Canadian Tax Myth and Facts
Posted by TaxSOS December 10 2011
Tagged Under : cra, income tax act, tax law
There are groups of individual in Canada who believe that citizens can lawfully not file an income return. Like always, there are those that are trying to make money because of the misunderstandings they caused encourage about tax laws. These groups are profiting from confusing individuals with tax myths. Some Canadian citizens confuse the right to their opinion on the constitution and taxes as the right to make their own decision on whether or not to pay taxes and file tax returns. It concerns the Canada Revenue Agency (CRA) that these individuals are putting themselves in a position of legal and financial problems. All Canadian citizens must follow the Income Tax Act laws as well as all other tax laws.
Many people have been confused about what is true about taxes and what tax myth is. ?The following are some common tax myths that are commonly referred to in some tax sheltering or questionable tax schemes that have been cracking down by CRA.
In a 1950 the Canadian Supreme Court decided that the federal tax was unconstitutional. Therefore, a person can legally not pay income taxes to the government.
This myth came from a misrepresentation of the Canadian Constitution giving the provinces the direct power of taxation. In the Constitution, Section 91 gives the federal government the power to collect money by any means necessary including taxation. Section 92 gives the provinces the power to enact direct taxes to add revenue for provincial needs. The federal government has the power to levy both direct and indirect taxes, which includes income taxes.
The Canadian courts case that is most often referred to, the Supreme Court’s decision was not about the government’s right to levy taxes or the constitutionality of it. The case was about labour and taxation, but not whether or not an individual had the right not to pay incomes taxes or file an income tax return. If a Canadian citizen thinks that paying taxes is unconstitutional, they have the right to request the courts to change the law. Laws apply until a court makes that determination.
There are many groups that are promoting the claim that an individual can declare themselves exempt from taxes. There are certain nonprofit organizations that are tax exempt. For them to be legally exempt they must file forms with the CRA and prove that they are tax exempt. Any individual that takes advice and thinks they can declare themselves tax exempt and don’t file tax returns or pay taxes are most likely to cause them to pay penalties, fines, the original taxes, and could be risking prison time for this mistake. Many of these individuals have paid for information from someone who has convinced them that it is true.? Before taken such advice, one must consider the consequences before not paying their taxes.
The government cannot enforce tax laws because they are unconstitutional. This makes the tax system based on a voluntary compliance.
The cornerstone of the Canadian Constitution is based on individual compliance with all laws including tax laws. All this means is the government expects citizens to obey the law and pay their taxes and file tax returns.? This does not and that the tax law cannot be charge against a person not paying their taxes. The Income Tax Act or other laws were enacted to make it possible to enforce penalties, fines, the original tax and imprisonment in some cases. There is a program called The Volunteer Disclosure Program allows individuals who have not paid their taxes or filed tax returns to contact the CRA and admit to the facts of their cases. If a taxpayer does this, they will not be doing so without the worry of being penalized or prosecuted.
There are individuals that have said they know people beside themselves who have not paid taxes or filed a return in a long time and the federal government has not enforced the law against them. They think it is that the Income Tax Act is not constitutional and that is why the government can’t enforce the law against them.
The CRA is prevented by the Income Tax Act to reveal any information about a taxpayer so they are unable to comment on the individuals that say they haven’t filed an income tax return for years. It is probably that they don’t know of the individuals yet. That could change if they keep bragging about no paying taxes.? In some cases the individual who doesn’t file an income tax return may be missing out on benefits such as the Canada Child Tax Benefit. In this case they could receive more money back by filing a return.
If a Canadian citizen is caught not pay taxes and not filing income tax returns, they could be prosecuted and charged fee of $1000 to $25,000, spend time in prison, and pay the original taxes plus penalties and fines. The CRA does prosecute tax payers who evade paying their taxes. In a period of a year in 2008-2009 they prosecuted 1124 and 323 included fraud and tax evasion. Another thing for anyone not paying tax is that the CRA gets 24,000 calls a year from tax payers reporting people who don’t pay their taxes.