Opinion

Taxpayers DO have the right to remain silent

Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr

Published

3 years ago

7 minute read

A taxpayer-friendly unanimous Federal Court of Appeal ruling came out this week in MNR v Cameco [2019 FCA 67]. At issue was whether or not the Minister (through the CRA) has the authority to compel oral answers to oral questions from taxpayers or their employees.

In his ruling, Justice of Appeal Rennie stated “…the Minister does not have the power to compel a taxpayer to answer questions at the audit stage…”, however, it may be in the best interest of the taxpayer to provide reasonable answers to reasonable questions in order to expedite the process. The full entire ruling can be found and read here

This ruling simply re-confirms, that even in an audit, you (and your staff) have the right to remain silent, and that the Minister’s powers are limited to physical evidence.

An exception to this is you are required to provide assistance in locating and providing that physical evidence, which may need to be orally.

Personally, when dealing with a very large number of taxpayers on our own office, we want to be certain that the file that the CRA is talking about is the same file in front of us. As such, we are a firm believer in the Canadian Home Builders’ Association motto that is ironically supported by the Government of Canada: “Get it in Writing.”

I am not advocating answering no questions, as the Minister (CRA) still has the ability to issue reassessments, thereby shifting burden of proof to the taxpayer further to disprove the reassessment.

I am, however, advocating at a minimum to get those questions detailed, and in writing. This will help to provide clarity and allow for proper thought in your answers as opposed to stating something with unintended consequences.

Here is a little example of what happens when you don’t get it in writing: in my dark-side days as a field auditor with the (then called) CCRA, we used to ask prying questions that the taxpayer had no idea they were answering.

For example, in one particular circumstance I was reviewing a file where it was suggested that the taxpayer was doing under-the-table cash jobs. This meant I would have to be creative in figuring out the taxpayer’s cost of living, and ruling out other sources of income.

Meeting in a quiet restaurant in a small Saskatchewan town, I was eventually able to have the taxpayer relaxed enough to think that we were having a normal conversation. Just a couple of ‘Riders fans that aren’t a fan of Ottawa, but hey, I have a job to do. When the taxpayer started complaining about the government, I joined in:

“Hey, I hear you. I’m not some suit from Ottawa. I’m from Regina. I mean both the feds and the province already get enough out of me from tax on my smokes.”

I don’t smoke.

The taxpayer didn’t know that, but the anger was timely because the province had just raised up the cigarette tax the previous year so packs were well over $6 a pack.

“Yeah I know”, the taxpayer said, “I smoke a pack a day”.

Music to my ears as a tax auditor, the taxpayer just told me that they need ($6 x 365) = $2,190 of after-tax income just to feed their cigarette habit.

I continued, “That’s terrible! Between getting our money on that, and getting it at the casino, it’s just crazy how much they make it hard to enjoy our weekends.”

“Yeah, I don’t win nuthin’ at the casino either,” the taxpayer stated.

To me I heard ‘I didn’t have any non-taxable casino winnings. In fact, the taxpayer likely had lost money in the year. This means the taxpayer needed to have more disposable income to gamble.’

The conversation continued for a good 30 minutes. Once I was armed with more knowledge of the taxpayer’s lifestyle and spending habits, I went to work. Bank statements, receipts, mileage information, fuel costs, type of vehicle, etc.

We would use information tools not only from Statistics Canada for price of fuel in different regions, we would also use websites like www.fueleconomy.gov that provide different estimated fuel consumption based on type of use and mileage going back to cars from the 1980s. Then we work backwards to see if the numbers made sense with respect to the taxpayer’s vehicle and costs.

When it was all said and done, I used the results of our conversation against the taxpayer. When I was finished, I found over $30,000 in an income variance between the taxpayer’s living costs and change in net worth compared to what was reported. Not only that, but the taxpayer had already backed themselves into a corner because of the questions that were answered which I had documented.

My guess is that in conclusion, the taxpayer thought they should have got the questions in writing instead of meeting me at a restaurant.

—
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html

Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr

CEO | Director, Canadian Tax Advisory CGL Strategic Business & Tax Advisors With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: “People don’t pay me for my looks. My modeling career ended at birth.” More info: https://www.CGLtax.ca/Litzenberger-Cory.html

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Hockey Canada’s Own Goal: Burying The Lawsuit

Published on June 27, 2022

Bruce Dowbiggin

Why in the name of Aurel Joliat would a sports organization want to put itself in the hands of the McHale’s Navy of governments? Namely, Justin Trudeau’s faculty lounge. But that’s what Hockey Canada has done. Its neglect and incompetence in a recent sexual assault allegation against members of the 2018 WJC champion team seems to have been asking for trouble.

