Canada Revenue Agency
Symbol of the Government of Canada
Skip to content | Skip to institutional links

Common menu bar links

About the CRA

Institutional links

corporate image

Deterring Non-Compliance

Taxpayers do not always succeed in complying. Honest mistakes on forms and differences in the interpretation of complex laws are to be expected. Some taxpayers are late in filing while others simply choose not to comply. To ensure that individuals comply with their obligations, the CRA takes action to encourage compliance, and to detect and deter non-compliance. These actions include

  • conducting reviews and audits;
  • communicating the results of our compliance actions; and
  • administering taxpayer relief provisions and dispute resolution.
What is an Audit?
 
A tax audit is the examination of a taxpayer's books and records. We conduct tax audits to monitor and maintain Canada's self-assessment tax system.
 
There are a number of ways that we select specific files to be audited. In some cases, we review the compliance of a particular group of taxpayers. In others, we follow leads from other audits or investigations, or from outside sources, such as those provided through our Leads and Assistance Program (www.cra.gc.ca/agency/investigations/leads-e.html).

Conducting Reviews and Audits

Each year, the CRA conducts a number of reviews and audits to ensure compliance with, and to promote awareness of, the tax laws we administer.

Did you know?
 
By law, taxpayers are required to keep adequate books and records for a minimum of six years to determine their tax obligations and entitlements. Using the services of a tax professional does not relieve taxpayers of these responsibilities.

Our review programs contribute to promoting taxpayer education by identifying common areas of misunderstanding (www.cra.gc.ca/reviews/). The analysis of results and feedback from taxpayers are used to improve the guides and forms we provide to the public.

Under these programs, we review deductions and credits on individual income tax returns, and ensure that various amounts have been correctly reported. These programs also form the basis of our Beneficial Client Adjustment Initiative and provide support for other important programs such as the Canada Child Tax Benefit, the GST/HST credit, and the Guaranteed Income Supplement.

In addition, the CRA conducts audits of individuals, businesses, charities, and non-profit organizations in order to review GST/HST returns, income tax returns, and payroll records. Our objective in auditing is to accurately determine the taxes and any interest or penalties payable under the law.

Charities and Non-Profit Sector
 
In 2005, the CRA initiated the national Charities and Non-Profit Organization Sector Project to identify the level of GST/HST compliance risk in charities and non-profit organizations.
 
Spotlight on Benefits: Validation and Controls
 
In order to ensure that non-compliance is identified and addressed, the CRA conducts validation and control activities to make sure that individuals who receive benefits and credits are eligible and that the amounts paid are correct. Our validation and controls program specifically targets accounts identified as high-risk for potential overpayments or underpayments. In 2006-2007, we adjusted 190,000 benefits accounts, and recouped overpayments totalling more than $185 million and made adjustments favouring benefit recipients of more than $76 million.

Communicating the Results of Our Compliance Actions

Law-abiding Canadians want to see evidence of fair and equitable tax administration. They want to see that action has been taken against those who do not comply.

We publicize court convictions in the media to inform people about the consequences of tax evasion and fraud committed against Canadians. Publicizing our enforcement activities contributes to an open and transparent tax administration by helping Canadians understand what the CRA does about non-compliance and why. It also acts as a deterrent by providing taxpayers with information about the risks and costs of non-compliance.

Did you know?
 
The CRA regularly advises the media of cases of individuals, corporations, and trusts convicted in the courts of tax evasion or of not filing income taxes when required. Publicized convictions are posted on our website at www.cra.gc.ca/convictions.
 
“The CRA pursues tax evaders to maintain public confidence in the integrity of the tax system. Canadians have to trust that our self-assessment system is working and that it is fair.”
 
-- William V. Baker,
Commissioner and Chief Executive Officer,
Canada Revenue Agency

Dispute Resolution and Administering Taxpayer Relief Provisions

Our ability to protect the revenue base can be affected by the public's confidence in the firmness and fairness of the overall tax administration system, and their trust in the integrity of the CRA. To earn and retain the trust of Canadians requires a redress process that is both fair and seen to be fair.

When taxpayers do not agree with us on a tax or penalty matter, they are entitled to a formal and objective review of their file. The CRA provides an impartial and timely dispute resolution process that respects taxpayers' fundamental right to redress in their dealings with the CRA.

In addition, our taxpayer relief provisions allow us to be more flexible and responsive to taxpayers' circumstances when it is unreasonable or unfair to penalize them. These provisions have given the CRA common-sense ways to help taxpayers that are unable to meet their tax obligations because of extraordinary circumstances.

The Voluntary Disclosures Program is another CRA initiative. The program gives taxpayers the chance to come forward and correct inaccurate or incomplete information, or to disclose previously unreported information, without penalty or prosecution (www.cra.gc.ca/voluntarydisclosures).

Did you know?
 
The CRA can forgive penalties and interest when they result from circumstances beyond a taxpayer's control, including:
  • natural or human-made disasters, such as floods or fires;
  • civil disturbances or disruptions in services; or,
  • serious illness or accident, or serious emotional or mental distress due to circumstances such as a death in the immediate family.
 
Voluntary Disclosures Program
 
The Voluntary Disclosures Program provides an opportunity for taxpayers to correct past omissions. Relief from penalty or prosecution is determined on a case-by-case basis if the disclosure meets certain validity conditions.
 
In 2006-2007, the CRA processed 8,244 voluntary disclosures, generating related assessments totalling over $525 million in taxes.

Date Modified: 2007-12-14

Top of Page
Important Notices