Citation: 2012 TCC 332
Date: 20120920
Docket: 2011-2489(IT)I
BETWEEN:
YVONNE TUCK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1]
The appellant, Yvonne Tuck, was
late in filing her 2008 income tax return and paying the related tax. The
return was filed approximately 12 months after the due date, and federal tax was
owed in the amount of $1,831.92.
[2]
Ms. Tuck seeks relief relating to the interest charged on the
unpaid tax and the imposition of a late-filing penalty. Although Ms. Tuck seeks relief for both provincial and federal amounts, this
Court has no jurisdiction with respect to provincial levies and these amounts
will not be dealt with.
[3]
Ms. Tuck was represented at the
hearing by her spouse, Trueman Tuck, who is a licensed paralegal.
Adjournment
request
[4]
At the commencement of the hearing,
an adjournment request was made so that Ms. Tuck could first apply to the
Canada Revenue Agency (CRA) for a waiver of interest and penalty pursuant to
the taxpayer relief provisions. After hearing the parties’ submissions, I
concluded that an adjournment was not appropriate and the request was denied.
[5]
To begin with, I was not satisfied
that an adjournment would accomplish Ms. Tuck’s objective of having the
CRA deal with a waiver application while an appeal to this Court was
outstanding. It appears to be the policy of the CRA to defer decisions on taxpayer
relief applications until after all appeal rights have been exhausted. This is
referred to in a document provided to the Court by Mr. Tuck (Information
Circular IC07-1 dated May 31, 2007, paragraphs 109 and 110).
[6]
Mr. Tuck argued that the CRA is not bound by the Information
Circular. That may be the case but I was not satisfied that an adjournment
would likely assist in achieving Ms. Tuck’s objective.
[7]
Moreover, it was not appropriate in my view to waste scarce
judicial resources in order to grant the request. Mr. Tuck stated that he only
recently became aware of this alternative remedy. This appeared to be at odds
with a letter written by the CRA to Ms. Tuck in December 2011 which outlined
the taxpayer relief procedure. I was not satisfied that Mr. Tuck only recently
became aware of this or that sufficient due diligence was exercised in making
an application to the CRA in a timely fashion before this appeal was set down
for hearing. I also noted that an application to the CRA has not yet been made.
[8]
For all these reasons, the
adjournment request was denied.
The issues
[9]
With respect to the
appeal, Mr. Tuck stated that he was abandoning constitutional arguments that
were similar to the well known “natural person” theories. He stated that these
were not being pursued because he now has a good relationship with the CRA and
is in the process of settling outstanding tax obligations.
[10]
I would briefly mention
at this juncture that in 2007 this Court struck out notices of appeal filed by
Mr. and Ms. Tuck relating to the 2002, 2003 and 2004 taxation years that were
based on this type of argument: Tuck and Tuck v The Queen, 2007 TCC 418.
Neither party mentioned this decision at the hearing.
[11]
The arguments now raised
by Ms. Tuck were not mentioned in her notice of appeal. As I understand the
oral submissions of Mr. Tuck, there are three
questions to be decided:
-
Should the penalty and interest be
vacated on grounds that there was an agreement with the CRA to deal with other
tax obligations first?
-
Should the penalty and interest be
vacated on grounds of due diligence?
-
Should the matter be referred back
to the Minister of National Revenue to further consider because the review at
the objections stage was inadequate?
Background
[12]
Mr. Tuck testified that he handled
his spouse’s financial affairs and accordingly would testify on her behalf. Ms.
Tuck confirmed this when she was called as a witness by the Crown.
[13]
According to Mr. Tuck’s
testimony, there were a number of reasons which led to the late filing for
2008. He explained that around 1995 the Tucks were struggling to cope with a rapidly expanding health food business and they got
behind in their tax filings. It was explained that the filings were complicated
because they had seven separate entities. It was difficult to catch up once the
filings were late. Mr. Tuck also testified that at the same time there were
financial pressures because he was laid off from his employment. He also
described problems with their
bookkeepers and accountants.
[14]
With respect to Ms.
Tuck’s 2008 tax return specifically, Mr. Tuck stated that it was not possible
to prepare it in time because most of Ms. Tuck’s income was comprised of
dividends from related corporations and the corporations’ financial information
was not yet available.
[15]
Mr. Tuck also stated that he has
been working cooperatively with the CRA through the voluntary disclosure
program to satisfy outstanding tax obligations. He stated that the payment
priorities are set by the CRA, who have decided that the first obligations to
be paid are trust amounts, specifically payroll and GST remittances owing by
one of the corporations. He stated that he understood that the CRA were in agreement
that other obligations could be deferred until the trust matters were dealt
with.
Existence of agreement
with CRA
[16]
As I understand Mr. Tuck’s
argument, it is that the payment priorities were set by the CRA, and that they
agreed to defer payment of Ms. Tuck’s obligations. Implicit in this is that the
CRA agreed to waive interest during this period.
