Citation: 2009 TCC 89
Date: 20090206
Docket: 2003-2907(IT)G
BETWEEN:
FAZAL MAHMOOD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
[1]
This is an appeal from assessments
issued by the Minister of National Revenue (the "Minister") for the
1999, 2000 and 2001 taxation years for unreported income in the amounts of
$312,896, $174,248 and $315,041 respectively.
I. Factual Background
[2]
In assessing the Appellant
for the taxation years under review, the Minister relied, inter alia, on
the following assumptions:
(a) that the Appellant is not a resident of Guyana;
(b) that neither the Appellant nor his
proprietorship are registered with Guyana Telephone and Telegraph Co.;
(c) that the Appellant had no legitimate business
operations in Guyana during the
taxation years in issue;
(d) that the Appellant was not employed in Guyana during 1999, 2000 or 2001;
(e) that the Appellant spends an equivalent
amount of time in Canada and Guyana;
(f) that the Appellant has sojourned in Canada for the following periods of time:
1997 102 days
1998 204 days
1999 156 days
2000 236 days
2001 181 days
(g) that the Appellant’s mother (Ms. Nazboon
Sarfraz) and sister (Ms. Sally Aziz) reside in Canada;
(h) that the Appellant, when in Canada, lives in a condominium registered
in his name (98% interest in the condominium) and in the name Aslim Ahamad (2%
interest in the condominium);
(i) that the condominium does not carry a
mortgage;
(j) that the condominium is the Appellant’s
mother’s (Ms. Nazboon Sarfraz) permanent dwelling;
(k) that the condominium is located at 3455 Morningstar Drive, Unit 225, Mississauga, Ontario, Canada;
(l) that the Appellant applied for and was
issued with a Canadian social insurance number in May 1976;
(m) that the Appellant has the following Canadian
credit cards:
Hudson’s Bay/Zeller[s]
CIBC VISA
Royal Bank VISA
Sears Canada
Canadian Tire MasterCard
(n) that, during the application process for the
Canadian Tire and Hudson’s Bay/Zeller[s] credit cards, the Appellant had signed
documents that acknowledged that he had been a resident of Canada for at least
one year and that he was not making false claims on the application;
(o) that the Appellant maintains three bank
accounts in Canada with the Royal Bank one of which (account number 5101985) is
in the joint names of the Appellant and Mr. Sheik Ghazali Mahmood and the other
two (account numbers 4508255 and 5047782) are in the Appellant’s own name;
(p) that the majority of the Appellant’s banking
transactions were conducted in Ontario and were of a continuous nature;
(q) that the banking system in Guyana was adequately suited to accommodate
foreign currency transactions;
(r) that the Canadian component of the financial
transactions was critical to the transferring of the funds.
[3]
At the outset of the
trial counsel for the Respondent and the Appellant produced four volumes of a Joint
Book of Documents (the "Joint Book") that contained documents that
both parties agreed were authentic.
[4]
The assessments were issued against
the Appellant following a seizure of approximately £35,000 sterling, $107,805
Canadian and $18,400 US in cash upon his arrival at Lester Pearson airport in Toronto on
November 11, 2001. The Appellant was arrested at the same time and
subsequently released. The Appellant was questioned on a number of occasions by
Canada Customs officials on the purpose of his multiple visits to Canada. In a previous
year, cash in his luggage had been seized by the Royal Canadian Mounted Police
("RCMP"). These funds were subsequently returned to the
Appellant. This time, the Appellant was not as lucky. The cash seized at Lester
Pearson airport by the RCMP has not been returned to the Appellant as, prior to
the expiration of the RCMP seizure, the Canada Revenue Agency (the "CRA")
seized the funds pursuant to a jeopardy order applied for to protect the
payment of the taxes at issue, in the event that the assessments are upheld.
