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Can My Assets Be Seized For Tax Evasion?

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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.

For example, under Ontario’s Civil Remedies Act, 2001, the government is authorized to seize “proceeds of unlawful activity”, which is defined broadly to include “property acquired, directly or indirectly, in whole or in part, as a result of unlawful activity”.

“Unlawful activity” is itself broadly defined as an act or omission that is:

    1. an offence under an Act of Canada, Ontario or another province or territory of Canada, or
    2. an offence under an Act of a jurisdiction outside Canada, if a similar act or omission would be an offence under an Act of Canada or Ontario if it were committed in Ontario.

Interestingly, there is no requirement that an individual whose property is seized actually be convicted of or even be charged with any illegal act. In fact, Subsection 17(2) of Ontario’s Civil Remedies Act, 2001, explicitly says that:

17(2)… an offence may be found to have been committed even if,

      1. no person has been charged with the offence; or
      2. a person was charged with the offence but the charge was withdrawn or stayed or the person was acquitted of the charge. 

The Ontario Divisional Court in Ontario (Attorney General) v $29,900 in Canadian Currency recently confirmed that once property is found to be derived from an unlawful activity, such as tax evasion, a court’s ability to relieve a party from forfeiture is extremely limited.  In fact, in that case the Divisional Court confirmed a lower court judge’s decision to order the forfeiture of all the money that had been seized under the Civil Remedies Act, 2001, even though the Crown had consented to some of the money being returned!

The use of civil forfeiture remedies in cases of tax evasion is just a further example of the government’s recent push to use all tools at its disposal to go after those who are not fulfilling their tax obligations.

Under the circumstances, any taxpayer who thinks that they may have this sort of exposure should contact a tax lawyer immediately. Unlike other tax professionals, taxpayers can be rest assured that anything said to a tax lawyer will be held in strict confidentiality under the protections of Solicitor Client Privilege. This protection can only be obtained from a dues paying lawyer in a solicitor-client relationship.

A possible option for anyone in this unfortunate tax situation could be to seek tax amnesty by availing oneself of the CRA’s Voluntary Disclosure Program (“VDP”). Unfortunately, time may be running out as the CRA has announced plans to restrict access to the VDP and had even discussed the possibility of closing down this program in the near future

Has the CRA accused you of tax evasion? If so contact us here

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