Taxes and Criminal Law

*this article was updated January 2, 2023
I deal with tax questions from distraught people. Their upset is understandable. There are endless ways you or your accountant can mess up your taxes, even despite best efforts.

Consider this:

  • The Canada Revenue Agency (CRA) has enormous investigative powers.
  • The CRA has a huge prosecution budget that is sometimes spent without regard to proportionality.
  • The CRA is vested with highly effective enforcement procedures.
  • Scammers very successfully exploit the existing distrust and fear many citizens have towards our tax system. Maybe you know what I'm talking about.

Something special about my legal practice is that I combine criminal law defense work with tax law. If you are facing an investigation or charges under the Income Tax Act, or think you might be, I can help you.
"It was a real pleasure working with you. I learned a lot. I look forward to more opportunities to work together." - tax lawyer who retained me to help him with a tax case involving a search warrant (and then did so again)
Below are two common tax issues that can affect everyone - Tax Avoidance, and Audits.

Tax Avoidance

Taxpayers are entitled to arrange their affairs to minimize tax by lawful means; this is lawful tax avoidance. Of course if there is an element of fraud, this is tax evasion and can lead to criminal charges. But there is a huge grey area in between lawful tax avoidance and tax evasion. It is called 'abusive tax avoidance'.

Where the Canada Revenue Agency (CRA) decides that a tax savings arrangement goes so far as to be abusive, even though it may technically comply with the Income Tax Act, it can reverse the tax advantages that would otherwise have been obtained, and/or issue civil penalties.

One factor the CRA will consider is whether the arrangement was done primarily for tax purposes and if so, did it misuse any provision of the Income Tax Act or was it an abuse of the provisions of the Act read as a whole. There is an astonishing amount of discretion in the hands of the CRA. In an effort to have some certainty, taxpayers can request an advanced ruling from CRA about their proposed tax arrangement. However, this is a complex procedure that can create a whole other set of problems.

In my practice, I have seen tax preparers promise people immediate tax advantages, and the tax preparers themselves believe that their schemes are legal as they technically comply with the provisions of the Income Tax Act. But when these tax advantages are later reversed as a consequence of the CRA discretionary decision that the arrangement was abusive, some unfortunate people who relied on the tax preparer have had to declare bankruptcy as they face huge unanticipated tax liabilities.

"Thanks so much for your help. I quite enjoyed meeting you and working with you. I wish you all the best." - client charged with failure to file tax returns


The Canada Revenue Agency (CRA) has broad powers to audit you and can require that you hand over documents and answer questions. This puts you in a position of self-incrimination and CRA is able to obtain information directly from you to which they would not otherwise have access. This is known as a compliance audit. If you are caught in this situation, consider calling me. Your first impulse may be to call your accountant, but their professional obligation is not to protect you from police involvement. Also, CRA may be entitled to your file at your accountant's office through their audit powers, while they are never able to obtain your file held at my office.

Sometimes the 'audit' is really an investigation into a possible fraud offence. This entitles you to all the rights that are available to any criminal suspect, including the right to remain silent. CRA agents, just like the police, are required to obtain search warrants to collect evidence for a fraud investigation. They can't use their audit powers for this.

After the 'audit', you may end up with penalties under the Income Tax Act, or worse yet, a tax evasion criminal charge. Establishing that your audit was really an investigation could mean having all the evidence against you thrown out. Without the evidence, there can be no penalties or criminal convictions.

Here are some clues that the 'audit' may be more than that:

  • the auditors have been working on your file for weeks, or longer, before they even ask for your records;
  • the audit goes back many years, as there is no limitation as to how far back a criminal investigation can go;
  • the information that is already known to auditors is enough that a criminal investigation could be made;
  • the auditor has already transferred some of your files to CRA investigators;
  • the auditor is effectively acting as an agent for the investigators, with or without the knowledge or consent of the investigators;
  • some questions that the auditors ask are relevant only to criminal guilt;
  • the auditors have driven by your house, done a search on the type of car you drive, or talked to your clients – all before questioning you and looking at your bookkeeping records;
  • someone with whom you have had financial dealings, including transferring assets to their name, has been contacted by the government (transfers solely to avoid tax liabilities could be illegal in some contexts);
  • these particular auditors also work or have worked as CRA investigators;
  • they ask questions about your level of accounting knowledge.

I can explore whether these clues exist in your case. If so, you may not be obliged to provide information. This is why it is important for you to call me immediately upon being told by CRA that you are the subject of an audit. Do not try to determine the question of whether you should refuse to comply with an audit on your own, as refusing to comply could have other serious consequences.

"Thank you for your good counsel going into our audit." - clients facing tax audit

Important points about representation by me for your Canadian taxation matters:

1. I am an independent sole practitioner, with no attachments to governments. Profit from my expertise in criminal and tax law, as well as my knowledge of civil actions and of governments. Tax matters can intersect with criminal law, civil law and public policy.

2. I negotiate for you with investigators and prosecutors, and I advocate for you in court if necessary.

3. Privacy between you and I is protected at the highest level in Canadian law. Communications between us are subject to solicitor-client privilege. The Canada Revenue Agency cannot require me to hand over your file to them. Your file with me is virtually impossible for any third party to obtain, including the government or your employer.

4. I know case law, legislation, and the rules of evidence and procedure. If you have concerns, such as the possibility of criminal charges being laid, talk to me.

5. If you are currently dealing with an accountant, I can speak directly to them about your case, to ensure a consistent strategy and a proper division of roles and tasks. 
Bonus if you read this far!
Request my free newsletter entitled "After CRA Seizes Your Documents", or book an appointment to discuss your criminal-related legal matter, by phoning me at 613.203.4874. Visit my main website by clicking here.