[5]
The documentary evidence contained
in the Joint Book, particularly the affidavits sworn by Sergeant Gene Hann
of the RCMP for the purpose of obtaining the initial seizure order, suggests
that the Appellant was engaged in the laundering of proceeds from the trafficking
of cocaine in Canada, the UK and the US by a criminal organization headquartered in Guyana. I note that
the Appellant has not been charged for these alleged activities. Sergeant Hann
testified that the RCMP did not plan to press charges with respect to the Appellant’s
alleged activities as money laundering is a hard crime to prove. Sergeant Hann
testified that he is satisfied with the outcome to date, namely that the Appellant
has been denied access to Canada and the alleged proceeds of crime are in the
custody of the CRA.
[6]
The Appellant disputes
the contents of Sergeant Hann’s affidavits. He claims that he was carrying
on legitimate banking transactions in Canada in the years
under review. He submits that he started buying and selling foreign currency in
Guyana in 1985 and has continued to do so to this day. He buys
foreign currency, often US and Canadian dollars, from tourists or currency
traders that operate throughout Guyana. The Appellant alleges that Guyanese banks
do not hold large foreign currency reserves and do not offer their customers competitive
foreign exchange rates. He claims that most tourists and former Guyanese residents
returning from the US or Canada
on vacation or to visit with family members prefer to deal with local street
vendors when exchanging foreign currency for Guyanese dollars.
[7]
Beginning in 1990, the Appellant
alleges, he started importing food products into his native country with his
business partner, Fazal Khan, also a Guyanese citizen and resident. At the
beginning they imported powdered milk from Ireland.
Afterwards they expanded their business to include cooking oils imported from
Holland, yeast from Mexico, tapioca from Thailand, plastic bags from China, tomato paste from an Italian-based supplier, orange juice
from Miami and Wrigley chewing gum from Chicago.
The Appellant testified that he and his partner would sell these food products
to wholesalers and/or retailers in Guyana. The Appellant
referred me to numerous letters and Christmas cards signed by suppliers, bills
of lading, insurance policies and invoices addressed to the Appellant at his home
in Guyana as proof of his legitimate business activities
in Guyana.
[8]
Starting in 1995 the Appellant
leased a bonded warehouse located in Paramaribo, Suriname.
Guyanese retailers and wholesalers would travel to Suriname by boat to the bonded warehouse to purchase goods. The merchants were
responsible for clearing the goods through customs in Guyana.
[9]
The Appellant alleges that the
funds that were brought to Canada were purchased with Guyanese dollars generated from
his import business and also belonged to other Guyanese merchants, who had contracted
with the Appellant for his services for the purpose of having him pay third
party suppliers on their behalf. He claims that he purchased Canadian and US
dollars because his suppliers would not accept payment in local currency. Approximately
$6,250,000 in total was brought into Canada during the taxation years under review. Each time he
left Guyana, the Appellant would fill out customs currency forms for the
currency that he was carrying on his trip to Canada. Currency declaration
forms must be completed by travellers on their departure from Guyana.
[10]
The Appellant testified that he
used four separate bank accounts opened with the Royal Bank of Canada ("RBC")
in Ontario to deposit the currency that he brought into Canada on a regular
basis. For each of these accounts, the Appellant explained, he granted signing
authority to a family member so that banking transactions could be carried out in
the event of his incapacitation or death. The bank account for which his son
also had signing authority was used principally to pay the maintenance fees and
other expenses associated with a condominium the Appellant owned in Ontario. The
Appellant’s son was living with his mother in Canada when this account was
opened. The Appellant claims that his mother and sister were responsible for
the condo fees and expenses and would deposit the funds in this account so that
the payments could be made on time. His mother would also deposit, from time to
time, funds that she had received from former Guyanese residents living in Canada. In
these cases, the Appellant had agreed to make payments of Guyanese dollars to the
family members of his mother’s friends and acquaintances on his return to Guyana.
[11]
The account opened jointly by the
Appellant and his wife was a US dollar account. This account was opened while the
Appellant’s wife was visiting with him in Canada. The Appellant testified that he closed the account
opened with his sister because she had withdrawn funds to pay personal expenses
and had caused the account to be overdrawn.