[17]
This submission depends
almost entirely on the self-serving testimony of Mr. and Ms. Tuck. I did not find it convincing.
[18]
If in fact the CRA made an agreement to defer Ms. Tuck’s
tax obligations, it is likely that the agreement would have been reduced in
writing. Mr. Tuck vaguely suggested that there might be a letter but he failed
to produce it.
[19]
Moreover, Mr. Tuck’s
submission appears to be at odds with correspondence from the CRA (Exhibits to
Affidavit of Yvonne Tuck). Two letters are relevant.
[20]
The first is a letter
from the CRA dated January 14, 2011 which confirms arrangements for paying
arrears and the filing of outstanding returns. This letter only relates to
obligations of corporations related to the Tucks. There is no suggestion that
it applies to Ms. Tuck’s personal tax obligations.
[21]
A second letter was
written to Ms. Tuck on December 29, 2011 which provided information as the procedure
for applying for a waiver of penalty and interest charges under the taxpayer
relief provisions. The letter indicates that interest was owing for several
years, including 2008. This strongly suggests that there was no prior agreement
with the CRA to waive late filing penalties or interest charges.
[22]
I am not satisfied that the CRA
made any agreement with respect to Ms. Tuck’s 2008 income tax obligations.
Has due
diligence been established?
[23]
Ms. Tuck also argues
that interest and the late-filing penalty should be vacated on grounds of due
diligence.
[24]
I would first comment that the
applicable legislation dealing with interest and late-filing penalties does not
provide for a due diligence defence. The applicable provisions are s. 161(1)
and s. 162(1) which read:
161. (1) General [interest
on balances] -
Where at any time after a taxpayer’s balance-due day for a taxation year
(a) the total of the
taxpayer’s taxes payable under this Part and Parts I.3, VI and VI.1 for the
year
exceeds
(b) the total of all
amounts each of which is an amount paid at or before that time on account of
the taxpayer’s tax payable and applied as at that time by the Minister against
the taxpayer’s liability for an amount payable under this Part or Part I.3, VI
or VI.1 for the year,
the
taxpayer shall pay to the Receiver General interest at the prescribed rate on
the excess, computed for the period during which that excess is outstanding.
162. (1) Failure
to file return of income
- Every person who fails to file a return of income for a taxation year as and
when required by subsection 150(1) is liable to a penalty equal to the total of
(a) an amount equal to 5%
of the person’s tax payable under this Part for the year that was unpaid when
the return was required to be filed, and
(b) the product obtained when
1% of the person’s tax payable under this Part for the year that was unpaid
when the return was required to be filed is multiplied by the number of
complete months, not exceeding 12, from the date on which the return was
required to be filed to the date on which the return was filed.
[25]
Although due diligence
is not recognized as a defence in the legislation, this Court has recognized a due diligence defence for
penalties provided that the taxpayer establishes that reasonable steps were
taken to comply with the legislation. This principle has no application to
interest, and due diligence is not a ground for this Court to vacate interest
imposed pursuant to s. 161(1).
[26]
With respect to due diligence
relating to the penalty, I am not satisfied that Ms. Tuck took all reasonable
steps to comply with the obligation to file an income tax return on time.
[27]
As mentioned earlier, this
argument was first raised at the hearing. It was not raised either in the
notice of objection or in the notice of appeal.
[28]
I would also note that Mr. Tuck’s
self-interested testimony referred to tax compliance problems that allegedly
occurred a long time ago. Even if the testimony is considered to be reliable, I
am not satisfied that it is a reasonable excuse for late filing the 2008 income
tax return.
[29]
I would also comment that Ms. Tuck
continued to assert for the 2008 taxation year that she was not subject to the
Canadian income tax system based on arguments similar to the natural person
theories. The anti-tax theories were raised both in the notice of objection and
by reference in her notice of appeal. The prior decision of this Court that
dismissed these arguments was issued in 2007. The fact that Ms. Tuck continued
to raise these arguments for the 2008 taxation year suggests a wanton disregard
for statutory tax obligations.
[30]
Finally, I reject the suggestion
that filing an income tax return late should be excused because the amount of
income is not known. The late-filing penalty under s. 162(1) could have been
avoided if the income tax return had been filed on time, with further information
to be submitted subsequently. I am not satisfied that proper diligence was
exercised.
Should matter be referred
back to Minister?
[31]
As an alternative argument, Ms.
Tuck suggests that this matter should be referred back to the Minister for
further consideration since the CRA refused to consider these issues at the
objections stage.
[32]
Even if these issues were raised
at the notice of objection stage, it is not appropriate to grant this type of
relief. Ms. Tuck essentially
seeks to reopen the objections process that ended when the reassessment was
confirmed. An appeal to this Court gives
taxpayers the opportunity of establishing by proper evidence that an assessment
is incorrect. If a taxpayer fails to do this, the appeal should be dismissed.
Conclusion
[33]
The appeal will be dismissed, and
each party shall bear their own costs.
Signed at Toronto, Ontario this 20th day of September
2012.
“J. M. Woods”
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