The CRA is responsible for collecting taxes owed and discouraging tax avoidance 
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To help do this, the CRA may carry out a more detailed review, after your tax return has been assessed, to verify the income reported and the deductions or credits claimed. This is done in the postreview program.
The post review focuses on the deductions individuals made when calculating taxable income and on the credits they claimed against tax payable. This includes comparisons to previous years' tax returns, third-party sources, and other databases. It may also involve the request for more supporting documents.
Once the post review is complete, the CRA may make changes to the tax return. In that case, the CRA sends the taxpayer a Notice of Reassessment that explains any changes it made to the taxpayer's original assessment, and states whether the taxpayer has overpaid or underpaid his or her taxes. For more information, see Review of your tax return by the CRA.
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On the bus to school the next day, Paul and Omar were again talking about taxes.
"You know those two brothers on your street who cut everybody's lawn and hedges?", asked Omar.
"Those guys do a lot of business" answered Paul, “Why?”
"Well, you get a paycheque that shows how much money you made and I guess that is used to figure out how much tax you will owe. But who decides how much money those guys made and how much tax they should pay?" asked Omar.
"I guess they do," answered Paul. "They are supposed to anyway."
"Well, what if they just keep the money and don't pay any taxes? What is wrong with that?" asked Omar.
"I am pretty sure that is illegal," Paul said. "Plus, I don't think that I should pay taxes and they shouldn't," he concluded.
"That's true," said Omar. "Still, I wonder what is being done about people who don't pay their taxes." |
The underground economy
Some individuals do not report their earnings and do not pay the taxes that they should. Earning income without reporting it is called the underground economy.
The underground economy can involve legal or illegal activities, including the sale of goods and services. When an individual earns money in this way and does not pay taxes, it is unfair to honest taxpayers. Also, when less tax is collected overall, the government has less money to spend on essential programs such as health care.
The CRA is committed to combating the underground economy with a balanced approach. This includes legal and enforcement activities such as audits and education to raise awareness of the problem.
The CRA is researching how to better understand the underground economy and how best to communicate with Canadians about this problem. For more information see, Underground economy initiative and Voluntary disclosures.
Criminal investigations
In some situations, the CRA will seek legal action against an individual or company for breaking a tax law. For example, an individual could be charged for deliberately filing false returns with incorrect details about income.
The CRA has a criminal investigations program to investigate, punish (for example, through penalty charges), and seek prosecution if needed in significant cases of tax fraud . If an individual is convicted of a tax-related crime, he or she could be fined or sent to jail. The details of the conviction could also be published in the newspaper. This is a serious but, fortunately, rare event. For more information, see Investigations.
