Date: 20100615
Docket: T-1689-09
Citation: 2010 FC 644
Ottawa, Ontario, June 15,
2010
PRESENT: The Honourable Mr. Justice Martineau
BETWEEN:
CHRISTOPHER
PATERSON
Applicant
and
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA
(Canada Revenue Agency)
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
By
letter dated May 1, 2009, the applicant was informed that as of April 30, 2009,
the Canada Revenue Agency (the CRA) was denying him the privilege of filing his
clients’ income tax returns electronically by way of the EFILE and SEND
programs as provided by section 150.1 of the Income Tax Act, R.S.C.
1985, c.1 (5th Supp.) (the Act).
[2]
The
applicant requested an administrative review of this decision, and on September
9, 2009, the Chief of Appeals confirmed the decision to deny the applicant
participation in these programs. It is this latter decision which is the
subject of the present application for judicial review.
[3]
Prior
to examining the particular facts of this case, section 150.1 of the Act makes
it clear that there is no right to file a tax return electronically. Rather,
subsection 150.1(2) specifies that “a person who meets the criteria in writing
by the Minister of National Revenue (the Minister) may file a return of
income for a taxation year by way of electronic filing” (my emphasis). Based on
the wording of the provision, it is clear that the Minister has full discretion
to grant, or revoke, the privilege of electronic filing. Relevant factors
governing the exercise of the ministerial discretion are listed in the
“Suitability screening” form posted on the CRA’s website.
[4]
Relevant
factors include inter alia, that the existing or prospective participant
in the EFILE program not have been convicted under the Act or any income tax act
of any province, not failed to comply with the requirement to pay, collect or
remit taxes as required under the Act (among other pieces of legislation), not
made any misrepresentations on their application or renewal of their electronic
filing privileges, and most importantly for the case at bar, the existing or
prospective participant must not have been engaged “in fraud, dishonesty,
breach of trust, or other conduct of a disreputable nature” (my underlining).
[5]
The
applicant is a sole proprietor who prepares and submits income tax returns for
a number of clients. Since about 2004, the applicant has had the privilege of
preparing and submitting these returns electronically as a participant in the
EFILE program set up by the Minister.
[6]
The
evidence on record reveals that with the assistance of Mr. Mohammed Gaye, one
of his clients who worked for a company purporting to campaign on behalf of
charitable organizations, the applicant accepted money from taxpayers who
wished to “donate” to these charitable organizations in exchange for an
“enhanced receipt” for tax purposes (the scheme). The receipt provided to the
taxpayer would reflect a much larger sum of money than was actually paid and
would then be used in the preparation of the client’s tax return to provide the
client with sizeable deductions from their taxable income.
[7]
For
example, the client participating in the scheme would pay $500 to the applicant
who would, in turn, send the money to Mr. Gaye. The applicant’s participating
client would then receive a receipt for $7,500, apparently issued in the name
of a notable charitable organization, for tax purposes. For each client that
purchased one of these enhanced receipts, the applicant was to receive $25 from
Mr. Gaye. There is no evidence on record that the tax receipts (although they
look authentic) provided through Mr. Gaye came from these charitable
organizations and/or that these organizations knew about the scheme or approved
of it.
[8]
Around
March 2009, the applicant was contacted by a client who had received a letter
from the CRA indicating that the latter were investigating allegations of
offences committed under the Act during the preparation of the individual’s
income tax return. While the applicant (as the preparer of said return) was not
named in the letter, he voluntarily contacted the investigator at the CRA and
arranged a meeting.
[9]
The
applicant has never denied his involvement in the scheme. On the contrary, he
was, and has been, quite forthcoming with the CRA. However, the applicant does
not believe he has done anything wrong since he was not aware that he was
engaged in any misconduct or fraud. He states that he had no reason to suspect
that the enhanced returns were in any way fraudulent. Indeed, the CRA had not
taken any issue with any of the returns he filed up until March 2009. There is
evidence on record that he himself claimed tax deductions based on the enhanced
returns. He now submits that he should have been informed in advance by the CRA
pursuant to the Taxpayer Bill of Rights that this posed a problem.
[10]
After
his meeting with the investigator, the applicant received the letter dated May
1, 2009, notifying him that he had lost his EFILE privileges as of April 30,
2009. The applicant had his privileges reinstated for a brief period of time to
enable him to file three outstanding returns for clients, however soon
thereafter the applicant’s privileges were again suspended.
