Guindon - Tax Court deguts the professionals' penalty provision (s. 163.2)

The taxpayer, who was a family lawyer, was assessed penalties of $546,747 under s. 163.2(5) (i.e., before taking into account any parallel Ontario assessment), calculated as 50% of the purported federal tax savings of all 134 participants in a charitable donation scheme in relation to which she, in her capacity of president of the charity, issued false receipts.  Bédard J. found that this sanction was essentially criminal in nature given its potential materiality and unlimited amount (it incresed with the number of taxpayers involved and their tax savings), as well as likely collateral damage to her professional reputation, so that it was invalid as not having been imposed pursuant to proper criminal proceedings (e.g., with a requirement for proof beyond a reasonable doubt).

If correct, this finding has the likely effect of eviscerating s. 162.5, given the significantly higher burden on the Crown in successfully applying a criminal provision.  It is not clear what other income tax or HST/GST penalty provisions this reasoning might apply to (other than, of course, the "twin" Excise Tax Act provision (s. 285.1)).

Neal Armstrong  Summaries of Guindon v. The Queen, 2012 TCC 287 under s. 163.2(5) and s. 163.2(4).