31 July 2002 Ministerial Correspondence 2002-0149214 - MC FINES & PENALTIES 65302 BC LTD

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Supreme Court decision in 65302 British Columbia Limited - whether the Act would be amended.

Position:

Finance's responsibility.

Reasons:

CCRA's role to administer the Act as passed by parliament.

XXXXXXXXXX

July 31, 2002

Dear XXXXXXXXXX:

The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your letter of June 13, 2002, concerning the adverse impact of a decision of the Supreme Court of Canada, on the deductibility of fines and penalties, and whether the Income Tax Act will be amended as a result of the decision.

Prior to the Supreme Court's decision in case 65302 British Columbia Limited, the position of the Canada Customs and Revenue Agency (CCRA) was that fines or penalties could be denied as a business deduction if the event that resulted in the fine or penalty being imposed was avoidable or contrary to public policy. The Supreme Court ruled that in the absence of a specific provision in the Act indicating otherwise, this position has no legal basis. The Court did note, however, that an act could be so "egregious or repulsive" that the fine or penalty subsequently imposed could not be justified as being incurred for an income-earning purpose.

The role of the CCRA is to administer and enforce the Act as passed by Parliament, and interpreted by the courts. Your concerns, however, relate to tax policy, which is the responsibility of the Department of Finance. In this regard, I assure you that Finance officials are aware of the decision and of the general concerns you raise with respect to the need for an amendment to the Act to reduce the effect of this decision.

I trust the information provided is helpful.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

Randy Hewlett
957-8973
2002-014921