The Canada Revenue Agency announced Wednesday two search warrants were issued in Â鶹´«Ã½Ó³»related to an ongoing criminal investigation of alleged tax evasion related to real estate transactions to the tune of $3 million in unreported income.
Details from the agency’s bulletin were sparse.
“On December 18, 2019, 16 CRA investigators took part in the operation, searching for evidence corresponding to the commission of offences against the Income Tax Act, Excise Tax Act, and the Criminal Code.
“The CRA has placed a significant focus in major centers such as the Lower Mainland in British Columbia, where there are consistently high numbers of real estate transactions. Today’s announcement further demonstrates how this focus is helping combat non-compliance and leveling the playing field for those who pay their taxes,” stated the CRA.
Recent tax audits of the B.C. real estate sector are now resulting in average assessments of more than $134,000, as the agency sharpens its aim at some of the most egregious instances of tax avoidance and evasion.
In a six-month period, from March to September of this year, the CRA has issued $149.9 million in assessments as a result of 1,113 real estate audits in B.C. alone.
In the first three months of 2019 average assessments were raking in more than $200,000.
The 2019 audits show an uptick in assessments for knowingly making false statements on returns – which can lead to criminal prosecution for tax evasion.
Steven Flynn, a chartered professional accountant who specializes in international taxation with Andersen Tax, told Glacier Media in June the results don’t surprise him, “because of the rapid increase in real estate prices and what’s been well-publicized activity, what with the flipping of properties and non-compliance and illegal activity that’s gone on in B.C.”
The real estate audit program effectively targets Greater Â鶹´«Ã½Ó³»and Greater Toronto properties. Since launching in 2015 the CRA has identified a total of $1.31 billion from its augmented real estate audit program, including $136.5 million from 2,188 penalties.
The CRA bulletin went on to state:
“Combatting non-compliance in the real estate sector requires a multi-pronged approach. This includes taxpayer education, publishing convictions, as well as collaborating with industry and government partners to reduce the social acceptability of, and participation in, the underground economy.
Tax evasion is a crime. Falsification of records, claims and CRA documents, wilfully not reporting income, or inflating expenses can lead to criminal charges, prosecution, jail time, and a criminal record. Under the income tax and excise tax laws, being convicted of tax evasion can include fines ranging from 50% to 200% of the evaded taxes and up to five years in jail. Being convicted of tax fraud under section 380 of the Criminal Code carries a sentence of up to 14 years in jail.
In 2018-2019, there were 22 convictions, with 12 taxpayers sent to jail for a total of 19 years. These individuals were sentenced for wilfully evading payment of $4,179,089 in taxes.”
It was not stated whether any of those 22 convictions were a result of the real estate audits.
