Category Archives: Charter of Rights

163.2, Charter of Rights, Income Tax Act, Supreme Court of Canada

Tax Advisor Penalties – Guindon

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Tax Advisor Penalties

Guindon v Canada, 2015 SCC 41

For a summary and analysis of the Federal Court of Appeal and Tax Court of Canada decisions see HERE.

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This was a decision of a 7 member panel of the Supreme Court of Canada (“SCC”), with the majority dismissing the tax professional’s appeal from the FCA decision (4:3).

The SCC majority held that the provisions of the ITA imposing penalties on tax professionals (planners and preparers) in certain circumstances (Income Tax Act, section 163.2) are administrative, not criminal, in nature.  As such, the provision does not result in the imposition of true penal consequences, with the result that the protections under section 11 of the Charter are not engaged (the person affected d is not a person “charged with an offence”).

The Facts are not repeated here but can be found HERE.

ANALYSIS

The majority, after recognizing that the notorious complexity of Income tax law leads to many taxpayers relying on advisors, identified the purpose of section 163.2 (and its imposition of monetary penalties) as aiming to prevent tax preparers and planners from making false statement that could then be used by another person for purposes of the ITA.

The preliminary issue relating to the appellant’s failure to give notice of a constitutional question was dealt with by the majority in paragraphs 15 – 40. The majority exercised the court’s discretion to consider the constitutional arguments despite a lack of notice.

In addressing the merits of the appeal – whether section 163.2 is criminal in nature – the majority stated that the test of whether or not Charter section 11 is engaged is to be found in R. v. Wigglesworth, [1987] 2 S.C.R. 541, with “additional analytical criteria” in  Martineau v. M.N.R., 2004 SCC 81.  The court must look at whether: (1) the proceeding is in nature criminal , or (2) whether the sanctions imposed results in “true penal consequences” (para 44).

After analyzing the  provision in question against the legal tests (at paragraphs 51 to 88), the majority concluded that section 163.2 is not criminal in process or in consequences. The court stated:

[89] We conclude that the proceeding under s. 163.2  is not criminal in nature and does not lead to the imposition of true penal consequences. We agree with Stratas J.A., writing for the Federal Court of Appeal, that “the assessment of a penalty under s. 163.2  is not the equivalent of being ‘charged with a [criminal] offence.’ Accordingly, none of the s. 11  rights apply in s. 163.2  proceedings”: para. 37.

[90] Finally, we note that even though s. 11  of the Charter  is not engaged by s. 163.2  of the ITA , those against whom penalties are assessed are not left without recourse or protection. They have a full right of appeal to the Tax Court of Canada and, as the respondent pointed out in her factum, have access to other administrative remedies: R.F., at para. 99; see, e.g., ITA , s. 220(3.1).

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Charter of Rights, Supreme Court of Canada, Tax Practice

Lawyers and Anti Money Laundering Laws

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Lawyers and Anti Money Laundering Laws 

Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7

The SCC had read down provisions of Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 , and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, SOR/2002‑184, that impose reporting obligations on lawyers and law firms (paragraphs 5(i) and (j), and sections 62, 63, 63.1 of the Act) ti exclude legal counsel and law firms.  

The majority of the Court stated:

[1]  Lawyers must keep their clients’ confidences and act with commitment to serving and protecting their clients’ legitimate interests. Both of these duties are essential to the due administration of justice.  However, some provisions of Canada’s anti-money laundering and anti-terrorist financing legislation are repugnant to these duties. They require lawyers, on pain of imprisonment, to obtain and retain information that is not necessary for ethical legal representation and provide inadequate protection for the client’s confidences subject to solicitor-client privilege. I agree with the British Columbia courts that these provisions are therefore unconstitutional.  They unjustifiably limit the right to be free of unreasonable searches and seizures under s. 8  of the Canadian Charter of Rights and Freedoms  and the right under s. 7  of the Charter  not to be deprived of liberty otherwise than in accordance with the principles of fundamental justice.

[…]

[59]                          I accept, of course, that the objectives of combating money laundering and terrorist financing are pressing and substantial as both the application judge and the Court of Appeal held.

[60]                          With respect to the proportionality analysis, the appellant has the burden of proving that (i) the objective is rationally connected to the limit; (ii) the limit impairs the right as little as possible; and (iii) there is proportionality between the effects of the limitation of the Charter  right and the objective. The rational connection does not impose a particularly onerous threshold: Little Sisters Book and Art Emporium v. Canada (Minister of Justice), 2000 SCC 69, [2000] 2 S.C.R. 1120, at para. 228. There is a logical and direct link between, on one hand, the combating of money laundering and terrorist financing (in which lawyers may unbeknownst to them be participating) and, on the other, governmental supervision through searches conducted at law offices.

[61]                          In my view, however, the justification fails the minimal impairment test. There are other less drastic means of pursuing the same identified objectives. The Court has previously outlined the sorts of protections that are required in order to meet the constitutional standard of protection for solicitor-client privilege: Lavallee.

[62]                          I am therefore of the view that s. 64 , and to the extent that they operate in relation to lawyers’ offices, ss. 62, 63 and 63.1 of the Act, cannot be justified.

– Sas Ansari, JD LLM PhD (exp)

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