conduct criminal investigations
Significant cases of tax evasion and other serious violations of the tax laws are investigated by us.
We select cases for criminal investigation based on priority and impact on compliance. As of March 31, 2024, 54% of most complex criminal investigations included the potential for taxes evaded of $1 million or more.
Once a criminal investigation case has been completed, it is referred, where appropriate, to the Public Prosecution Service of Canada (PPSC) for possible criminal prosecution.
A criminal investigation involves many steps such as gathering evidence, interviewing taxpayers and witnesses, executing search warrants and analyzing evidence. The length of time required to investigate will be dependent on the complexity of the case, the number of individuals and/or businesses involved, the availability of evidence, the need for international requests for assistance and the level of cooperation of witnesses. As with any criminal investigation undertaken by law enforcement, our criminal investigations can be complex and often require years to complete.
Cases referred for criminal investigations:
- 2023-2024: 186
- 2022-2023: 130
- 2021-2022: 101
- 2020-2021: 110
- 2019-2020: 244
Search warrants executed:
- 2023-2024: 59
- 2022-2023: 26
- 2021-2022: 27
- 2020-2021: 14
- 2019-2020: 196
We work closely with the Royal Canadian Mounted Police, provincial and local police, and other law enforcement agencies to protect the integrity of the tax system. Working with our domestic and international partners, we share knowledge, expertise, best practices and identify tax schemes and their participants.
Ongoing criminal investigations from joint forces operations with other law enforcement agencies:
- 2023-2024: 16
- 2022-2023: 25
- 2021-2022: 31
- 2020-2021: 31
- 2019-2020: 19
In our criminal investigations, investigators prepare a comprehensive report based on the results of the investigation and send it to the PPSC where charges are believed to be warranted. The PPSC will then independently review the evidence and decide whether to initiate and conduct a prosecution on behalf of the federal Crown.
Files where criminal charges were laid under the Income Tax Act, Excise Tax Act, and/or criminal code:
- 2023-2024: 7
- 2022-2023: 28
- 2021-2022: 16
- 2020-2021: 25
- 2019-2020: 33
For the five-year period from April 1, 2019, to March 31, 2024:
- The courts convicted 135 taxpayers for evading the payment of more than $44 million in federal tax combined
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These convictions resulted in sentences totaling $25.1 million in court fines and more than 108 years in jail
* These numbers may not account for all convictions in 2023-2024, as conviction and sentencing may take place during a different fiscal year.
Convictions:
- 2023-2024: 13
- 2022-2023: 31
- 2021-2022: 23
- 2020-2021: 36
- 2019-2020: 32
Federal tax evaded:
- 2023-2024: $13.5M
- 2022-2023: $7.8M
- 2021-2022: $4.4M
- 2020-2021: $10.9M
- 2019-2020: $7.4M
Taxpayers sentenced to prison term:
- 2023-2024: 7*
- 2022-2023: 13
- 2021-2022: 10
- 2020-2021: 15
- 2019-2020: 13
* This number may not account for all convictions in 2023-2024, as conviction and sentencing may take place during a different fiscal year.
Years in prison:
- 2023-2024: 16*
- 2022-2023: 33
- 2021-2022: 15
- 2020-2021: 26
- 2019-2020: 19
Note: The total number of years in prison have been rounded.
* This number may not account for all convictions in 2023-2024, as conviction and sentencing may take place during a different fiscal year.
Average jail term (in months) per sentence:
- 2023-2024: 27*
- 2022-2023: 31
- 2021-2022: 18
- 2020-2021: 21
- 2019-2020: 17
Note: The average jail term (in months) per sentence has been rounded.
* This number may not account for all convictions in 2023-2024, as conviction and sentencing may take place during a different fiscal year.
Court-imposed fines:
- 2023-2024: $2.9M*
- 2022-2023: $10.7M
- 2021-2022: $3.3M
- 2020-2021: $5.2M
- 2019-2020: $3.0M
* This number may not account for all convictions in 2023-2024, as conviction and sentencing may take place during a different fiscal year.
Publication of prosecutions
We publicize convictions relating to tax evasion and other tax crimes. We may also, on occasion, release prejudgment information at different stages of a criminal investigation or prosecution, including, but not limited to, the execution of a search warrant, seizure of assets, and/or the laying of criminal charges. Publishing this information serves to maintain the integrity of Canada’s self-assessment tax system and warns Canadians about potential illegal tax schemes, and to deter others from committing tax and other financial crimes.
Learn more: Enforcement notifications: compliance actions
Learn more: The CRA's criminal investigations process
We keep you informed about tax schemes
A key part of our compliance strategy is to target tax promoters and advisors of tax schemes.
Tax schemes are plans and arrangements that attempt to deceive taxpayers by promising to reduce the taxes they owe, often through large deductions, tax credits, or promises of tax-free income.
Promoters and advisors of tax schemes
Individuals or corporations who promote or sell schemes that seek to break or bend the rules of Canadian tax laws. These tax promoters and advisors purposely make false statements to help their clients evade and avoid taxes. As a result, they obtain a financial benefit from the fees they receive from their client.
Through increased audits of tax promoters and advisors, improved intelligence gathering, and better communication with taxpayers, we identify and shut down illegitimate tax shelters and tax schemes. Those who choose to participate in or promote these schemes may face serious consequences, including penalties, court-imposed fines, and possibly even jail time.
Third party penalties on promoters and tax preparers:
- 2023-2024: $1.5M
- 2022-2023: $20.1M
- 2021-2022: $32.3M
- 2020-2021: $1.8M
- 2019-2020: $17.4M
Learn more: Tax schemes
How you can help us
- Offshore Tax Informant Program (OTIP)
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You may be eligible for a reward when you tell us about international tax non-compliance through the Offshore Tax Information Program (OTIP).
The OTIP is a key part of our efforts to combat international tax avoidance and evasion. It allows for financial rewards to be made to individuals who provide specific and credible information about major international tax non-compliance that leads to the collection of at least $100,000 in federal taxes owing.
We encourage anyone, no matter where they are in the world, to come forward if they have information about major international tax non-compliance.
By reporting on suspected international tax non-compliance, informants not only benefit from the possible rewards, but contribute to the administration of a fair tax system where everyone pays their taxes. This ensures the delivery of services and programs to Canadians, as well as more resources for public facilities, such as schools, roads, and hospitals.
As of March 2024:
- The OTIP received approximately 1,190 written submissions
- Over 930 taxpayers have been identified for audit based on information received through the program
Written submissions:
- 2023-2024: 96
- 2022-2023: 109
- 2021-2022: 99
- 2020-2021: 72
- 2019-2020: 171
Federal tax and foreign reporting penalties assessed through information from OTIP:
- 2023-2024: $79.9M
- 2022-2023: $177M
- 2021-2022: $11.3M
- 2020-2021: $39.1M
- 2019-2020: $11.3M
Note: The amount of federal tax and foreign reporting penalties assessed are now reported on an annual basis, rather than accumulatively.
- Leads Program
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If you suspect a person, business or charity of tax or benefit cheating in Canada, report them to us by submitting a lead to the Leads Program.
Leads:
- 2023-2024: 36,920
- 2022-2023: 35,689
- 2021-2022: 41,178
- 2020-2021: 62,855
- 2019-2020: 34,106
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- Date modified:
- 2025-06-04