[12]
The Appellant opened a bank
account under the trade name of F.M. Trading Enterprises ("F.M.
Trading") following a request from RBC, which advised the
Appellant that it would not accept large cash deposits in personal bank
accounts. RBC was willing to do so only for an account opened in a business’s
name.
[13]
The Appellant alleges that F.M.
Trading is a business name that he chose to designate the joint enterprise that
he carries on with his partner, Mr. Khan. The registration filed with
Ontario Corporate Affairs shows the Appellant’s address in Guyana as the
enterprise’s head office. Under the heading "Business Name
and Mailing Address", however, the Appellant indicated his sister’s home
address in Ontario, and her home phone and fax numbers were given.
[14]
The documentary evidence establishes
that the Appellant dealt with Friedberg & Co Inc. and Calforex, two large
currency traders based in the Metropolitan Toronto area, to complete the wire
payments to his own suppliers and those of Guyanese merchants that he had agreed
to act for as payment agent.
[15]
The Appellant was shown
a deed of transfer produced in the Appellant’s Book of Documents (the "Appellant’s
Book"). The Appellant testified that this deed of transfer was with regard
to the purchase of land referred to as "Lot numbered 142 . . . section A .
. . in the Town of Corriverton, situate on the Corentyne Coast in the county of Berbice,
Republic of Guyana . . .". The land had been rented by
the Appellant’s family since 1976 and a house had been built on it while rented
(the "family home").
[16]
The Appellant testified
that he is a devout Muslim and that he regularly attends mosque in Guyana and in Canada when visiting. He explained that he was an
active member of the Guyana Islamic Trust during the taxation years under
review. He alleges that this institution is a charitable organization that
donates money to, and helps, poor families in Guyana.
[17]
The Appellant owns a Honda
125 cc motorbike which he uses in Guyana and which is
registered in his name. He referred me to a copy of his insurance policy as proof that
the motorbike is registered in his name in Guyana.
The Appellant claims that he does not hold a Canadian driver’s licence although
he admitted that he had purchased a used car in Canada, which was registered in
the name of a friend living in Canada. This car was available for his use and
was generally parked at the condominium on the outskirts of Toronto where his mother lived.
[18]
The Appellant entered Canada under a multiple-entry visa issued by the Canadian government,
which expired shortly after his arrest. He has applied for a new visa, but his
request has been denied.
[19]
The Appellant alleges that
he never sought employment in Canada and did not apply for landed immigrant
status. He claims that he did not apply for a Canadian social insurance number
("SIN"). In this regard, the Appellant was referred by his counsel to
a letter signed by C. Lemay of Citizenship and Immigration on June 7, 2002
and addressed to Mr. Angelo Villella, Investigations, Special Enforcement
Program ("SEP"), of the CRA. In this letter Mr. Lemay indicated that
Human Resources Development Canada ("HRDC") had informed him that a social
insurance card had been issued to the Appellant in 1976.
[20]
The Appellant suggested
that a social insurance card could be obtained easily before 1976 by completing
an application and mailing it to the competent authorities. The Appellant’s
parents separated when he was a young child and his father moved to Winnipeg, Canada,
some time around 1975. He speculates that his father must have applied for the social
insurance card without his knowledge and approval.
[21]
The Appellant bought a condominium
located on the outskirts of Toronto to allow his mother to live out the rest of
her years in Canada in comfort. The Appellant alleges that a
mortgage broker informed him that he could not obtain a mortgage as a non‑resident
of Canada. Apparently he needed a Canadian resident as
a part owner of the condominium to qualify for a mortgage. This caused the
Appellant to register a 2% joint interest in the property in the name of Aslim Ahamad,
a close friend living in Canada. The remaining interest was registered in
the Appellant’s name.
[22]
The Appellant admitted
that he would stay with his mother at the condominium on his travels to Canada.
He testified that his mother and/or his sister purchased the furniture for the condominium,
with the exception of a television which he acquired as a gift for his mother.
