Regardless of how income is earned, it may be taxable and must be reported. Many individuals and businesses earning income from illegal activities do not report the money they make. Not only are they not complying with Canada’s tax laws, they may also be using these funds to conduct further illegal activities for profit. This is unfair to law-abiding Canadians; it endangers our communities and deprives Canadians of tax revenue for important services.

The Canada Revenue Agency (CRA) takes all tax non-compliance seriously, including non-compliance committed by those involved in illicit businesses.

Taxing illicit income

The CRA audits individuals and businesses known or suspected of making income from illegal activities, such as drug trafficking, theft, or fraud. The CRA has specialized auditors who are skilled at determining someone’s hidden income and wealth. These auditors work closely with CRA’s debt collection area to help coordinate actions such as garnishments, asset liens, and cash seizures to ensure amounts are promptly paid.

This approach allows the CRA to improve the fairness of the tax system for all and collect amounts owed before individuals can hide funds or liquidate their assets.