Winnipeg businessman fined for tax evasion

The Canada Revenue Agency (CRA) announced that Khalid Tawfeeq (Tawfeeq) of Winnipeg, Manitoba, pleaded guilty on June 29, 2021, in Winnipeg Provincial Court, to one count of income tax evasion under the Income Tax Act, and one count of Goods and Services Tax/Harmonized Sales Tax (GST/HST) evasion under the Excise Tax Act. Tawfeeq was ordered to pay a $158,268 fine, representing 175% of the income tax and GST/HST evaded.

Tawfeeq is the sole shareholder of Salvage International Inc. (Salvage), a licenced used car dealership that repaired and resold vehicles purchased from auctions in Manitoba, Saskatchewan, and Alberta. As an incentive for prospective buyers and to reduce the purchase price, Tawfeeq transferred vehicles from Salvage’s inventory to his sons, who sold the vehicles as private sellers, to avoid charging GST/HST. In the fiscal years ending in 2015, 2016, and 2017, Tawfeeq evaded the payment of $62,977 of corporate income tax on 150 vehicles sold using the above method.

During the same period, Tawfeeq evaded $27,462 in GST/HST by unlawfully claiming input tax credits on Salvage’s GST returns for vehicles purchased for a third party. Tawfeeq was reimbursed by the third party for the purchases, and was not eligible to claim the input tax credits as he was not the owner of the vehicles.

All case-specific information above was obtained from the court records.

Tax evasion is a crime. Falsifying records and claims, wilfully not reporting income, or inflating expenses can lead to criminal charges, prosecution, jail time, and a criminal record. From April 1, 2020, to March 31, 2021, there were 36 convictions, with 15 taxpayers sent to jail for a total of 26.2 years. These individuals were sentenced for wilfully evading payment amounts totalling $10,902,950 in tax.

The CRA remains dedicated to maintaining the integrity of Canada’s tax system, as well as the social and economic well-being of Canadians during these unprecedented times. The CRA continues to aggressively pursue tax evasion and false claims with all tools available to them. The CRA is continuously working towards making sure that individuals and businesses report income earned and eligible losses, and claim benefits to which they are entitled, so that important benefit programs can be administered to those who need them.

As a result of COVID-19, we are seeing the increased importance of these benefits, and are working to make sure that they continue to be available to Canadians. Any individual or business who underreports income, or claims losses or benefits to which they are not entitled, including ineligible claims for COVID-19 benefits, may have to repay the benefit amounts and may be subject to other possible action.

The CRA has set up a free subscription service to help Canadians stay current on the CRA’s enforcement efforts.

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Associated Links

• Leads Program
• Voluntary Disclosures Program

Contacts

Media Relations - Regional Contact
Joanne de Waal
Canada Revenue Agency
306-517-0515