Commingling business and personal assets is simply a nice way of saying, “tax evasion”. In my previous article, I highlighted the Alberta court’s conclusions that the owners of Alberta Hot Oil Services Ltd., engaged in schemes to deduct personal expenses as business expenses. In that case, the court found that the convicted parties evaded $73,406.83, and convicted the parties to a jail sentence and significant fines.
In a new case reported by the CBC
, CRA is alleging that an Ottawa couple evaded $523,532 in taxes by operating schemes to: “under-report their taxable income”. At the date of writing, these allegations had not yet been proven.
In this new case, however, CRA has taken the unusual step of seizing property under proceeds of crime provisions in the Criminal Code of Canada
. According to the CRA website, this marks the first time that the agency employs this tactic.
Proceeds of Crime Laws
Under proceeds of crime legislation, the Attorney General can apply for an order authorizing the seizure of property used in criminal activity. Normally, when the authorities charge an individual (or individuals) with a criminal offence, as they charged the couple from Ottawa, the authorities carry the heaviest burden of proof. They must satisfy a court that the offenders are guilty “beyond a reasonable doubt”. This is the highest burden of proof in our legal system. The reason for this is quite simple. Someone charged with a criminal offence can loose his or her liberty. Under our laws (the Charter of Rights and Freedoms), the authorities can only take away someone’s liberty if justified. That justification translates into a heavy burden of proof imposed on the authorities.
However, because seizing property doesn’t jeopardize someone’s liberty, the burden of proof imposed on authorities to seize property is lower. At law, they must prove that the property was used in a criminal activity on a balance of probabilities. This burden is often referred to as the 50% + 1. This is much easier to do than to prove the parties committed the offence beyond a reasonable doubt.
While many may applaud the government for taking a more aggressive stand, the practice of seizing property is controversial. In a case in Toronto
, the police dropped drug charges against two homeowners, presumably due to problems with the evidence. Nevertheless, the government proceeded to seize 60% of the value of their home. The couple could not afford to fight the government in that case.
When you consider that a court in British-Columbia awarded $1.7 million dollars
in damage; $750,000.00 of which were awarded as punitive damages, against CRA for: “high handed, reprehensible and malicious” behaviour, this new tactic takes on a more ominous tone. What would have happened had CRA applied for forfeiture in that case?
No one wants to see someone take advantage of the system or commit tax fraud. If we were able to rout offenders out with 100% accuracy, then by all means, let’s seize their stuff. However, as life has taught us, the authorities are not always right. In fact, they are often wrong. Giving authorities the power to seize assets when the case against the alleged perpetrator is less than solid can lead to serious injustice.
Philippe Richer is President of TLR Law Group. TLR has been located in the St. Boniface neighbourhood, in Winnipeg, since 1996. The office serves the middle class and small business within the province. With a focus on estates, wills, real estate, and corporate law, he leads his team in providing accessible legal services. Philippe also authored the business law course for the Knowledge Bureau and instructed the français juridique class at the faculty of Law at the University of Manitoba.