The Consequences of Avoiding Income Tax
It can be painful to pay income tax. As Canadians we see a very significant percentage of our income go the government. This money is used to fund our infrastructure, health care, schools and other public services.
Some Canadians earn cash income and do not report it to the government. By doing this they avoid paying income tax. This puts more money in their pockets. However, there can be significant consequences for not filing tax returns and not paying taxes that go beyond neglecting one’s civic duty as a Canadian citizen.
Avoiding taxes is against the law. Tax evasion is a criminal offence that carries serious penalties including jail time and large fines. If you are convicted of tax evasion the financial consequences can go way beyond what paying the tax would have cost you in the first place.
There is another consequence to avoiding taxes that most people do not think about. People who are injured in car accidents and cannot work are entitled to income replacement benefits from their own auto insurance companies. However, if you have not filed taxes then your insurance company will not pay income replacement benefits. For seriously injured people who cannot work this can result in a financial disaster. Recovering lost wages following a serious injury is always easier if the injured person honestly reported his or her income in the years leading up to the injury. If you are a tax evader and you are seriously injured in a car accident, chances are you will regret your decision to avoid paying taxes.
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