[23]
The Appellant received
many credit card application forms following the opening of bank accounts with RBC.
He eventually applied for and obtained five credit cards. Counsel referred the Appellant to transaction
summaries for each of his credit cards. I note that the vast majority of the
purchases recorded on the statements were for airline tickets issued by BWIA
and for items consistent with the Appellant’s testimony that he was acquiring goods
in Canada for use in Guyana.
[24]
The Appellant provided
tax assessments, payment notices and instalment reminders issued by the Inland
Revenue Service of Guyana for the taxation years under review. The Appellant filed
his tax returns on the basis that he was a resident of Guyana.
The Appellant provided a profit and loss statement for his joint enterprise for
the fiscal period ending December 31, 1999. This statement showed that the
total net income of the enterprise for 1999 was approximately $5,580 Canadian
dollars. This statement was prepared by the Appellant’s tax consultant.
[25]
The Appellant’s
daughter Wallima Hadiya Shamsudeen testified that she lives in
Ontario and is married to a Canadian resident. Ms. Shamsudeen also alleged
that she lived with her parents and two of her three brothers at the family home
in Guyana during the years at issue. She was
attending high school at the time.
[26]
The witness
corroborated the Appellant’s statement that her oldest brother, Sheik Mahmood,
moved to Canada in 2001 and stayed for a few years but has
since returned home.
[27]
The Appellant’s mother
testified that she was born in Guyana and was married to the Appellant’s father
in 1951. The couple was divorced when her son was a small child. The witness
explained that all of her five children were raised in Guyana.
She corroborated her son’s testimony that he purchased the land on which the family
home is built.
[28]
The witness moved to Canada approximately 21 years ago. At the time of her
immigration to Canada, her son was married and was living with his wife and two
children in Guyana. She testified that her son and his family
have always lived in the family home.
[29]
The witness
corroborated her son’s testimony that she would deposit small amounts of cash
in the Appellant’s accounts with RBC at the request of various members of the
Guyanese community living in Canada. She and her daughter would also deposit
funds to pay the maintenance fees for the condominium.
[30]
Stuart Wuebbolt,
an investigator with the CRA, testified that the file was first assigned to him
in 2002. He worked on the Appellant’s file with Tracy Mccellan, an auditor
assigned to the Integrated Proceeds of Crime division, a joint CRA and RCMP
initiative.
[31]
The witness explained
that he requested the Appellant’s credit card and bank accounts statements. He
also sought details concerning the Appellant’s air travel from BWIA, the
airline with which the Appellant travelled to Canada.
[32]
The witness reviewed
the criteria adopted by the CRA in Interpretation Bulletin IT-221R3
(Determination of an Individual’s Residence Status). In the instant case, he
looked at the regularity of the Appellant’s travel to Canada, the amount of
time he spent in Canada with members of his immediate family (including his
sister, mother and son), the ownership of a condominium in Ontario and the
business transactions conducted by the Appellant in Canada in determining that he
was a resident of Canada for the purposes of the Income Tax Act
(Canada) (the "Act"). He reviewed the Appellant’s BWIA travel records and his bank records
to determine how many days he spent in Canada.
[33]
Mr. Wuebbolt
testified that the BWIA information was not completely reliable as it contained
information indicating that some of the travel may have been done by family
members using the Appellant’s travel reward points. The witness could not
determine whether the Appellant himself had travelled on each of the occasions indicated
on the airline’s records. He therefore relied on the banking and credit card summaries
and assumed that the Appellant was in Canada on each date
that a banking or credit card transaction was completed in Canada.
[34]
The witness also took
into account the fact that the Appellant had a Canadian SIN number. He assumed
that the Appellant had applied for a social insurance card as he had no
information to the contrary in his file.
[35]
The witness was asked if
he had considered whether the Appellant may have been carrying on business in Canada in the taxation years in question. He testified that
the assessments were issued solely on the basis that the Appellant was a
resident of Canada.