Hockey Canada’s access to public funds (HC gets 6 percent of its funds from the government) is now frozen by the federal government, effective immediately, over its response to the alleged sexual assault and a subsequent out-of-court settlement last month after a woman claimed she was assaulted by members of the country’s 2018 gold-medal winning world junior hockey team in June of that year at a gala in London, Ont.

And why, after the Chicago Blackhawks sexual abuse scandal that surfaced last year, has the NHL once again been shown incompetent in dealing with a sexual assault allegation? Twenty-two members of the 2017-18 junior squad in question were NHL draft picks. While we don’t know the eight in question one only has to peruse the roster of that team to realize a number of the players are stars in the NHL at the moment.

In the absence of evidence otherwise, all members of that team are under suspicion. (The woman, who decided against speaking with police or HC investigators, chose not to identify the players.) CBC reports, “The woman, now 24, was seeking $3.55 million in damages from Hockey Canada, the Canadian Hockey League and the unnamed players. Details of the settlement have not been made public”.

Which looks bad enough on the organization trusted to handle both men’s and women’s hockey in this country. But then the HC suits appeared in front of a House of Commons committee to throw a little accelerant on the fire. Outgoing HC chairman Tom Renney told MPs that HC had hired an outside law firm in 2018 to help it with the allegation that— so far— has produced no criminal charges.

HC president Scott Smith— who said Sport Canada had been notified of the allegation in 2019— testified, “players present at the event in London were ‘strongly encouraged’ to participate, but it was not mandated. (Renney initially testified that between four and six of the 19 players in question spoke with investigators before Smith indicated later the number was 12 or 13.) He added that HC does not know the identity of the eight John Does listed in the lawsuit.

Needless to say the voluntary nature of testimony caused heads to explode among the politicians. “We were all expecting answers to all the questions, the many questions, that we have regarding how they handled the whole situation when they testified,” Sport Minister Pascal St. St-Onge told reporters. “Unfortunately, we did not receive many answers… But we did learn a few things.”

Such as HC saying that public funds (HC got $ 14 M. From the feds in 2020-21) had not been used to settle the lawsuit. St. Onge was not mollified. And so funding was frozen pending a forensic audit and fuller explanations of the HC’s handling of the incident. “The fact that they haven’t been identified sort of shocks me,” added Liberal MP Anthony Housefather, a member of the committee.

HC might have predicted the volatility of the allegations. Previous sexual abuse cases such as former coach Graham James’ abuse of Theo Fleury, Sheldon Kennedy and others in the 1980s produced national outrage— and HC protocols on how to deal with future incidents. While it appears that HC followed some protocols of conducting an independent investigation, the revelation that players involved were not compelled to testify beggars the imagination.

With the euphoria of the Stanley Cup, Memorial Cup and IIHF World Championships now dissipating, hard questions need to be asked. The innocent should have the shroud removed from their reputations. Those who sought anonymity in the lawsuit need to face NHL sanctions. And Hockey Canada needs to understand yet again that carrying the flag for Canada in world hockey only covers them so far.

Bruce Dowbiggin @dowbboy is the editor of Not The Public Broadcaster (http://www.notthepublicbroadcaster.com). The best-selling author was nominated for the BBN Business Book award of 2020 for Personal Account with Tony Comper. A two-time winner of the Gemini Award as Canada’s top television sports broadcaster, he’s also a regular contributor to Sirius XM Canada Talks Ch. 167. His new book with his son Evan Inexact Science: The Six Most Compelling Draft Years In NHL History is now available on http://brucedowbigginbooks.ca/book-personalaccount.aspx

Bruce Dowbiggin

Exit Stage Right: Bordering On A Change

Published on June 25, 2022

Bruce Dowbiggin

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“There’s something happening here. What it is ain’t exactly clear.” Buffalo Springfield

In a delightful irony the hippy ode to 1960s Richard Nixon tyrant-obsession is now applicable to 2020s Woke oppression. While the Left still reminisces about its rebellious past it has in fact morphed into the Establishment Party. The smugness of the new symmetry was summed up in Montreal by F1 driver Sebastian Vettel, whose team is sponsored by Saudi Aramco (the world’s largest petroleum producer) criticizing Alberta’s energy industry for sins against Gaia.

Short of a miracle, nothing will penetrate this orb of virtue. These onetime radicals have closed the information loop; nothing is getting in now. The View’s self-image as truth speakers for the power grid is locked in for life, contrary information be damned.

