When it comes to policing Canada’s voluntary tax compliance system (for income taxes and the GST/HST), the CRA has several effective enforcement weapons in its arsenal. One weapon that one does not often see employed is international extradition of individuals wanted for Canadian tax evasion and/or fraud.
One recent case made the headlines in Canada, when the CRA announced March 11, 2019 that a man living in Costa Rica has been successfully extradited to Canada under charges of tax fraud.
Criminal charges for fraud had been laid against the individual (Mr. Branch) in 2012. Branch had been a partner in a business called Fiscal Arbitrators, and the charges alleged that between 2007 and 2011, Branch and his business partner promoted a tax scheme where clients would claim non-existent business loans, improperly reducing the client’s taxable income. Fiscal Arbitrators would then allegedly prepare fraudulent T1 Income Tax and Benefit Returns for individuals—contrary to section 380(1)(a) of the Criminal Code.
After Branch could not be located, a Canada-wide arrest warrant was issued in 2013, followed by an Interpol “Red Notice”, which identified Branch as wanted for prosecution in Canada.
Branch was found and arrested in Costa Rica in September 2017 for the purpose of extradition.
This case is emblematic of the CRA’s increased focus on tax frauds, including promoters of improper tax schemes. The public outcry following 2016’s Panama Papers scandal has added to this focus.
As reported by the Toronto Star, CRA Assistant Commissioner Ted Gallivan underscored that, “[t]his is a more aggressive CRA… (The Panama Papers) allows us to showcase how the CRA has changed… [This] reflects a shift to more severe consequences for people who are participating in aggressive tax avoidance and tax evasion”.
Ultimately, while extradition is a rare tool reserved for the most severe of cases, Branch’s case demonstrates the lengths the CRA is prepared to go to enforce the law.
Individuals involved in high risk or aggressive tax planning (or in outright tax evasion or tax fraud) should think twice before embarking on those plans. The CRA is not going away anytime soon, and it has the enforcement weapons to ensure that tax cheats find their way back into the Canadian court system.
Persons finding themselves in these unenviable situations ought to seek immediate legal advice.
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