[36]
Mr. Wuebbolt
testified that he made an arbitrary assessment of the Appellant’s worldwide
income for the purposes the Act. In the absence of reliable information
he assumed that all deposits made in the Appellant’s bank accounts, excluding the
F.M. Trading account, constituted the Appellant’s worldwide income. The
F.M. Trading bank deposits were excluded because the witness believed that
the CRA would have little chance of collecting the tax due on the additional
income that would be assessed if the deposits in this account were included in
income.
[37]
Mr. Wuebbolt was subjected
to a lengthy cross-examination by the Appellant’s counsel, Mr. MacDougall.
The witness was asked whether he took into account all or part of
Sergeant Hann’s affidavit in drawing up his report and responded in the
negative. Mr. MacDougall pointed out that Sergeant Hann indicated in
his affidavit that the Appellant was allegedly engaged in illegal money‑laundering
activities in Guyana. Mr. Wuebbolt was asked why he did
not consider the Appellant’s alleged illegal conduct in Guyana noted by Sergeant Hann in making his
determination.
[38]
Mr. MacDougall
pointed out to Mr. Wuebbolt that his residence determination report
contained a number of shortcomings. The final report failed to account for the
fact that the Appellant had a driver’s licence, identification card and
passport issued by the Government of Guyana and that the Appellant had filed
tax returns on the basis that he was a Guyanese resident.
II. Positions
of the Parties
[39]
Mr. MacDougall
argues that the evidence shows that the Appellant was not ordinarily resident
in Canada in the taxation years under review. He
suggests that the facts of the present case are different from the facts
considered by Mr. Justice Rand in the Supreme Court case of Thomson
v. Minister of National Revenue, [1946] S.C.R. 209. Counsel argues that the
Appellant cannot be found to be a deemed resident of Canada for the 2000
taxation year because the examination of his passport shows that he was present
in Canada for less than 183 days in that year. I do not have to consider this issue for the 1999 and
2001 taxations years as the Respondent admits that the Appellant was present
for less than 183 days in each of those years.
[40]
Finally, Mr. MacDougall argues
that his client’s centre of vital interests is more closely tied to Guyana, his
country of birth, making the Appellant a resident of Guyana for the purposes of
the Act under paragraph 4(2)(a) of the Canada‑Guyana Income
Tax Convention (the "Convention").
[41]
Mr. MacDougall made it clear
at the outset of the proceedings that he would not lead evidence to contest the
amount of income on which his client would be subject to tax as a result of the
assessments. He accepts that the case can be disposed of solely on the basis of
whether his client was a resident of Canada or not for the taxation years at
issue.
[42]
Not surprisingly, Mr. Leckie,
counsel for the Respondent, argues that the evidence should lead me to conclude
as follows:
a) The Appellant was residing or
ordinarily resident in Canada during the 1999, 2000 and 2001 taxation years.
b) Alternatively, the Appellant is deemed
to have been a resident of Canada for the 2000 taxation year because he sojourned
in Canada for more than 183 days.
c) In the event of a finding by me
that the Appellant was a resident of both countries, the tiebreaker rule in
paragraph 4(2)(a) of the Convention makes the Appellant a resident
of Canada for the purposes of the Act.
III. Analysis
[43]
The question before me
is largely one of fact. This being the case, the Supreme Court of Canada’s decision
in Thomson v. Minister of National Revenue and the decision of former
Chief Justice Bowman of this Court in Fisher v. The Queen, 95 DTC 840, merit
a brief review.
