Tax & Trade Blog

We have blogged here and here about the real estate projects that the CRA is currently working on, usually resulting in assessments of GST/HST on sales of renovated homes or short-term rental housing.

In a recent Tax Court case involving Cheema, the CRA was permitted to open up statue-barred periods in order to assess a homeowner for taxable income generated from a short-term purchase and resale of a house in Calgary.  This case serves as a warning for taxpayers in similar situations: treating housing like “inventory” to produce gains will result in CRA assessments —even many years later, making Voluntary Disclosures the only viable strategy for addressing past exposure.

We have recently seen many clients make improper “corrections” or “amendments” to previously-filed GST Returns, which ultimately causes even more problems, and leads to unrecoverable GST!

In fact, there is no legislative basis for filing a corrected or amended GST Return.  We regularly see clients who chose to deal with errors by making “after-the-fact” changes to “GST collectible” or “GST credits claimed” in later periods – perhaps believing that if net tax was under-reported in January, it can be fixed by adding extra “net tax” to July!

While errors on GST Returns are a fact of life, the way that these mistakes are corrected can cause bigger problems (think: lost money)!

On December 13, 2017, the CRA released GST/HST Memorandum 16-5 outlining its new GST/HST Voluntary Disclosure Program (“GST/HST VDP”) (IC00-1R6, Voluntary Disclosures Program which was released around that same time outlines the new Income Tax VDP). The new GST/HST VDP is a marked departure from the present VDP that it will replace as of March 1, 2018.

In a recent blog titled “Can I go to jail for tax evasion”, we discussed how the CRA has been increasingly seeking jail time for people engaged in tax fraud or tax evasion. In fact, relatively recently a Toronto man was sentenced to five years in jail for filing false GST/HST returns.

The recent decision in (British Columbia (Director of Civil Forfeiture) v. Sanghera, shows that not only can those who commit tax evasion face jail time, but they can also have their assets seized by the government under civil forfeiture statutes.

To date, civil forfeiture statutes have been enacted in the following eight Canadian provinces: Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, and Quebec.

These civil forfeiture statutes allow the government to seize and transfer ownership of property without compensation when the property is suspected of having been acquired through an illegal act or suspected of being used to commit an illegal act.

With all of the concerns that businesses engaged in the import/export of products in the United States and Canada face (increased global competition, currency fluctuations and product quality), one of the least considered but most important involves the often confusing world of customs compliance.

While it is inevitable that errors or omissions may occur in customs compliance, errors can be expensive. To avoid customs assessments, and attendant interest and penalties (not to mention potential prosecution), constant vigilance of one's customs obligations is required.

In a previous blog post titled “CRA coming for contractors?” we discussed the recent decision of the Federal Court of Appeal in Rona Inc. v. Canada (Minister of National Revenue), which seemed to suggest that CRA may have a special project on the go to target Canadian home improvement contractors that are currently operating in the underground economy.

An email and website post from PayPal to its users earlier this week seems to indicate that the CRA is now going after all Canadians that buy and sell online.

Over the past number of years the CRA has been taking an increasingly aggressive stance against Canadian taxpayers who don’t meet their tax obligations.  This approach has only intensified – and perhaps very rightly so – since the Panama Papers scandal broke.  Since then the Canadian government has earmarked an additional $444.4-million between 2016 and 2021 to help the CRA crackdown on tax evaders. 

In years past, tax evaders caught by the CRA could expect hefty fines and penalties, but would rarely face jail time. More recently however the CRA has been trying to put people engaged in tax fraud or tax evasion in jail.

A recent tax case in the Federal Court of Appeal (FCA) involving the RONA home improvement chain (Rona Inc. v. Canada (Minister of National Revenue) seems to suggest that CRA may have a special project on the go to target Canadian home improvement contractors that are currently operating in the underground economy.