[11]
The
applicant sought review of the latter decision. This was not a statutory appeal
but an administrative review. The Chief of Appeals reviewed the whole file de
novo; he considered new evidence brought to his attention. The applicant
was informed of the impugned decision to confirm his suspension on September 9,
2009. According to the letter from the Chief of Appeals:
…
[The applicant’s] conduct was
disreputable in nature because of [his] involvement in selling charitable
donation receipts to [his] clients for gain. Further, [he] knowingly prepared
returns using these donations receipts from which there were no actual
contributions to the registered charities. As a result, [the CRA] find[s] that
[his] conduct in this matter does not reflect positively on the integrity of
the EFILE program…
[12]
There
is no jurisprudence concerning the applicable standard of review when assessing
the decision to revoke an individual’s electronic filing privileges. That said,
it is clear that the appropriate standard of review is that of reasonableness. Whether
an existing or prospective participant is eligible to be given electronic filing
privileges is a discretionary determination and mostly a question of fact that
warrants a fair amount of deference. In the case at bar, the nature of the
question in addition to the special expertise of the Minister support the
conclusion that the decision to grant or suspend electronic filing privileges
is reviewable on a standard of reasonableness. As such, the Minister, or his
“officers, clerks or employees” who are empowered to administer and enforce the
Act (see subsection 220(2)), is in a better position than the Court to enforce
the Suitability screening criteria and assess what constitutes “fraud”,
“dishonesty”, “breach of trust” or other conduct of a “disreputable nature”.
[13]
In
a nutshell, the applicant argues that the impugned decision warrants intervention.
The conclusion that he was not engaged in any “disreputable conduct” is
unreasonable as he never had any reason to question the authenticity of the
receipts provided to his clients. Furthermore, the applicant states the CRA
never once warned him that such suspicious receipts were in circulation and on
one previous occasion, the CRA investigated one of the receipts and concluded
that it was reasonable. Finally, the applicant argues that the conclusion of
the Chief of Appeals is not supported by the evidence since it is not proven
that he received money as a result of his alleged participation in the scheme.
[14]
For
the reasons that follow, the application for judicial review must fail.
[15]
The
applicant simply disagrees with the conclusion reached by the Chief of Appeals
that the applicant’s conduct was “disreputable” in nature. According to Dunsmuir v. New Brunswick,
2008 SCC 9 at paragraph 47, when reviewing the reasonableness of a decision,
the Court is concerned with the justification, transparency and intelligibility
within the decision making process, in addition to whether the decision falls
within the range of acceptable outcomes, defensible with regard to the facts
and the law. There is no question here that the impugned decision of the Chief
of Appeals is reasonable. The Chief of Appeals certainly had the
right to come to his own conclusions, which he did in this case.
[16]
While
the applicant may not have had any reason to question the authenticity of the
receipts his clients were being supplied, he most definitely knew that the
amounts paid by his clients were not equal to the amounts they were given
credit for when he was completing their income tax returns. There was evidently
some sort of wilful blindness on the part of the applicant. The mere fact that
the applicant did not believe this to be fraudulent does not detract from his
admission that he participated in a scheme whereby taxpayers were making claims
for the deduction of sums of money they never paid to these charitable
organizations. As it is often said, ignorance of the law is no excuse.
[17]
Again,
as aforesaid, the applicant has never denied his involvement in the scheme and
despite the fact that it is not proven that he actually received money from Mr.
Gaye, as is evident from his own admission, he participated in the scheme for
gain. Coming from a person who had the privilege of preparing and submitting
returns electronically, such behaviour is disturbing. Undeniably, it is enough
to cast doubt and suspicion. The Minister is there to protect the integrity of
the system. It was reasonable for the Minister to consider this behaviour as
some form of breach of trust or other conduct of a disreputable nature. Such
conduct certainly did not reflect positively on the integrity of the EFILE program.
Accordingly, it cannot be said that the decision to suspend a discretionary
privilege, to which the applicant has no right, is unreasonable.
[18]
For
the foregoing reasons, this application for judicial review is dismissed with
costs.
JUDGMENT
THIS COURT ADJUDGES AND ORDERS
that the
judicial review application made by the applicant be dismissed with costs.
“Luc
Martineau”
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