[44]
In the Thomson
case, the Appellant was found to be "residing" or "ordinarily resident"
in Canada in the taxation years in question. Mr. Thomson who was a
Canadian citizen had homes available to him at East Riverside, New Brunswick and Pinehurst, North Carolina. Each
year, the taxpayer would move from North Carolina to New Brunswick with his family and domestic staff. He would
routinely stay in New
Brunswick for a continuous
period of 150 days from May to October. He would leave New Brunswick with the approach of winter in late October and
return to Pinehurst with his family and domestic staff. This was the pattern of
life adopted by the taxpayer for his family and himself. Mr. Justice Rand
interprets the words "residing" or "ordinarily resident" as
follows:
The gradation of degrees of time,
object, intention, continuity and other relevant circumstances, shows, I think,
that in common parlance "residing" is not a term of invariable
elements, all of which must be satisfied in each instance. It is quite
impossible to give it a precise and inclusive definition. It is highly
flexible, and its many shades of meaning vary not only in the contexts of
different matters, but also in different aspects of the same matter. In one
case it is satisfied by certain elements, in another by others, some common,
some new.
The expression "ordinarily
resident" carries a restricted signification, and although the first
impression seems to be that of preponderance in time, the decisions on the
English Act reject that view. It is held to mean residence in the course of the
customary mode of life of the person concerned, and it is contrasted with
special or occasional or casual residence. The general mode of life is,
therefore, relevant to a question of its application.
For the purposes of income tax
legislation, it must be assumed that every person has at all times a residence.
It is not necessary to this that he should have a home or a particular place of
abode or even a shelter. He may sleep in the open. It is important only to
ascertain the spatial bounds within which he spends his life or to which his
ordered or customary living is related. Ordinary residence can best be
appreciated by considering its antithesis, occasional or casual or deviatory
residence. The latter would seem clearly to be not only temporary in time and
exceptional in circumstance, but also accompanied by a sense of transitoriness
and of return.
But in the different situations of
so-called "permanent residence", "temporary residence",
"ordinary residence", "principal residence" and the like,
the adjectives do not affect the fact that there is in all cases residence; and
that quality is chiefly a matter of the degree to which a person in mind and
fact settles into or maintains or centralizes his ordinary mode of living with
its accessories in social relations, interests and conveniences at or in the
place in question. It may be limited in time from the outset, or it may be
indefinite, or so far as it is thought of, unlimited. On the lower level, the
expressions involving residence should be distinguished, as I think they are in
ordinary speech, from the field of "stay" or "visit".
[45]
The Supreme Court concludes
that the taxpayer is a dual resident because “. . . his living
in Canada is substantially as deep rooted and
settled as in the United
States. . . . ”
[46]
I mentioned the Fisher
case because the essence of that case is captured by former Chief Justice
Bowman’s quotation of the following lines from Robert Frost’s poem, "The
Death of the Hired Man": “Home is the place where, when you have to go
there, [t]hey have to take you in.”
[47]
Counsel for both
parties submitted a Joint Brief of Authorities (the "Joint Brief of
Authorities") containing eight other cases that analyze the question of
residence, dual residence and the application of treaty tiebreaker rules. Each of these
cases turns on its own particular facts. Of special interest is the fact that
in each of the cases the taxpayer had the right to live in Canada because the
taxpayer was either a Canadian citizen or held landed immigrant status. The
taxpayers in those cases argued that they had severed their former residential
ties to Canada. In the present case, the Appellant did
not have the right to live permanently in Canada.
Each time he came to Canada he entered under a multiple-entry visa,
stayed for a while to conduct business and left to return a short time later
with another carry-on bag of cash to be deposited and transferred outside of
Canada for the purpose of paying for goods ordered by the Appellant or his
clients. In fact, the Appellant has now been denied access to Canada altogether except for the right to attend his trial.
[48]
The facts of this case
are very different from those considered in the Thomson case, in which
Mr. Thomson came to Canada each year during the summer months with his
whole household in tow. In the present case, the Appellant almost always
travelled to Canada alone and left immediately after his
business in Canada was conducted.
[49]
This having now been stated,
the question remains whether the Appellant’s conduct in Canada, his continuous entry and return, the presence here of
family members and the ownership of the condominium are factors which are sufficient
for a finding that the Appellant was residing or ordinarily resident in Canada
in the years under review. If I so find, does the application of the tiebreaker
rules make the Appellant a resident of Canada
or of Guyana?
