The Canada Revenue Agency (CRA) is aware that electronic
sales suppression (ESS) software is being marketed and sold to Canadian
businesses. As part of its efforts to combat the underground economy, the
Government of Canada has introduced new measures to address this problem. ESS
software (commonly known as zapper software) is illegal. Designed to work with
point of sale systems and electronic cash registers, businesses use this
software to knowingly delete part of their sales from their computer records to
reduce their GST/HST and income tax obligations.
Using ESS software offers an unfair advantage to those who
use it to circumvent Canada’s tax laws, which in turn undermines the
competitiveness of businesses that follow the rules. The Government of Canada
is committed to protecting the integrity of Canada’s tax system.
New measures took effect on January 1, 2014 that
allow the CRA to impose civil penalties for designing, using, possessing,
acquiring, manufacturing, developing, selling, possessing for sale, offering
for sale, or otherwise making available ESS software. These measures also
include new criminal offences.
The new penalties and offences are as follows:
Administrative monetary penalties Under the new legislation, businesses that
use, possess, or acquire ESS software will face the following administrative
monetary penalties:
• $5,000 on the first infraction; and
• $50,000 on any subsequent infraction. Anyone who
manufactures, develops, sells, possesses for sale, offers for sale or otherwise
makes available ESS software will face $10,000 on the first infraction, and
$100,000 on any subsequent infraction. Criminal offences Under the new
legislation, businesses or others that use, possess, acquire, manufacture,
develop, sell, offer for sale, or otherwise make available ESS software will
now face:
• on summary conviction, a fine of not less than $10,000
and not more than $500,000, or imprisonment for a term of not more than two
years, or both; or
• on conviction by indictment, a fine of not less than
$50,000 and not more than $1 million or imprisonment for a term of not more
than five years, or both.
The CRA is working hard to detect and deter those who
choose not to comply with tax laws, so that all income is reported, the proper
amount of taxes is paid, and the tax system is fair for everyone. This includes
working to identify those who design, use, possess, acquire, manufacture,
develop, sell, possess for sale, offer for sale, or otherwise make available ESS
software. By discouraging the use of ESS software and penalizing those who
continue to use it, the CRA is helping to ensure a level playing field for all
businesses and taxpayers. Although customers may not notice if a business is
using ESS software, they can still do their part by always asking for a copy of
their receipt. If you know of any taxpayer who is not complying with the tax
laws, let us know. We will review the information and, when warranted, take
appropriate action. For further information and a contact number, go to
Informant Leads Program. If you have been using ESS software and want a second
chance to correct your tax affairs, you can make things right through the CRA’s
Voluntary Disclosures Program (VDP).
The VDP allows taxpayers to correct inaccurate or
incomplete information or disclose information they have not previously
reported to the CRA. If they make a valid disclosure before they become aware
that the CRA is taking action against them, they may only have to pay the taxes
owing plus interest. Go to Voluntary Disclosures Program for more information
on the program. If your business has been contacted about ESS software or if
you have information that could help the CRA identify someone who develops,
sells, or uses the software, you are encouraged to contact the CRA Informant
Leads Program where you will find information on how to report suspected tax
evasion. Get it right from the start—don’t zap! Visit About the underground
economy to learn more about what the CRA is doing to address the underground
economy. For more information on the new measures to combat the use of ESS
software, read the questions and answers or visit Electronic suppression of
sales.
Please consult the Canada Revenue Agency website
should you have any questions or concerns. http://www.cra-arc.gc.ca For more
information on the above, please contact HazloLaw Founder & Business
Lawyer, Hugues Boisvert at 613-747-2459 x 304 or at hboisvert@hazlolaw.com
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