Canada Revenue Agency Collects Over $100 Million in Unpaid Crypto Taxes Amidst High Non-Compliance

CRA Intensifies Crypto Tax Enforcement, Recovers Over $100 Million

The Canada Revenue Agency (CRA) has announced that its specialized team of 'cryptoasset auditors' has successfully collected over $100 million in unpaid taxes over the last three years, stemming from more than 200 active files. This significant recovery highlights the agency's ongoing efforts to address tax non-compliance within the rapidly evolving cryptocurrency sector. Despite these substantial collections and identified high risks of non-compliance, no criminal charges related to crypto tax evasion have been laid by the CRA since 2020.

The CRA's focus on digital assets comes as a response to what it identifies as a 'high level of ambiguity' surrounding crypto assets in Canada, with polls indicating that a significant portion of the public lacks a clear understanding of their tax obligations.

Audit Strategies and Non-Compliance Risks

The CRA established a dedicated cryptocurrency unit in 2017 to build intelligence and conduct audits focused on crypto-related risks. The agency's compliance efforts have revealed substantial non-compliance, with up to 40 percent of Canadian taxpayers using cryptoasset platforms either failing to file their taxes or being categorized as high risk for non-compliance. Furthermore, 30 percent of users who do file tax returns are deemed high risk.

To identify potential tax evasion, the CRA employs various tools, including 'Unnamed Persons Requirements' (UPRs), which compel crypto exchanges to provide customer data. Notable instances include orders issued to Coinsquare in 2021 and more recently to Dapper Labs Inc., a Vancouver-based firm specializing in non-fungible tokens (NFTs). These UPRs allow the CRA to obtain transaction data and user information, which is then cross-referenced with taxpayer declarations to spot discrepancies.

Challenges in Prosecution and Future Outlook

Despite the significant amount of unpaid taxes recovered and the high rates of non-compliance, the absence of criminal charges since 2020 raises questions. Tax evasion is a criminal offense in Canada, carrying severe penalties including fines of up to 200% of the tax due and potential jail time of up to five years, or 14 years for fraud. The CRA typically boasts a near 90% conviction rate for tax crimes.

Court filings suggest that the federal government's efforts to combat crypto-based tax evasion and illicit financing are hindered by limited resources for enforcement in a space characterized by its borderless and often anonymous nature. A top CRA crypto auditor has even stated a belief that 'there is no way to reliably identify taxpayers operating in the crypto space and assess compliance' with income tax reporting obligations. For taxpayers who have previously failed to report crypto income, the CRA's Voluntary Disclosures Program (VDP) offers a pathway to avoid criminal prosecution and potentially reduce penalties by voluntarily coming forward.

Looking ahead, Canada is set to implement the Crypto-Asset Reporting Framework (CARF), developed by the Organisation for Economic Co-operation and Development (OECD). Starting in 2026, CARF will require crypto-asset service providers in Canada to report annual data on transactions and customer information to the CRA, with the first exchange of information scheduled for 2027. The 2024 federal budget allocated $51.6 million over five years to the CRA to support the implementation and administration of this new reporting system. This initiative aims to increase transparency and curb tax evasion by providing the CRA with a clearer picture of crypto activities within the country.