Date: 20090218
Docket: T-1501-07
Citation: 2009 FC 183
Edmonton, Alberta, February 18, 2009
PRESENT: The Honourable Madam Justice Heneghan
BETWEEN:
RAINER
KNIE
Applicant
and
THE
MINISTER OF NATIONAL REVENUE
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
Mr.
Rainer Knie (the “Applicant”) seeks judicial review of the decision of the
Minister of National Revenue (the “Respondent”) to deny waiver of interest
and penalties pursuant to subsection 220(3) of the Income Tax Act,
R.S.C. 1985, c.1 (5th Supp.) (the “Act”). The decision was set out in
a letter dated July 12, 2007, to the Applicant.
[2]
The
Applicant argues that the Minister, through his delegates, committed reviewable
errors in denying his relief. First, he submits that the Minister failed to
consider all relevant facts as to the existence of “extraordinary
circumstances”, relative to the 1996 to 1998 tax years, in denying his request
for relief. Further, he argues that the Minister failed to take into account
his current personal situation in denying the relief sought.
[3]
The
Applicant says that an error by his former accountant, who is now deceased,
gave rise to incorrect attribution of salary. He says that monies that he
advanced to a corporate entity, by way of a loan, were incorrectly treated as a
salary by the accountant. Interest and penalties accumulated when the Applicant
failed to pay the income tax that was assessed relative to the salary in
question.
[4]
The
Respondent submits that he acted reasonably and properly in deciding to
positively exercise his statutory discretion to waive interest and penalties.
He submits that the factors identified in Information Circular Number IC07-1
(the “Guidelines”) were considered, as required, in reaching this decision to
deny waiver of interest and penalties. He argues that no error was committed in
the exercise of the statutory discretion.
[5]
Subsection
220(3.1) of the Act gives the Respondent the discretion to waive interest and
penalties, in whole or in part, and provides as follows:
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3.1) The Minister may, on or before the day
that is ten calendar years after the end of a taxation year of a taxpayer (or
in the case of a partnership, a fiscal period of the partnership) or on
application by the taxpayer or partnership on or before that day, waive or
cancel all or any portion of any penalty or interest otherwise payable under
this Act by the taxpayer or partnership in respect of that taxation year or
fiscal period, and notwithstanding subsections 152(4) to (5), any assessment
of the interest and penalties payable by the taxpayer or partnership shall be
made that is necessary to take into account the cancellation of the penalty
or interest.
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(3.1) Le ministre peut, au plus
tard le jour qui suit de dix années civiles la fin de l’année d’imposition
d’un contribuable ou de l’exercice d’une société de personnes ou sur demande
du contribuable ou de la société de personnes faite au plus tard ce jour-là,
renoncer à tout ou partie d’un montant de pénalité ou d’intérêts payable par
ailleurs par le contribuable ou la société de personnes en application de la
présente loi pour cette année d’imposition ou cet exercice, ou l’annuler en
tout ou en partie. Malgré les paragraphes 152(4) à (5), le ministre établit
les cotisations voulues concernant les intérêts et pénalités payables par le
contribuable ou la société de personnes pour tenir compte de pareille
annulation.
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[6]
A
decision made pursuant to this provision is a discretionary one, reviewable on
the standard of reasonableness: see Dunsmuir v. New
Brunswick,
[2008] 1 S.C.R. 190 at paragraph 51.
[7]
The
Guidelines inform the exercise of the statutory discretion, in particular
paragraphs 23, 25, 33 and 35.
[8]
Paragraph
23 identifies three circumstances where relief from penalties and interest may
be warranted:
23. The Minister may grant relief from
the application of penalty and interest where the following types of situations
exist and justify a taxpayer’s inability to satisfy a tax obligation or
requirement at issue:
(a) extraordinary circumstances
(b) actions of the CRA
(c) inability to pay or financial
hardship
[9]
Paragraph
25 identifies circumstances that may be considered to be extraordinary, as
follows:
25. Penalties and interest may be waived
or cancelled in whole or in part where they result from circumstances beyond a
taxpayer’s control. Extraordinary circumstances that may have prevented a
taxpayer from making a payment when due, filing a return on time, or otherwise
complying with an obligation under the Act include, but are not limited to, the
following examples:
(a) natural or man-made disasters such
as, floor or fire;
(b) civil disturbances or disruptions in
services, such as a postal strike;
(c) a serious illness or accident; or
(d) serious emotional or mental distress,
such as death in the immediate family.
[10]
Paragraph
33 identifies the factors to be taken into account in making a decision:
33. Where circumstances beyond a
taxpayer’s control, actions of the CRA, or inability to pay or financial
hardship has prevented the taxpayer from complying with the Act, the following
factors will be considered when determining whether or not the CRA will cancel
or waive penalties and interest:
(a) whether or not the taxpayer has a
history of compliance with tax obligations;
(b) whether or not the taxpayer has
knowingly allowed a balance to exist on which arrears interest has accrued;
(c) whether or not the taxpayer has
exercised a reasonable amount of care and has not been negligent or careless in
conducting their affairs under the self-assessment system; and
(d) whether or not the taxpayer has acted
quickly to remedy any delay or omission.
[11]
Finally,
paragraph 35 addresses the relevance of third-party actions, as follows:
35. Taxpayers are generally considered to
be responsible for errors made by third parties acting on their behalf for
income tax matters. A third party who receives a fee and gives incorrect
advice, or makes arithmetic or accounting errors, is usually regarded as being
responsible to their client for any penalty and interest charges that the
client has because of the party’s action. However, there may be exceptional
situations, where it may be appropriate to provide relief to taxpayers because
of third-party errors or delays.
[12]
Having
regard to the evidence contained in the Certified Tribunal Record, that is, the
evidence that was before the Minister’s delegate and having regard to the
applicable standard of review, I am not persuaded that any reviewable
error has been demonstrated.
[13]
The
record shows that the Applicant has a history of non-compliance with satisfying
the requirements to file his tax returns and to make payments in respect
of his tax liabilities. The evidence is sparse about the errors of his
former accountant and in any event, the errors of a third party do
not automatically yield a positive exercise of the statutory discretion.
[14]
There
is also little evidence about the Applicant’s current financial circumstances.
The onus lies on him to submit evidence that is sufficient and relevant for the
decision-maker.
[15]
In
view of all the circumstances as documented on the record and having regard to
the relevant jurisprudence, I am satisfied that there is no basis for judicial
intervention and this application for judicial review is dismissed. In the
exercise of my discretion pursuant to Rule 400(1) of the Federal Courts
Rules, SOR/98-106, there is no order as to costs.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that the
application for judicial review is dismissed, no order as to costs.
“E.
Heneghan”
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1501-07
STYLE OF CAUSE: RAINER
KNIE v.
THE MINISTER OF NATIONAL REVENUE
PLACE OF
HEARING: Calgary,
Alberta
DATE OF
HEARING: February
16, 2009
REASONS FOR JUDGMENT: HENEGHAN
J.
DATED: February
18, 2009
APPEARANCES:
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Marc F. Crarer
|
FOR THE APPLICANT
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Kim Palichuk
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FOR THE RESPONDENT
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SOLICITORS
OF RECORD:
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Crarer Law
Office
Calgary, AB
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FOR THE APPLICANT
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John H. Sims,
Q.C.
Deputy
Attorney General of Canada
Ottawa, ON
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FOR THE RESPONDENT
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