[50]
I note that the Appellant
was not completely truthful when he testified. Therefore, it would be imprudent
for me to rely solely on the Appellant’s testimony in deciding this issue. I
asked the Appellant on more than one occasion to explain the large discrepancy
between the small amount of income that he reported in Guyana
and the million dollars of payments made to suppliers through the Canadian banking
system. I suggested that the transaction level was inconsistent with the Appellant’s
reported income. I also drew the Appellant’s attention to the fact that his
share of the partnership capital was reported to be approximately $100,000
Canadian. Of this, $90,000 represented the purchase price of the condominium,
leaving $10,000 for working capital. This amount of working capital was
insufficient to finance the Appellant’s transactions in Canada.
[51]
I suggested to the Appellant
that perhaps he was understating the amount of net income that he declared to
the Guyanese tax authorities. The second possibility was that the contents of Sergeant Hann’s
affidavit were perhaps accurate in whole or in part. After much hesitation, the
Appellant finally admitted, rather reluctantly, that perhaps he was understating
the income that he reported to the Guyanese tax authorities.
[52]
Bearing this background
in mind, there is however, a number of sources which corroborate the Appellant’s
testimony and allow me to conclude that he was not residing or ordinarily resident
in Canada. The documentary evidence corroborates the
Appellant’s testimony that his permanent residence is his family home in Guyana. The Appellant’s mother and daughter confirmed this
fact, with the Appellant’s daughter admitting that she lived at the family home
with two of her three brothers during the years in question.
[53]
The Appellant’s travel
habits confirm that he must have been living in Guyana when he was not visiting
Canada. An examination of his passport confirms that the Appellant
departed from Guyana each time he travelled to Canada. The Guyanese currency declaration forms also point
to this fact. Substantially all of the commercial documentation introduced as evidence
was mailed or sent by courier to the Appellant at his family home address. The
tax document received by the Appellant or filed with Guyanese Inland Revenue also
establishes strong ties to Guyana.
[54]
This leaves me to
review other factors which I believe constitute residential ties attaching the Appellant
to his country of birth. First, there is the presence in Guyana of his closest family members, namely his wife and
three of his four children. The three youngest children were all attending
school in Guyana during the period under review.
[55]
The existence of the Appellant’s
business operations in Guyana are disputed by the Respondent. The Respondent
argues that the Appellant was engaged solely in the alleged illicit money-laundering
activities conducted in Canada. The pleadings state that the Appellant
had no legitimate business activities in Guyana.
I disagree with the Respondent’s interpretation of the evidence. There is
a substantial amount of independent evidence which corroborates the Appellant’s
version of the facts and rebuts the Respondent’s assertions. As noted earlier, most
of the third-party commercial documents presented in evidence were addressed to
the Appellant at his family home.
[56]
If I am to accept the Respondent’s
allegation that the Appellant was engaged in money laundering in Canada, I must conclude that parts of his business must have
been legitimate in order for him to succeed in the alleged activities. One
cannot launder money simply by transferring money around shell corporations in
a circle. So-called dirty money is cleansed when it is washed through a
legitimate business. At the very least, the evidence points to the fact that
some of the Appellant’s economic activities were legitimate. If I conclude that
the Appellant was engaged in money laundering as suggested by Sergeant Hann
in his affidavit, then he must have had been doing so by using the proceeds of crime
to purchase food and other household products for distribution to wholesalers
and retailers in Guyana. The money would have been laundered when
it was collected by the Appellant from the merchants when the goods were landed
in Guyana. In the end, I conclude that nothing
really turns on whether the Appellant’s activities were legitimate or whether
they were illicit as suggested by the Respondent. I am of the opinion that
illegal activities, whether conducted in Guyana or Canada,
must be considered in an even-handed residency determination, in much the same
way that proceeds from national or international criminal activities are
subject to tax in the hands of a Canadian resident.