Meanwhile the former party of Wall Steet/ Bay Street is now churning with revolutionary foment about sovereignty and secession. While pundits will say that this right-wing pushback has happened in the past— see: Social Credit Party/ Reform Party— there is a dark commitment contained in the current crisis.

The elites of Ottawa and DC saw Donald Trump as a rogue Gilgamesh bent on conquering gullible conservatives, but he was instead a messenger from the middle class to the elites that they have failed the people who don’t fly private jets. Instead of heeding the warning the Left condemned Trump, believing his demise would spell the end of the rebellion.

Fat chance. Faster than you can say Ron DeSantis, governments in affected regions are setting out the terms of their continued cooperation with the elites. While Elon Musk points Twitter away from its advocacy role as establishment censors, grassroots movements are staking out a challenge.

In Alberta, where Jason Kenney’s half-hearted attempts to articulate the province’s resentment at having its energy industry sacrificed to foreign grad students and Marxists, a potential successor is being blunt on where she’s going. Enter former Wildrose leader Danielle Smith, now running for the United Conservative Party leadership. “On Day One, I’m introducing the Alberta Sovereignty Act, authorizing our provincial government to refuse to enforce any federal law or policy that attacks Alberta’s interest or our provincial rights.”

Smith sees Quebec’s rejection of federal rights & freedoms and British Columbia’s lax enforcement of cannabis laws prior to legalization as a pathway in which Alberta could opt to dodge federal law. “It seems to me we’ve established a precedent that laws that do not work in a particular jurisdiction, that the province has the latitude to either seek an exemption or say it won’t apply,” Smith said. She pointed to Quebec’s Bill 96, which insists on French supremacy in the province, as examples for Alberta to follow.

Jesse Kline in the National Post (a sovereignty sceptic) outlined the issues: “Alberta’s grievances are very real. Our electoral system gives more weight to voters in Quebec and Atlantic Canada than in the West. The Senate, which is supposed to be regionally represented, affords twice as many seats to Ontario and Quebec as all the western provinces combined.

“The equalization system is full of baked-in inequalities that put Alberta at a disadvantage. And if Alberta’s oil and gas industry isn’t being attacked by the openly hostile Liberal government in Ottawa, it’s being stymied by the other provinces.”

Legal scholars were quick to dampen enthusiasm for the proposal. “The idea is frankly so absurd and untenable I’m not even sure it would create a crisis, because it would be laughed out of court too quickly for a crisis to develop,” says Emmett Macfarlane, a constitutional law expert at the University of Waterloo.

The usual media suspects, too, are tut-tutting the notion. They repeat the hoary clichés from Meech Lake days about “a peaceful, prosperous and democratic country that has withstood the test of time.”

In this gauzy nostalgia there seems to be little realization at the heart of federal power in Ottawa that they’re losing the country. That, maybe, siding with the guy who calls fellow citizens fascists, Nazis, anti-science and worse—then goes and hides in a bunker while you get honked at— is not a legal problem but a moral one.

How far would Trudeau’s federal government be willing to go in punishing elected officials in Alberta and perhaps Saskatchewan who defy them? Having the law on your side is one thing. Enforcing it is another. Waging economic war against the West on behalf of Ontario only perpetuates the grievances of the West and splits the nation further. Sovereignty author Barry Cooper did the math. “Indeed, that is the whole point. The Canadian Constitution has never worked in favour of Albertans, so it needs to be changed.”

Meanwhile, Texas Republicans, smarting over the porous border with Mexico and their own GOP senators voting to erode the Second Amendment are drawing their own line in in the dust. In a recent document, the state GOP called for a referendum on secession in 2023. The referendum will determine if Texas should “reassert its status as an independent nation.”

“The legality of seceding is problematic,” Eric McDaniel, associate professor of government at the University of Texas at Austin, told The Texas Tribune in 2016. “The Civil War played a very big role in establishing the power of the federal government and cementing that the federal government has the final say in these issues.”

But halting the erosion of state sovereignty might be too late. A series of recent referenda have revealed that nine Oregon counties have voted to join Idaho, with another three to vote in November. Those counties— which make up 64 percent of Oregon’s land mass— are fed up with Oregon’s Uber-left government based on the coast and seek to join the more conservative Idaho.

This comes in concert with a wholesale exodus of people and businesses from high-tax blue states such as New York, Illinois and California to red states with lower taxes, less crime and fewer regulations. In Canada, urban Boomers are fleeing the major metro regions for rural Ontario or the Maritimes, convinced that the urban crime, soaring taxes and a crumbling infrastructure delivered by today’s elites has seen its day.

As Buffalo Springfield said, “ It starts when you’re always afraid. Step out of line, the man come and take you away.”