Citation: 2010 TCC 99
Date: 20100309
Docket: 2009-1096(IT)I
BETWEEN:
JEAN-CLAUDE LECLERC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
AMENDED REASONS FOR JUDGMENT
Favreau J.
[1]
These are
appeals from reassessments made under the Income Tax Act, R.S.C. 1985,
c. 1 (5th Supp.), as amended (the Act). In the reassessments dated
April 9, 2008, for the 2003 taxation year and
September 4, 2008, for the 2006 taxation year, the Minister of
National Revenue (the Minister) imposed penalties of $2,500 for each taxation
year (2003 and 2006) for the late filing of form T1135 entitled "Foreign
Income Verification Statement". Interest
of $895.17 for 2003 and of $298.53 for 2006 was added by the Canada Revenue
Agency (CRA).
[2]
In making
and confirming the reassessments dated April 9, 2008, and
September 4, 2008, regarding the 2003 and 2006 taxation years, the
Minister relied on the following assumptions:
[Translation]
a.
The appellant owns a
condominium unit located in Poitiers, France, the cost amount of which exceeds
$100,000. (admitted)
b.
Accordingly, every year, the
appellant must file form T1135 "Foreign Income Verification
Statement" on or before the due date for filing his income tax return. (admitted)
c.
For the 2003 and 2006
taxation years, the appellant enclosed that form with his tax return. (admitted)
d.
The appellant had to file
his tax return for the 2003 taxation year by April 30, 2004. (admitted)
e.
The appellant filed his tax
return for the 2003 taxation year on September 18, 2007. (admitted)
f.
The appellant had to file
his tax return for the 2006 taxation year by April 30, 2007. (admitted)
g.
The appellant filed his tax
return for the 2006 taxation year on June 19, 2008. (admitted)
[3]
The
underlying facts of this case are not disputed, but it must still be explained
that the appellant filed late his tax returns for 2003 and 2006, more
specifically, on September 18, 2007, and June 19, 2008,
respectively, and that the appellant enclosed form T1135 with each of his
tax returns without being asked to do so by the CRA. Based on the appellant's
tax returns, he did not have to pay any tax or any penalties for filing his tax
returns late.
[4]
The only
issue is whether the Minister was correct in imposing a penalty for the late
filing of form T1135 for the 2003 and 2006 taxation years.
[5]
Subsection 233.3(3) of the Act states
the following:
Returns respecting foreign property – A
reporting entity for a taxation year or fiscal period shall file with the
Minister for the year or period a return in prescribed form on or before the
day that is
(a) where the entity is a partnership, .
. .
(b) where the entity is not a
partnership, the entity’s filing-due date for the year.
[6]
The phrase
"filing-due date" is defined in subsection 248(1) of the Act as
follows:
. . . the day on or before which
the taxpayer’s return of income under Part I for the year is required to be
filed or would be required to be filed if tax under that Part were payable by
the taxpayer for the year;
[7]
In the case
of an individual, the filing-due date for a tax return for a given year is
April 30 of the following year, according to the rules found in
subsection 150(1) and subparagraph 150(1)(d)(i) of the Act.
[8]
The penalty
for failing to file an information return as and when required by the Act is
set out in subsection 162(7) of the Act. The penalty is equal to the
greater of $100 and the product obtained when $25 is multiplied by the number
of days, not exceeding 100, during which the failure continues.
The appellant’s position
[9]
In his Notices
of Appeal to the Court, the appellant acknowledged that the applicable
statutory provisions are very clear and that he could not claim his ignorance
of the Act. However, he claims that his failure to meet the filing-due
date for form T1135 resulted from an involuntary omission on his part,
which was mainly due to his return to studies and his mother's mental illness.
The appellant also alleges that he was misled by
section 162 of the Act under which the taxpayer is not liable to a penalty
if he or she files a tax return late for a given taxation year if no tax is
payable or unpaid, which was his exact situation.
[10]
The
appellant also stated that he had never intended to conceal foreign income and
had never committed any kind of fraud. To support his statements, the appellant
filed photocopies of the income tax refund cheques for $850.85 and $1,597.26
with respect to the 2002 and 2003 taxation years. He was simply late filing form T1135.
