Punishing in the Public Interest: Exploratory Canadian Evidence Pertaining to Convictions and Incarcerations for Tax Offences

24 Pages Posted: 3 May 2021

See all articles by Oliver N. Okafor

Oliver N. Okafor

Ryerson University - Ted Rogers School of Management

Jonathan Farrar

Wilfrid Laurier University, Canada

Date Written: 2021

Abstract

Although naming and shaming is a deterrence strategy used by tax authorities, ostensibly to increase tax compliance, the contents of tax conviction notices in which taxpayers are named and shamed have not been investigated in empirical research. To this end, this study uses a sample of 2,570 taxpayers convicted of tax offences by the Canadian tax authority over a ten-year period (2006 through 2015) to identify key characteristics of convictions and incarcerations for tax crimes, and to understand how key conviction characteristics are associated with incarceration. Over this period, findings show that 55% of tax convictions in Canada relate to failure to file tax returns, and that 14% of convicted individuals are incarcerated for an average of 17 months. The mean unreported income per convicted taxpayer is $89,978, the mean unremitted excise tax per convicted taxpayer is $15,330, and the mean fine amount per convicted taxpayer is $48,201. Males are more likely to be convicted of a tax crime than females. Further, professionals are far more likely to be incarcerated than non-professionals. Results also indicate that underreporting related to excise tax as a form of tax evasion is more likely to result in harsher sentencing than underreporting related to income tax. Lastly, we observe a downward trend in convictions and incarceration over the 10-year span, such that the total convictions and incarcerations at the end of the sample period are roughly one-third of the convictions at the beginning. Implications for public policy are discussed.

Keywords: Tax conviction notices, Incarceration, Naming and shaming, Tax evasion

Suggested Citation

Okafor, Oliver N. and Farrar, Jonathan, Punishing in the Public Interest: Exploratory Canadian Evidence Pertaining to Convictions and Incarcerations for Tax Offences (2021). Journal of Accounting and Public Policy, 2021, Available at SSRN: https://ssrn.com/abstract=3832450

Oliver N. Okafor (Contact Author)

Ryerson University - Ted Rogers School of Management ( email )

350 Victoria Street
Toronto, Ontario M5B 2K3
Canada

HOME PAGE: http://https://www.ryerson.ca/accounting-finance/faculty/oliver-okafor/

Jonathan Farrar

Wilfrid Laurier University, Canada ( email )

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