Crimes Penalties

Here is an exceptional case where evidence was excluded from a criminal prosecution because CRA could not explain the loss of its auditor’s notes and the investigators did not make notes. The accused tax protesters had argued that the auditor’s notes might have shown that the audit was being used unlawfully to conduct a criminal investigation. If so, the fruits of that investigation should be… Read More »R. v. McCartie and McCartie, 2015 BCPC 66 and R. v. McCartie and McCartie, 2015 BCPC 69 (BC Prov Court) — Evidence excluded from criminal prosecution because CRA inexplicably lost auditor’s notes and investigators didn’t make notes

This decision affirms the FC’s decision.  (See Da Huang (2013 FCC, Simpson) – If you can show legal sources for part of the money CBSA seized from you at the border, it should give it back.) “[78]           Having conducted the required textual, contextual and purposive analysis I am satisfied that subsection 29(1) of the Act allows the Minister to grant relief from forfeiture in respect of a portion… Read More »Canada (Public Safety and Emergency Preparedness) v. Huang, 2014 FCA (Dawson, Gauthier, Trudel) — PCTFMLA – CBSA can release the part of the funds seized that aren’t proceeds of crime

The GST system works by having businesses collect GST (or QST and HST) from their customers.  The businesses are supposed to remit the tax collected to CRA (RQ) but they may deduct amounts they pay their suppliers (input tax credits) to reduce the amount remitted.   Businesses do not pay GST to their employees and so amounts paid to employees do not reduce the GST… Read More »Pépinière A. Massé Inc. c. La Reine, 2014 CCI (Paris) — If you can’t prove that a real person sold you goods or services, you can’t claim input tax credits

Under subsection 163(1) of the Income Tax Act, a taxpayer who fails to report income in two tax returns out of four tax years is liable to a 10% penalty based on the unreported amount of tax. A matching provincial penalty applies. (See “Lower Penalties Cost More” on this website.) The penalty applies even if taxes were withheld at source and reported to CRA by the payer… Read More »Galachiuk v. The Queen, (2014 TCC Graham) — Failure to report penalty – due diligence in either of two tax years

“[3]         51 Taylor is a 12-unit residential apartment building in Chatham.  … “[7] … Between May 1, 2002 and August 13, 2007, when the respondent Attorney General of Ontario (“AGO”) obtained a preservation order, there were 311 documented police occurrences.  During the same period, 21 search warrants were executed at the Property, primarily at three apartments, resulting in 49 arrests, with 119 charges being laid. … Read More »Ontario (Attorney General) v. 51 Taylor Avenue, (2014 ONCA MacPherson) — You could lose your apartment building if you don’t try to evict tenants involved in illegal drugs

This is another forfeiture case.  Here, the Ontario Government tried to seize a home the owner used for a marijuana grow operation.  The Court of Appeal agreed that the forfeiture order was “clearly not in the interests of justice”.    “[8] … Mr. Dowdle … pleaded guilty to the production offence only after receiving an assurance from the federal Crown that there would be no attempt… Read More »Ontario (Attorney General) v. 714 Railton Avenue, (2014 ONCA MacPherson)  — Forfeiture: If the federal prosecutor promises you that you won’t forfeit your home if you plead guilty, you may be protected later

Fercan Developments Inc. owned an $8MM former Molson’s Brewery plant.  But the property was better known for being Canada’s largest and best concealed marijuana grow operation, raising “a large number of plants that were capable of generating $8,000,000 in sales per year.”  [Para. 11] Vince DeRosa owned Fercan.  His brother Robert managed Fercan’s properties in Barrie Ontario.  The Ontario Court of Justice found that “Robert had… Read More »AG v. $4,067,685.10 (Canadian Currency), 2014 ONSC 2537  (Vallee) — If you weren’t involved in the crime, your property won’t be forfeited even if it was used for crime

