Income Tax Act
Ignorance Is No Excuse
Pursuant to the Income Tax Act and all relevant Regulations taxes must be paid on all income earned inside or outside of Canada however the law also provides for schedules of credits, refunds, benefits and other entitlements, that many Canadian taxpayers are lawfully use to decrease the amount of income tax payable.
When one embarks in a tax planning strategy they are looking to reduce their overall tax burden consistent with the spirit of the law, by taking advantage of the provisions as listed above.
Tax avoidance is a term used when an individual or business uses unacceptable or abusive tax planning that falls outside the spirit of the tax laws. Aggressive tax planning refers to arrangements that “push the limits” of acceptable tax planning.
Some use the term “Tax Mitigation” as another term for legal utilization of the tax regime to one’s own advantage. It is a term that sounds a little more legal that avoidance.
Tax evasion usually involves a deliberate act of ignoring a specific part of the law in an effort to avoid paying taxes
Examples of evasion tactics to willfully avoid taxes are:
- under reporting of taxable receipts
- false claims of expenses
- claiming non-deductible items
- overstating claims
Tax Evasion, unlike Tax Avoidance, has criminal consequences that can include prosecution in a criminal Court of law for Income Tax Act offences in addition to the civil penalties found under the Act resulting in a significant escalation of monetary penalties imposed.
Ignorance is NO Excuse
Ignorance of Canadian Tax Laws is not an acceptable excuse in the eyes of the Courts or Revenue Canada.
Ignoring the “tax man” will not make things go away and may even contribute to increased prison time and/or increased monetary fines when determining your fate.
Some of those attempting not to pay tax believe that they have discovered interpretations of the law that show that they are not subject to being taxed: these individuals and groups are sometimes called tax protesters. An unsuccessful tax protestor has been attempting openly to evade tax, while a successful one avoids tax.
Tax resistance is the declared refusal to pay a tax for conscientious reasons (because the resister does not want to support the government or some of its activities). Tax resisters typically do not take the position that the tax laws are themselves illegal or do not apply to them (as tax protesters do) and they are more concerned with not paying for particular government policies that they oppose.