[11]
The
appellant submitted David Sherman's notes on subsection 162(10) stating
that the CRA had an administrative
"one chance" policy to not apply a 162(7) or 162(10) penalty to a
taxpayer's first late voluntary filing of certain forms such as form T1135
concerning foreign property. The following excerpt from the notes is especially
pertinent:
This policy
was withdrawn in Jan. 2006; the taxpayer must apply via the Voluntary
Disclosure Program for relief from the penalty: . . .
The appellant claims that the CRA had not
informed him of this policy change despite the fact that he had been reporting
foreign income since 1992.
[12]
The CRA
already knew that the foreign property whose cost amount exceeded $100,000
existed because the appellant checked the appropriate box in his tax returns to
indicate that he owned foreign property whose cost amount exceeded $100,000,
and because form T1135 was enclosed with his tax returns. With regard to
the content of form T1135, the appellant indicated that it was identical
from one year to the next and that the penalty for failure to file or late filing
($25 per day) was not indicated on it.
[13]
The
appellant also deplored the fact that the Act did not provide an exception to
the application of the late filing penalty. The taxpayers cannot use
the due diligence defence against the application of the penalty. In addition, the appellant called attention to how
unreasonable the penalty is. In his case, for
2003, the penalties and interest make up 148.4% of the total tax payable, that
is, $3,395.71 (as of April 9, 2009) in addition to the total federal
tax payable of $2,288.68.
[14]
The
appellant criticized the imposition of interest on the penalty set out in
subsection 162(7) of the Act and the fact that the only way to avoid the
penalty is to apply via the Voluntary Disclosure Program, as if he had
committed fraud or failed to pay tax on his foreign‑source income.
Analysis and conclusion
[15]
The wording
of subsections 162(7) and 233.3(3) of the Act is very clear and
poses no difficulty of interpretation. Parliament's intention is to motivate
taxpayers who own foreign property whose cost amount exceeds $100,000 to report
their foreign-source income.
[16]
Based on the general principles of statutory
interpretation used by the Supreme Court of Canada in Canada Trustco
Mortgage Co. v. Canada, [2005] 2 S.C.R. 601,
"[t]he interpretation of a statutory provision must be made according to a
textual, contextual and purposive analysis to find a meaning that is harmonious
with the Act as a whole" (page 601).
[17]
The
textual, contextual and purposive analysis of subsections 162(7) and 233.3(3)
makes it possible to find a meaning that is harmonious with the Act as a whole. The text of
those statutory provisions is harmonious with objectives sought by Parliament.
Unfortunately for the appellant, I do not believe
that the principles of statutory interpretation can help him in any way.
[18]
The
appellant made an honest mistake because he did not know the consequences of
failing to file form T1135 by the due date. The penalty under
subsection 162(7) of the Act was imposed correctly, and the due
diligence defence is not applicable in this case.
[19]
The
appellant could have avoided having to pay those penalties by applying via the
Voluntary Disclosure Program, but he did not do so, probably because he did not
know about it. However, the appellant cannot be blamed for his lack of knowledge
with regard to that program even though he had studied tax law. In fact, it is not obvious that that program could apply to
taxpayers who did not commit fraud and who reported all their foreign-source
income for several years.
[20]
It is not
so much being subject to the penalty under subsection 162(7) of the Act
that poses the problem as the lack of statutory provisions setting out a
defence that does not require you to use a program that was not designed to
deal with a simple late filing of a form. That is obviously a matter
for Parliament. The same observation could be
made with respect to the quantum of the penalty; Parliament could consider
providing relief to take into account cases similar to the appellant's where the
penalty is disproportionate to the tax otherwise payable.
[21]
With
respect to the interest on the penalties under subsection 162(7) of the Act, it
is sufficient to say that the Court has no jurisdiction to deal with that
issue.
[22]
For these
reasons, the appeals are dismissed.
Signed at Ottawa, Canada, on this 9th day of March 2010.
"Réal Favreau"
on this 9th day of
June 2010
François Brunet,
Revisor
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