Suppose the police stop you and find you have $10,000 in cash in your pocket.  Can they keep it?  Maybe.   If you commit a crime, you may be fined or imprisoned.  But normally, the government must prove your guilt beyond a reasonable doubt and under very strict prosecutorial rules.   But since the mid-1980s in the US, and more recently in Canada, governments have… Read More »Ontario v. $10,000.00 in Canadian Currency (In Rem), (2014 ONSC Ellies) — If the police stop you, they can keep your property

As Justice Miller said, “This is a sad and sorry tale of taxpayers … who are just six of many taxpayers who were led down a garden path, with the carrot at the end of the garden being significant tax refunds. The tax refunds were the result of claiming fictitious business losses.”  (Para. 2.) The tax scheme made no sense but the participants didn’t question… Read More »Torres v. The Queen, (2013 TCC C. Miller) – “Fiscal Arbitrators” – Do not suppose that because someone else got a refund with a tax scheme that you can too — CRA might just have made a mistake

If, through lack of vigilance, blindly and imprudently you let your accountant defraud you by keeping your money instead of sending it to CRA, but you weren’t secretly or expressly involved in or benefiting from his stratagems, are you liable for gross negligence penalties for his failures to accurately report and pay your taxes?  No.  (Paras. 74 and 82) Though an experienced business man and… Read More »Vachon c. La Reine, (2013 CCI Tardif) — If your accountant steals your money instead of sending it to CRA, you must still pay the tax but probably not the penalties

Mr. Bandula, was a drywall contractor who immigrated to Canada in 2000.  The reassessments related to his 2002 and 2003 tax years and GST reporting periods.  Justice Bocock didn’t believe the contractor’s excuses for under-reporting or his claims to extra, unreceipted business expenses.  (CRA had allowed unvouchered business expenses and, because the Appellant couldn’t show which of his claims were beyond those allowed, the TCC… Read More »Bandula v. The Queen, (2013 TCC Bocock) — Drywall contractor escapes gross negligence penalties despite admitted under-reporting

Ms. McLeod’s is another example of a fake business loss scheme.  Many of these are in the TCC now.  A group called “Fiscal Arbitrators” was the main advocate but many others modeled on them.   The idea is that you are not taxable because you are an agent for yourself.  (The argument’s more involved but, as Justice Woods said, it’s “pure nonsense”.) Ms. McLeod “was… Read More »McLeod v. The Queen, 2013 TCC (Woods) – Employees: Do not listen to false business loss schemes.  The penalties will ruin you.

Mr. Morgan retired.  His employer gave him the funds from his pension.  Some went to a locked-in RSP.  $143,510 went to him directly and the balance, $36,102, the employer transferred to an RRSP for Mr. Morgan’s wife.  Mr. Morgan hadn’t reported some trust income in two of the 3 earlier tax years. Those failures made him liable for a penalty under ITA s. 163(1) on the amount… Read More »Morgan v. The Queen, (2013 TCC Woods) — If you don’t report income, you could pay a 20% penalty, even if all tax was withheld

InfoSpec sold “zapper” software.  It was convicted of fraud under s. 380 of the Criminal Code of Canada.  (It wasn’t convicted of the charge of tax evasion.)  It appealed the fraud conviction saying that “the sale of software designed to assist a third-party to commit fraud is not itself fraud.” (Para. 3).  The BC Court of Appeal agreed and over-turned the conviction.   As the BCCA… Read More »R. v. InfoSpec Systems Inc., (2013 BCCA Frankel) — It’s OK to sell “zapper” software, knowing that its only use is to delete cash register sales to evade taxes — But the Government will change the law on 01Jan 2014

This is an important case for people who fail to report having $10,000 or more of cash when crossing Canada’s borders.   Under the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act, the Canada Border Services Agency can seize your cash or negotiable instruments if you don’t report having them when you cross the border.  (See my article on the Proceeds of Crime (Money Laundering) and Terrorist… Read More »Da Huang (2013 FCC, Simpson) – If you can show legal sources for part of the money CBSA seized from you at the border, it should give it back