[57]
I note that the Respondent
argues that the Appellant’s business of importing goods into Guyana was
conducted from Suriname where he and his partners allegedly rented
space in a bonded warehouse. On this point, suffice it to say that the bills of
lading and invoices and insurance documents were addressed to the Appellant at his
family home address. I infer from these documents that the orders to acquire
the goods were placed by the Appellant through facsimile transmissions or
telephone conversations originating from Guyana.
Sergeant Hann’s affidavit and testimony also contradict the Respondent’s
version of the facts. In his affidavit, Sergeant Hann suggests that the Appellant
was laundering the proceeds received by traffickers in Guyana
from the distribution of cocaine in Canada, the US
and the UK. The Appellant flew from Guyana each time
he visited Canada in the years under review, bringing the
cash with him in a carry‑on bag. If the Appellant was money laundering,
the funds would have had to have been collected in Guyana, which means that the
Appellant would have had business activities in Guyana.
[58]
The CRA auditor claims
that the Appellant spent more than half of the year in Canada
in the 2000 taxation year. This conclusion was based on the assumption that the
Appellant must have been in Canada when transactions were processed in his
bank accounts or on his credit cards.
[59]
Exhibit A-5 produced
and prepared by the Appellant’s counsel tabulates the Appellant’s days in
Canada based on information contained in his passport, particularly the stamps showing
his entry into Canada and his return to Guyana.
I find this evidence to be more reliable than the Respondent’s source of
information in light of the fact that the Appellant’s mother was the person who
made the small deposits in the Appellant’s bank account, these being either money
to pay the maintenance fees for the condominium or funds received from friends
or acquaintances to be paid by the Appellant to their family members back home.
In short, the evidence shows that the Appellant was not always in Canada when transactions were recorded in his bank accounts.
[60]
The evidence does show
that the Appellant had some ties to Canada in the years
in question. His mother lived in a condominium which he owned. He stayed in the
condominium when he came to Canada. One of his sons also lived there, along
with his sister, who stayed there from time to time. The Appellant used the
Canadian financial system to deposit funds, exchange currency and ultimately
pay the foreign suppliers of his business. He attended the local mosque near
the condo that he owned in Canada. He had a car available to him that was parked
at the condo. He went on camping trips with friends and visited Niagara Falls at least seven times.
[61]
In my view, these facts
are not sufficient to make the Appellant a resident of Canada
for the purposes of the Act. The condominium, while owned by the
Appellant, was really his mother’s home and not his own. His mother has lived
there the entire time. The Appellant lives at the family home in Guyana with his wife and his three children.
[62]
The Appellant’s
Canadian activities are similar to the activities of other non‑residents
carrying on business in Canada. One can be a non-resident of Canada and own real estate in Canada at the same time.
Section 116 of the Act and Part XIII deal with these cases.
The former provision applies when a non-resident sells property and the latter when
a non-resident collects, among other things, rental income.
[63]
In the event that I am
wrong and Canada is the Appellant’s home in the same way Guyana is, I find that
the tiebreaker rule in paragraph 4(2)(a) of the Convention makes
him a resident of Guyana for the purposes of the Act. The Appellant’s family
and economic interests are more closely tied to Guyana
than to Canada.
[64]
I surmise that the Appellant’s
alleged criminal activities may have influenced the CRA in its pursuit of these
proceedings. The Act was adopted to provide rules governing the
imposition and collection of taxes. It was not meant to sanction criminal
activity save for the case of tax evasion and similar cases. In the end, what
matters is whether the Appellant’s conduct in Canada
makes him subject to Canadian tax. It is immaterial whether the Appellant’s
activities are legitimate or whether they are of a criminal nature.
[65]
I suggested to the
Respondent’s counsel at the outset of argument that perhaps the assessments
could have been based on the alternative ground that the Appellant was carrying
on business in Canada. In my opinion, this would have been a stronger
foundation for the assessments. This was not done, however. Therefore, for the
reasons noted above, I allow the Appellant’s appeal, with costs, and order the
assessments for each of the taxation years under appeal to be vacated.
Signed at Ottawa, Canada, this 6th day of February 2009.
"Robert J. Hogan"
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