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Criminal Tax Evasion Findings Impact Tax Court Appeals

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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.

In this case the evidentiary findings of fact of the criminal court judge that acquitted the taxpayers of tax evasion were not only admitted, but the TCC judge placed so much weight on these findings that he chose to alter the general order of proceedings in the tax appeals to require Crown Counsel to begin first, and prove the CRA assessment.

The taxpayers were a married couple and their corporations, and operated a hotel and nightclub in Nanaimo, BC.  The corporation was assessed for unreported income and unremitted GST/HST, and the individuals assessed personally as directors. The two individuals were also charged criminally with tax evasion, but were acquitted with the trial judge finding the Crown’s case “weak” and supported by “unreliable” and “highly uncertain” evidence which contained “significant flaws” and “discrepancies”.

Following their successful tax evasion acquittals, the Samaroos brought a preliminary motion before the TCC for an order admitting the judge’s findings of fact from the criminal tax evasion trial, and precluding the CRA from presenting any evidence challenging or rebutting those findings of fact. 

Due to the differing standards of proof in criminal proceedings and tax appeals, the TCC declined to apply the doctrines of issue estoppel or abuse of process to exclude the CRA from presenting additional evidence to contradict or challenge the findings of fact made in the tax evasion trial.

However, the TCC found that since the tax appeals and the tax evasion trial were essentially in respect of the same factual issues, certain findings of fact from the tax evasion trial could be “admitted and with impact” in the tax appeals. (In fact, the TCC placed so much weight on these admitted facts that it held that the Samaroos had “preliminarily challenged and potentially demolished certain assumptions of facts of the Minister”).  The TCC thus took the extraordinary step of altering the order of the proceedings, and required the CRA to present its case first at trial! 

While the TCC did not explicitly go so far as to reverse to onus of proof onto the CRA in the tax appeals,  it came very close to doing so by suggesting that the CRA needed to marshall evidence to rebut the criminal trial judge’s findings of fact. 

By way of commentary, our view is that the TCC’s decision to admit the findings of fact from the tax evasion trial is a welcomed approach in the context of civil and criminal tax disputes that involve the same fact pattern.  Tax litigation should not be conducted in a vacuum, and taxpayers should not have to waste time and resources establishing facts that have already been accepted by a criminal trial judge in a subsequent tax appeal.

Has the CRA accused you of tax evasion? If so contact us here

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A version of this article appeared in the November 2017 issue of

the Canadian Tax Foundation’s Canadian Tax Highlights.


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