Two-tiers of tax treat­ment

The Western Star - - EDITORIAL -

There are some ques­tions to be an­swered.

Re­cently, CBC News re­vealed that at least some of the wealthy users of a tax dodge of­fered to rich Cana­dian fam­i­lies had been given se­cret Canada Rev­enue Agency (CRA) deals to settle their tax li­a­bil­i­ties.

Mem­bers of roughly 20 fam­i­lies had used a tax avoid­ance plan pitched by KPMG. The ac­count­ing firm told the “high worth” fam­i­lies that they could “do­nate” at least $5 mil­lion to shell com­pa­nies on the Isle of Man, and avoid in­come tax in the process.

At least some of the tax dodgers were of­fered deals last year of­fer­ing to let them pay the back taxes due on their in­come, along with some in­ter­est. Now, it seems some of those deals are be­ing made.

The CBC was told by a CRA rep­re­sen­ta­tive that the deals were, “sup­ported by the facts of this par­tic­u­lar case,” and that the agency had “max­i­mized rev­enue” by mak­ing a de­ci­sion to not go through Tax Court — “There is gen­er­ally sub­stan­tial sav­ings to the pub­lic and a ben­e­fit to the jus­tice sys­tem when cases are re­solved through a set­tle­ment.”

But what about those who don’t have mil­lions of dol­lars, for whom “max­i­miz­ing rev­enue” doesn’t seem to be the or­der of the day?

Go into fed­eral Tax Court records just for 2019, and you can find ordinary cit­i­zens fighting not only re­assess­ments by the Cana­dian Rev­enue Agency, but in­ter­est, penal­ties and gross negligence penal­ties as well.

One B.C. cou­ple lost $80,000 in RRSP con­tri­bu­tions that was stolen in a scam. It was taken from an RRSP pro­gram that they had checked out and found to be le­git­i­mate — but after the theft, the CRA dis­al­lowed their RRSP con­tri­bu­tions and added the money to their tax­able in­come.

(We should point out, the CRA added it to their tax­able in­come in the year 2000, and added penal­ties, in­clud­ing gross negligence penal­ties.)

Nine­teen years after 2000, a Tax Court judge ruled that the re­assess­ment was im­proper.

No be­hind-the-scenes set­tle­ment deal there, just the CRA adding more fi­nan­cial in­sult to $80,000 in injury.

Per­haps the cou­ple hadn’t heard that “CRA prac­tice also rec­og­nizes that the ear­li­est pos­si­ble res­o­lu­tion of dis­putes is in the pub­lic in­ter­est, as lengthy lit­i­ga­tion is costly to all par­ties and the out­come of com­plex, taxre­lated lit­i­ga­tion pro­cesses may be dif­fi­cult to pre­dict,” as a me­dia re­la­tions of­fi­cer told the CBC about the Isle of Man scheme.

But back to the main is­sue: as set­tle­ments are made, it looks like the peo­ple who de­vel­oped and pitched a scheme that saw more than $130 mil­lion moved off­shore will not, as the fed­eral Lib­er­als said when the scheme was dis­cov­ered, have to ex­plain the process in court.

Tax­a­tion has to be fair and trans­par­ent. This is nei­ther.

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