The Canada Revenue Agency (CRA) issued a warning to taxpayers today about participating in so-called “tax protester” movement as a way of avoiding income tax.
The CRA said that it is “particularly concerned that some taxpayers continue to choose to participate in the tax protester movement, which wrongly claims that people can refuse to file their income tax and benefit return and pay their taxes owed.”
The agency notes that one of the most common arguments tax protesters use is drawing a distinction between the “natural” and “legal” person, treating themselves as two separate people for income tax purposes. “They define the natural person as the individual who performs the labour required to earn the income and the legal person as the legal entity that the federal government creates when it issues and uses the social insurance number,” the CRA explains. “Tax protesters allege that the legal person has to file a tax return but that the income received belongs to the natural person and is therefore not subject to Canadian income tax.”
However, it stresses that Canadian courts at both the federal and provincial levels “have repeatedly and consistently rejected arguments made in these tax protester schemes.”
And, it warns that participation in these sorts of schemes can have serious legal and financial consequences. The CRA reports that between January 2007 and March 2014, it convicted 35 individuals who participated in the tax protester movement. And that, in addition to having to pay the taxes owing, they were also ordered to pay $5.4 million in fines and to serve an aggregate 325 months of jail time. Of the 35 convictions, four involved promoters of the schemes who were sentenced to $1.28 million in fines and 188 months of jail time, it says.