Citation: 2006TCC321
Date: 20060704
Docket: 2005-2659(GST)I
BETWEEN:
PIERRE ROY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from an assessment made under section 323 of Part IX of the Excise
Tax Act, R.S.C. 1985, c. E‑15 ("the Act").
[2] The assessment that
forms the basis of the assessment against the Appellant in his capacity as
director of Piemar son et vision Inc. was first made and later confirmed
following an objection on May 5, 2005.
[3] The facts on which
the Minister of Revenue ("the Minister") relied in making the
assessment are set out in paragraph 5 of the Reply to the Notice of Appeal.
Those facts are as follows:
[TRANSLATION]
(a) During
the years 1996 to 2000, the Appellant was a director of Piemar son et vision
Inc. (hereinafter "the company").
(b) During the
aforementioned years, the company was a GST registrant.
(c) An audit of the
company disclosed that the company had collected GST without remitting it to
the Respondent during the period in issue.
(d) In addition,
the company, through its sole director Pierre Roy, filed its returns late
and without remittances for the periods ending January 31, 1997,
April 30, 1997, July 31, 1997, and October 31, 1997.
(e) Moreover, the
company, through its sole director Pierre Roy, ceased to file the company's returns
within the time allotted by law for the periods from November 1, 1997
to January 31, 2000.
(f) On or about
January 23, 2002, the company, through its sole director Pierre Roy, filed
the returns for the periods from November 1, 1997, through January 31, 2000,
without tax remittances.
(g) The Appellant
was the director of the company during the periods in which it was required to
pay the Respondent the net tax, and he looked after the day-to-day management
of the company.
(h) The Appellant,
as director of the company, did not act with the degree of care, diligence and
skill to prevent the failure that a reasonably prudent person would have
exercised under comparable circumstances.
(i) In particular,
the Appellant took no concrete and positive measures to prevent the company
from failing to remit taxes.
(j) Indeed, the
Appellant wilfully refused to file the company's tax returns and [to remit] the
taxes collected.
(k) In addition,
following an audit, the company was assessed in October 1996 for uncollected
taxes on commissions pursuant to the Act respecting the Québec
sales tax (R.S.Q. c. T-0.1) for the periods of August 1, 1996, to April 30, 1996.
(l) The Appellant
objected, and told the Ministère du Revenu du Québec that, in his opinion, the
commissions were not taxable.
(m) On or about
January 23, 2001, the interpretation directorate of the Ministère du Revenu du
Québec determined that the commissions received by the company were not taxable
supplies under the Act respecting the Québec sales tax.
(n) Following this
decision, the amounts owed by the company under the Act respecting the
Québec sales tax were adjusted.
(o) An inadvertent
error was made by the Ministère du Revenu du Québec in processing the company's
tax return, filed on March 25, 1997, for the period ending
January 31, 1997. The error was corrected in May 1997.
(p) The interest
and penalties were lawfully imposed and are essentially due to the late filing
of the returns, and the late remittances, by the company and the Appellant.
[4] The Respondent has
framed the issues as follows:
[TRANSLATION]
(a) In his capacity
as director of the company, is the Appellant jointly and severally liable,
along with the company, to pay the net tax payable and the interest and
penalties?
(b) Did the
Appellant, as director of the company, exercise as much care, diligence and
skill to prevent the company's failure to remit the net tax payable as a
reasonably prudent person would have exercised under the same circumstances?
[5] The Appellant argued
his own case and was clearly well prepared. He prepared several documents
in support of his testimony. He explained that, in 1992, he created a company
whose business was to sell audio and video components.
[6] He was remunerated
primarily by a commission on his sales. In May 1996, Diane Lavallé
notified him that she would be visiting his business to conduct an audit in
connection with the payment of the Québec Sales Tax (QST) and the Goods and
Services Tax (GST).
[7] As agreed, she
reported to the place of business and conducted the audit. Following the audit,
she notified the Appellant that all the commissions that he received from the
various companies with which he was doing business, and whose head offices are
located outside Quebec, are subject to the GST and QST.
