Canada Customs digs up tax evasion in IT sector

A Toronto-area IT consultant convicted on three counts of tax evasion has been fined $39,000 by the Ontario Court of Justice.

The Canada Customs and Revenue Agency Wednesday said Reynaldo Sabarillo, a self-employed computer software

consultant based in Markham, Ont., failed to report more than $150,000 in income between 1996 and 1997. The CCRA said Sabarillio had used a hidden bank account and submitted phony invoices when filing his return.

The court ordered Sabarillo to pay any federal taxes and GST that was concealed plus interest in addition to the fine.

Sabarillio could not be reached for comment at press time.

“”It was more of a random selection with a tax return; it wasn’t really that we were looking for it,”” said CCRA spokesman Peter Delis. “”It is a sector of the industry that’s a bit of a concern to us.””

Delis said the IT sector may be prone to tax evasion due to the fragmentation in the workforce.

“”There’s a lot of people who are on contract and aren’t reporting their income from a lot of the companies,”” he said.

Michael Atlas, a tax consultant based in Toronto, agreed. “”Often the reason they incorporate themselves, in addition to possible tax benefits for themselves, is there was some fear amongst the agencies (clients) paying them,”” he said. “”I think there’s a real issue that if these people didn’t become corporations, even though they call themselves self-employed, they may well be considered employees.””

Delis said in some cases, tax evasion can stem from lack of awareness by independent consultants.

“”A lot of the individuals that were hired by a lot of computer firms were hired during peak times,”” he said. “”Right now, I don’t think that the computer industry is as busy as it may have been two years ago, but it happens. I’m sure you’ll find it happening with people in all sectors of the economy. Probably a lot of people may have failed to realize what their tax obligations were.””

Atlas wasn’t so sure. “”I would assume that a lot of these people do employ accountants,”” he said. “”There are certain accounting firms, I think, that have a big practice of those kinds of people who have formed corporations and look after them.””

Sabarillio’s fine represents 75 per cent of the money he hid from the government. Delis said the courts can fine up to 200 per cent of the amount.

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Jim Love, Chief Content Officer, IT World Canada
Shane Schick
Shane Schick
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