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Subscribe to this list via RSS Blog posts tagged in Criminal Charges

In a recent blog, we introduced the ongoing tax saga of Tony and Helen Samaroo, a husband and wife that owned and operated a restaurant, a nightclub and a motel, who were charged with 21 counts of tax evasion.

The Samaroos were acquitted of all charges in a 2010 criminal trial where the trial judge found the Crown’s case “weak” and supported by “unreliable” and “highly uncertain” evidence which contained “significant flaws” and “discrepancies”.

Following their acquittals, the Samaroos sued the prosecutor and CRA for malicious prosecution. The claim against the prosecutor was dismissed; however, in a scathing 70 page decision Justice Punnett of the British Columbia Supreme Court found the CRA guilty of malicious prosecution and ordered the CRA to pay approximately $1.7 million in damages to the Samaroos.

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In a recent blog titled “Can I go to jail for tax evasion”, we discussed how the CRA has been increasingly seeking jail time for people engaged in tax fraud or tax evasion. In fact, relatively recently a Toronto man was sentenced to five years in jail for filing false GST/HST returns.

The recent decision in (British Columbia (Director of Civil Forfeiture) v. Sanghera, shows that not only can those who commit tax evasion face jail time, but they can also have their assets seized by the government under civil forfeiture statutes.

To date, civil forfeiture statutes have been enacted in the following eight Canadian provinces: Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, and Quebec.

These civil forfeiture statutes allow the government to seize and transfer ownership of property without compensation when the property is suspected of having been acquired through an illegal act or suspected of being used to commit an illegal act.

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If the CRA believes that taxpayers have knowingly failed to report income or remit GST and other taxes owing they will often bring concurrent criminal tax evasion charges in addition to simply re-assessing a taxpayer. In this scenario, the protections afforded to taxpayers in the criminal tax evasion matter – the burden of proof being on the Crown to prove the charges beyond a reasonable doubt – are not present in the tax appeals.  Similarly, unlike in the criminal context, the burden of proof in tax appeals is on the taxpayer, who must demolish the CRA’s assessment and any relevant assumptions of fact. 

Given the differing standards in criminal versus civil proceedings, criminal acquittals typically have little, if any, impact on a subsequent civil proceeding. The CRA is therefore often successful in tax appeals before the Tax Court of Canada (“TCC”) even after a taxpayer has been acquitted in a criminal prosecution based on the same fact pattern.

Samaroo v. The Queen, 2016 TCC 290 (“Samaroo”) is an exception to the general rule.

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In Mazo v The Queen (2016 TCC 232), the Tax Court of Canada considered the tax consequences applicable to income earned through an illegal pyramid scheme.  

 

Facts - Roberta Mazo participated in a pyramid scheme run by the company Business In Motion International Corporation (“BIMIC”). She profited from the scheme and was subsequently reassessed by the Minister of National Revenue as having unreported income for the 2007, 2008, and 2009 tax years.

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An out-of-court statement is generally inadmissible as evidence in court to prove the truth of the statement’s contents – this is the general rule against hearsay.  There are a number of exceptions to this rule including an admission – where a party wishes to use a statement made by the opposing party against that opposing party.  An admission is admissible as evidence of the contents of that admission.  Where that opposing party’s agent makes such a statement, it is also admissible as evidence of the truth of its contents.  The recent decision in Spears et al. (2016 NSPC 20) stands for the proposition that a taxpayer’s accountant’s statement to CRA can be admitted as evidence for the truth of its contents.  This is an important case for business-owners who rely on their accountants to deal with the CRA on behalf of the business.

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