[8] The Appellant was
very surprised by this decision and launched an all-out fight against it. The
decision was confirmed several times, but he did not give in: he continued his
efforts, and, five years later, he achieved victory.
[9] After this, the
Appellant undertook numerous efforts to normalize his file. As a form of
protest, he refrained from filing certain returns or filed them late, and he
wrote to the Ministère du Revenu du Québec and the Minister responsible for the
Capitale-Nationale region to complain, and he met with the various actors.
He feels that he continues to be the subject of unfounded and exaggerated
claims, specifically with respect to interest and penalties. He regularly
requests explanations and reports, but never receives satisfactory answers.
Following his efforts to obtain help from the Minister, he believed, at
one point, that everything would be resolved, because he noticed that certain
actors were showing more interest. However, he said that he never obtained the
clear and precise answers that he was demanding.
[10] The Respondent, for
her part, called Richard Roy and Christian Bouchard as witnesses. Mr. Roy
explained to the Court that up until recently, when he was designated the
collections officer on the account, he had nothing to do with this file.
[11] Mr. Roy acknowledged
that certain mistakes might have been committed, and, with the help of his
records, he stated that there are 147 interventions noted on the file. He
acknowledged that this number does not include certain meetings, telephone
calls or correspondence with people other than the collections staff.
[12] The witness became
impatient when the Appellant asked him certain questions. The Respondent's
other witness, Mr. Bouchard, provided certain explanations that made it
possible to draw distinctions between documents whose contents should have been
the same. He acknowledged that the documents prepared by the computer system
were often complex and could seem incomprehensible to some people. This is why
the people responsible for the file would prepare more accessible and
comprehensible reports at the request of the individual concerned.
[13] Like Mr. Roy,
Mr. Bouchard became somewhat impatient under the Appellant's questioning.
One of the things that he did when he had trouble providing a very specific
answer was to fall back on the reliability of the computer system, adding that
the process of simplifying certain documents was essentially aimed at enabling
the taxpayer and the court to understand those documents.
[14] On several
occasions, I have stated that our tax system is based on self‑assessment,
which requires taxpayers to do reasonably good bookkeeping so that an analysis
and audit can be done at any time. This includes the retention of relevant
vouchers and documents that will enable the data recorded in the various
journals to be validated.
[15] Unless such
bookkeeping is done, people who are audited face adverse consequences.
[16] As for the state,
its responsibility is to give all taxpayers the explanations that they request,
and to do so in accessible accounting language so that the taxpayers can
understand the situation well. Certainly, every taxpayer is entitled to a
report in clear accounting language. It is absolutely not sufficient to claim
that the work was done using software and that the result thereby obtained is
reliable, correct and incontestable, especially if the person concerned, or his
agent, does not understand the information provided.
[17] In the case at bar,
not only has the Appellant not been careless, reckless or irresponsible, but he
has shown a constant interest in putting his file in order. His dogged
determination to understand his file is irrefutable evidence that he was
looking after his case and did not want to pay any more tax than he owed.
This is a very legitimate demand, and he was fully entitled to clear
answers to his questions.
[18] In my view, there is
absolutely nothing in this matter that could lead me to conclude that the
Appellant lacked vigilance and was negligent or careless; on the contrary, it
has been shown, on a balance of probabilities, that he was very active and even
perhaps aggressive when that was necessary to straighten out his file.
The Appellant's testimony clearly establishes this, but the notes entered
in his file with respect to the exceptional number of interventions by the
Appellant, who wanted to know exactly how the Respondent had managed her work,
are also very telling and convincing in this regard.
[19] Accordingly, the
appeal is allowed and the assessment is set aside.
Signed at Ottawa, Canada, this 4th day of
July 2006.
"Alain Tardif"
Translation certified true
on this 6th day of December 2007.
Brian McCordick, Translator
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