It is estimated that the Canada Revenue Agency (CRA) loses billions of dollars each year because of fraudulent GST/HST refund claims and other fraudulent activities related to GST/HST. The CRA’s tax auditors routinely deny the input tax credits (ITCs) of legitimate businesses because a third-party supplier didn’t possess a valid GST/HST registration number. This remains the case even if the legitimate Canadian business was the victim of fraud and can prove that it did in fact pay GST/HST to that supplier.
There are various types of GST/HST fraud schemes, including fraudulent refund claims, false invoicing, and evasion of GST/HST through the underground economy. The CRA has various tools and resources in place to identify and combat GST/HST fraud, including data analytics, tax audits, and criminal tax investigations.
After reviewing Canada’s GST/HST system, this article compares two of the more involved types of GST/HST fraud: (1) carousel fraud, also known as missing-trader fraud, and (2) accommodation-invoice fraud, also known as false invoicing. It then concludes by offering pro tax tips for Canadian businesses from our expert Canadian GST/HST lawyers.
Source: goodservicetax.com
