Charged with Failing to File GST/HST Returns? What Ontario Business Owners Need to Know

What Is a GST/HST Filing Offence?

Under Canada's Excise Tax Act (ETA), every GST/HST registrant is required to file returns on time and remit any amounts owing. When a registrant fails to do so, the Canada Revenue Agency (CRA) can pursue administrative penalties, civil collection, and — in more serious cases — criminal prosecution.

Most business owners understand that late filing attracts interest and penalties. What many do not realize is that persistent failure to file GST/HST returns can result in criminal charges under the ETA, carrying the possibility of fines, penalties, and even imprisonment.

How CRA Escalates to Criminal Prosecution

The CRA does not typically prosecute a first-time late filer. The escalation usually follows a pattern. First, the CRA issues Demands to File — formal notices requiring the registrant to submit outstanding returns by a specific date. If the registrant ignores these demands, the file may be referred to the CRA's Criminal Investigations Division, which can recommend prosecution through the Public Prosecution Service of Canada (PPSC).

The key statutory provision is section 326(1) of the Excise Tax Act, which makes it an offence to fail to file a return as and when required. Each reporting period for which a return is not filed can constitute a separate count. This means a registrant who has not filed for several years could face dozens of charges — one for each missed reporting period.

Quarterly vs. Annual Filing: Why Your Reporting Period Matters

One of the most overlooked issues in GST/HST prosecutions is the reporting period election. When a business first registers for GST/HST, the CRA assigns a default reporting period based on the registrant's annual revenue (the "threshold amount"). For most small businesses with revenue of $1,500,000 or less, the default is annual filing — unless the registrant actively elects a shorter period.

This distinction is critical in a prosecution. If the Crown alleges quarterly filing obligations but cannot produce proof of an election to file quarterly, the proper basis should be annual filing. The practical effect can be dramatic: instead of facing 50 or more counts (one per missed quarter over a decade), the registrant may only face 10 to 13 counts (one per missed year). Fewer counts generally means less exposure at sentencing.

Defence counsel should always request full disclosure of the CRA's records, including any election forms (GST20) on file. If no election exists, the Crown's Information may be deficient on its face.

The Importance of Voluntary Compliance

In tax prosecutions, one of the most effective mitigation strategies is to bring filings up to date before the matter is resolved. This typically involves retaining a qualified accountant to prepare all outstanding returns and submitting them to the CRA.

Courts look favourably on accused persons who take concrete steps to remedy their non-compliance. When a registrant can demonstrate that all outstanding returns have been filed and accepted by the CRA, it substantially strengthens their position at sentencing. It shows the court that the accused has taken responsibility, that the tax gap has been quantified, and that the CRA is no longer in the dark about the registrant's obligations.

Voluntary compliance also removes one of the Crown's strongest arguments at sentencing — that the accused continues to flout the law and that a significant penalty is needed to compel future compliance.

The Interplay Between Criminal and Civil Proceedings

An important feature of GST/HST prosecutions is that they often run in parallel with civil collection efforts by the CRA. The criminal case addresses the failure to file; the civil side addresses the tax debt itself.

These two tracks require different strategies. On the criminal side, the goal is to minimize or eliminate penal consequences — fines, probation, or imprisonment. On the civil side, the goal may be to negotiate a payment arrangement, apply for taxpayer relief, or — in appropriate cases — address the debt through insolvency proceedings such as a consumer proposal or bankruptcy.

It is generally advisable to resolve the criminal matter first, or at least bring filings up to date, before pursuing formal insolvency proceedings. A trustee in bankruptcy needs accurate financial information, which depends on having filed returns. And a sentencing judge may view an insolvency filing more favourably if it reflects a genuine effort to put one's financial house in order, rather than an attempt to evade obligations.

Sentencing Considerations

Section 326(2) of the Excise Tax Act provides that a person convicted of a failure-to-file offence is liable on summary conviction to a fine of not less than $1,000 and not more than $25,000, or to both a fine and imprisonment for a term not exceeding 12 months. The court has discretion within this range.

Factors that courts consider at sentencing include the number of reporting periods missed, the total amount of tax involved, the length of non-compliance, whether the accused has a prior record of tax offences, and — critically — whether the accused has since filed all outstanding returns and cooperated with the CRA.

Joint submissions on sentencing, where both the Crown and defence agree on an appropriate sentence and present it to the court together, are common in these cases. Courts will generally accept a joint submission unless it would bring the administration of justice into disrepute. A well-prepared joint submission that accounts for the accused's compliance efforts, personal circumstances, and the overall tax context can result in a significantly more favourable outcome than a contested sentencing hearing.

Practical Guidance for Business Owners

If you are a GST/HST registrant who has fallen behind on filing, here are some key points to keep in mind.

Do not ignore Demands to File. A Demand is a formal legal instrument. Ignoring it is what transforms an administrative problem into a potential criminal one. Respond promptly, even if you cannot file immediately — communicate with the CRA and demonstrate good faith.

Retain an accountant immediately. Before seeking legal counsel for the criminal matter, or at the same time, engage a qualified accountant or tax professional to prepare your outstanding returns. This is the single most impactful step you can take.

Understand your reporting period. Review your GST/HST registration and confirm whether you elected quarterly or annual filing. If you never made an election, your default period may be annual, which could significantly affect the scope of any prosecution.

Seek legal counsel experienced in tax prosecution defence. GST/HST offences under the Excise Tax Act are prosecuted by the PPSC, not provincial Crowns. The procedure, disclosure obligations, and sentencing principles differ from ordinary provincial offences. You need counsel who understands this specific area.

Do not assume criminal charges mean jail time. For first-time offenders who take steps to comply, the outcome is frequently a fine — often at or near the statutory minimum — particularly where voluntary compliance has been demonstrated. Courts recognize that failure to file is often the product of disorganization, financial hardship, or poor advice rather than deliberate evasion.

Consider the civil side early. If the underlying tax debt is substantial, discuss your options with a licensed insolvency trustee. A consumer proposal or other arrangement may be available to address the debt in a manageable way, but timing matters — and it is generally best to coordinate the civil and criminal strategies together.