Canada Revenue Agency (finally) warns Canadians about (detax) tax protester schemes

Canada Revenue Agency (finally) warns Canadians about (detax) tax protester schemes

The Canada Revenue Agency (“CRA”) has assessed a number of taxpayers who have participated in the detax schemes. In addition, the CRA has imposed 50% subsection 163(2) gross negligence penalties. We think that — in many cases — the imposition of the subsection 163(2) gross negligence penalties is wrong in fact and law.

We are in the process of representing taxpayers to dispute the correctness of the subsection 163(2) gross negligence penalties. The detax “interpretation of the law” has been promoted for some time. CRA has finally issued a press release warning taxpayers about detax and other types of tax protester schemes. We are not sure what took so long.

The interesting sections of the CRA’s press release, along with our comments, are as follows.

“The CRA cautions all Canadians to be aware of individuals who try to convince them to not pay their taxes. Taxpayers should be aware that tax protestors who promote intentional tax evasion are seeking a personal financial benefit at the expense of the taxpayer and of all Canadians.”

countertax-thinking-2012-11-28-pullquote1.png

In our experience, taxpayers who participated in the detax scheme were persuaded that the scheme was legal and not contrary to the law. It is not that the detax promoters persuaded these taxpayers that they should willfully evade tax or that the tax legislation was unjust. Instead, the detax promoters persuaded these taxpayers that the law allows for a refund of tax paid.

“Canada has one of the highest rates of compliance in the world. However, individuals who try to evade or avoid taxes by participating in tax evasion schemes will be detected and addressed accordingly. That means you will lose the high fees you paid up front for the bad advice you’ve received from the promoter, and once your tax return is processed the CRA will reassess income tax and interest, and charge penalties. In some cases, you could be prosecuted for tax evasion.”

As discussed, the CRA is routinely imposing 50% gross negligence penalties. It appears that — at this time — the CRA is not deleting the penalties at the objection stage. In order to dispute the penalty, taxpayers will likely need to retain a tax lawyer and appeal the penalty in the Tax Court of Canada.

“If you have doubts about certain tax arrangements, you should get advice from an independent tax professional, someone who is not connected to the scheme or promoter. If it sounds too good to be true, it probably is.”

It is not advisable or appropriate for taxpayers who participated in the detax scheme to obtain advice from the tax promoters, accounting professionals involved in the detax scheme or the CRA. We believe that all of these parties have a vested interest in the outcome and, therefore, taxpayers will not receive independent information and advice.

We recommend that taxpayers call our firm to obtain independent advice from a tax lawyer and discuss their options.

Insights

Susan Farina wearing a dark blue top and dark rimmed circular glasses brightly smiling while sitting at a desk with a pen and paperwork in front of her

What Accountants Say

Peter Aprile is a very hands on and practical tax lawyer who is very focused and diligent. He is a pleasure to work with.

- Susan Farina, Tax Partner, Price Waterhouse Coopers

David Cuddy in a blue button up shirt standing in a park

What Clients Say

I’m a Senior VP with an accounting and finance background. I’ve worked with lawyers and large law firms. I was referred to Counter to fix a tax dispute. It is very rare to encounter lawyers that combine expertise, dedication, and a businesslike approach to litigation. I have no hesitation in recommending Counter.

- David Cuddy, Senior Vice-President, Finance & Business Operations, CFL

Laura Couvrette smiling in a plaid top standing with arms folded

What Accountants Say

Counter Tax Litigators has worked with Fuller Landau to resolve several of our clients’ tax disputes. Counter delivers superior communication.

- Laura Couvrette, CPA, CA, Fuller Landau LLP

Mark Ram standing in a office hallway wearing a white button up with dark blue jacket and dark rimmed glasses

What Clients Say

I spent a good part of my career dealing with attorneys on innumerable matters, and found Peter to be extremely competent, open-minded and exceptionally honest. I would not hesitate to use Peter again, and highly recommend the team at Counter Tax Litigators.

- Mark Ram, Retired CEO

Klaus W. Reif sitting at a desk, dressed in a blue jacket with a silver wrist watch

What Clients Say

Counter’s representation on our behalf was well informed, professional and efficient, which ultimately resulted in a highly satisfactory decision in all aspects.

- Klaus W. Reif, President, Reif Estate Winery

Brian Grott wearing a white button up with a red tie with white dots, softly smiling and leaning against a desk

What Clients Say

I was amazed with the results. They went above and beyond, and I would recommend Counter to any person or business with a significant tax dispute.

- Brian Grott, Northland Screen Corp

How can we help you?

Recognition

Our law firm and tax lawyers regularly receive
recognition as leaders in tax controversy and litigation.

top_lawyer_23-24_v2
canadian_law_awards_2023_v2
martinsdale_hubbell_2020_overall_rating_v2
canadian_lawyer_21-22_top_law_v2
lexpert_2022_logo_v2
martinsdale_hubbell_2020_peer_rated_v2
innovative_lawyers_icon_v2
precedent_logo_v2
fastCase50_v2