The Ontario government is pledging to get tougher with companies that don’t submit tax returns. The province announced a plan Monday to cancel the corporate charters of businesses that refuse to pay.

“We are sending a clear message that everyone must pay their fair share,” said Finance minister Janet Ecker. “These measures will help ensure that tax revenues are collected in a timely fashion.”

Between April 4 and April 30, the Ministry of Finance will be mailing a notice to corporations currently in default of filing tax returns or Exempt from Filing declarations. Once notified, businesses are required to file one of these documents and remit any outstanding tax payments.

In the event that a corporation fails to respond to the initial notification, the ministry will issue a follow-up letter to the corporation and/or initiate contact with the corporation by telephone. The ministry will then issue demand letters, whereby the directors of the corporation may be charged under the Provincial Offences Act, summoned to court for failure to file, and fined $200 per day.

Corporations with tax due to the government are also currently charged a late filing penalty of up to 17% on the outstanding balance, escalating up to 50% for repeat late non-filers.

Corporations that do not comply with the requirement to file returns or declarations will find that their corporate charters have been cancelled. Corporations that cannot be located because they have failed to inform the ministry of a change of address will also have their charters cancelled.

The implications of a cancelled charter are serious, and include: forfeiture of corporate assets to the crown; loss of limited liability and insurance coverage; and inability to claim tax losses.

To qualify as exempt from filing, the corporation must: have filed its federal tax return for the tax year with the Canada Customs and Revenue Agency; have no Ontario taxable income and owe no Ontario tax for the tax year; be a Canadian-controlled private corporation; provide its federal business number to the Ministry; and not be subject to Ontario’s corporate minimum tax.

In addition to the plan announced today, the ministry has already taken a number of steps to address corporations in default such as: creating a special unit to address non-filers; ensuring that the ministry’s corporate tax roll is complete, accurate and up-to-date; and reviewing 12,000 default accounts, from which 500 charters have been identified for cancellation.