Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: The Federal Government's response to the Supreme Court's decision in 65302 British Columbia Ltd. v. The Queen (99 DTC 5799), which established that Parliament, not the courts, should decide on public policy issues and that generally, as long as a fine is incurred to earn income, it is deductible.
Position: In accordance with the principles established by the Supreme Court in 65302 British Columbia Ltd., taxpayers will be allowed to deduct fines and penalties incurred to earn income. The tests of "avoidability" and "public policy" discussed in IT-104R2 are no longer relevant, and as a result, the bulletin will be withdrawn entirely.
Reasons: Based on our comments at the 2000 CTF Roundtable.
XXXXXXXXXX J. Gibbons, CGA
2001-007418
April 6, 2001
Dear XXXXXXXXXX:
We are replying to your letter dated February 22, 2001, concerning the Federal Government's response to the Supreme Court's decision in 65302 British Columbia Ltd. v. The Queen (99 DTC 5799). The Supreme Court held that a fine incurred for the deliberate overproduction of an egg quota was deductible. This decision established that Parliament, not the courts, should decide on public policy issues and that generally, as long as a fine is incurred to earn income, it is deductible.
In accordance with the principles established by the Supreme Court in 65302 British Columbia Ltd., taxpayers will be allowed to deduct fines and penalties incurred to earn income. The tests of "avoidability" and "public policy" discussed in IT-104R2 are no longer relevant, and as a result, the bulletin will be withdrawn entirely. The Supreme Court concluded that only in rare cases where the offence giving rise to the fine or penalty was so egregious or repulsive would the fine or penalty not be deductible. At the Canadian Tax Foundation's annual conference on September 27, 2000, the Canada Customs and Revenue Agency addressed the impact of a number of recent cases, including 65302 British Columbia Ltd. We have attached a copy of an unofficial transcription of our comments at this conference concerning 65302 British Columbia Ltd.
Any changes to the rules relating to the income tax deduction for fines and penalties would require an amendment to the Income Tax Act which falls within the purview of the Department of Finance. Thus, you should contact that Department if you wish to obtain information on any new tax policy initiatives being considered as a result of the decision in 65302 British Columbia Ltd.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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