REASONS
FOR JUDGMENT
Graham J.
[1]
Kwaku Amoako-Boatey and Janet Amoako-Boatey are
married. Their appeals were heard together on common evidence.
[2]
When Mr. Amoako-Boatey filed his tax returns for
his 2003, 2004, 2005 and 2006 taxation years, he claimed to have made
charitable donations that included donations of $6,400, $7,200, $6,000 and
$2,650 respectively. The Minister of National Revenue denied those donations on
the basis that they were not made.
[3]
When Ms. Amoako-Boatey filed her tax return for
her 2004 tax year, she claimed to have made $1,640 in charitable donations. The
Minister denied those donations on the basis that they were not made. When Ms.
Amoako-Boatey filed her tax returns for her 2005 and 2006 tax years, she
claimed to have paid $9,900 and $12,000 respectively in child care expenses.
The Minister denied those expenses on the basis that they were not incurred.
[4]
The Minister applied gross negligence penalties
to all of the adjustments to Mr. and Ms. Amoako-Boatey’s incomes. During the trial,
the Minister conceded that the penalties should be removed with regard to Ms. Amoako-Boatey’s
2005 and 2006 tax years.
[5]
I will first examine the child care expenses and
then move on to the donations.
Child Care Expenses
[6]
As set out above, Ms. Amoako-Boatey claimed child
care expenses of $9,900 and $12,000 on her 2005 and 2006 tax returns.
[7]
Ms. Amoako-Boatey testified that she was
separated from her husband in 2005 and 2006. Mr. Amoako-Boatey lived in a
different municipality. They had three children who were 2, 8 and 10 years old
in 2005. The children lived with Ms. Amoako-Boatey and went to school near her
home. Ms. Amoako-Boatey was employed full time. These facts were not in
dispute. Based on the foregoing, I find that Ms. Amoako-Boatey must have used
some form of child care in 2005 and 2006. The question remains whether she paid
for that child care.
[8]
Ms. Amoako-Boatey testified that she hired a
neighbour, who lived in the building across the street, to look after her
children. The neighbour’s name was Mary Dansowaah. Ms. Dansowaah did not
testify. Ms. Amoako-Boatey testified that she had sought out Ms. Dansowaah when
her problems with the CRA arose and that she had learned that Ms. Dansowaah had
moved back to Ghana about six years previously and had since passed away.
[9]
Other than her own testimony and that of Mr. Amoako-Boatey,
Ms. Amoako-Boatey had no evidence supporting the existence of her
agreement with Ms. Dansowaah. Ms. Amoako-Boatey testified that they did not
have a written contract. She paid Ms. Dansowaah in cash. Ms. Amoako-Boatey did
not provide copies of her bank statements showing the withdrawal of that cash.
The amounts that Ms. Amoako-Boatey paid Ms. Dansowaah were large and
represented approximately one-third of her income so I would have expected her
to be able to at least attempt to trace those amounts through her bank
statements. Ms. Amoako-Boatey testified that she had had receipts at one
time but that she had given those receipts to her tax preparer and no longer
had access to them. Ms. Amoako-Boatey filed a paper copy of her 2006 tax
return. I note that those receipts should have been attached to that return,
particularly because she had given them to her tax preparer. They were not. Ms.
Amoako-Boatey did not call any witnesses who might have been able to confirm
that Ms. Dansowaah had looked after the children.
[10]
Ms. Amoako-Boatey’s only evidence in support of
her child care expenses was her own testimony and, to a very limited extent,
Mr. Amoako-Boatey’s testimony. Both Mr. and Ms. Amoako-Boatey’s testimony in
respect of their purported charitable donations sufficiently undermined their credibility
that I am not prepared to rely on that testimony alone to support Ms. Amoako-Boatey’s
claim for child care expenses.
[11]
Ms. Amoako-Boatey’s 2006 tax year is not statute
barred. Thus the Minister may rely on her assumptions of fact for that year.
The Minister assumed that Ms. Amoako-Boatey did not incur any child care
expenses in 2006. Based on all of the foregoing, I find that Ms. Amoako-Boatey
has failed to demolish that assumption. Thus her appeal of her 2006 tax year
cannot succeed.
[12]
Ms. Amoako-Boatey’s 2005 tax year is statute
barred. For the Minister to raise an assessment after the normal reassessment
period, the Minister must prove both that the taxpayer made a misrepresentation
and that the misrepresentation was attributable to neglect, carelessness or
wilful default. In proving the misrepresentation, the Minister may not rely on
her assumptions of fact. In Ms. Amoako-Boatey’s case, the misrepresentation
that the Minister must prove is that Ms. Amoako-Boatey did not incur child care
expenses or did not incur those expenses in the amount she claimed.
[13]
Had the foregoing been the only evidence before
me, I would have found that the Minister had not proven that Ms. Amoako-Boatey
made a misrepresentation in her 2005 tax return. The fact that Ms. Amoako-Boatey
could not support her claim for child care expenses does not necessarily mean
that the Minister has proven a misrepresentation. If all that were required in
order to prove a misrepresentation in respect of a deduction was that a
taxpayer be unable to prove an entitlement to the deduction, then the burden
would effectively remain on the taxpayer. That would defeat the entire purpose
of a year being statute barred. The burden is on the Minister to prove that Ms.
Amoako-Boatey did not incur the child care expenses in question. To meet that
burden, the Minister needs to do something more than simply point to a lack of
evidence from Ms. Amoako-Boatey. At the very least, the Minister needs to
be able to convince me that the reason Ms. Amoako-Boatey does not have any
evidence of the child care expenses is that those expenses were never incurred.
To do that, the Minister needs to do something more.
[14]
The extra evidence that the Minister needs came
from Ms. Amoako-Boatey’s explanation of her payment arrangement with Ms. Dansowaah.
Her explanation did not ring true. It sounded like a poorly thought through
explanation that Ms. Amoako-Boatey had developed after the fact to justify the
amounts she had claimed in her returns.
[15]
To explain the $9,900 amount claimed in 2005 she
testified that she had paid Ms. Dansowaah $40 per day, which was $200 per week,
which was $800 per month, which was $9,600 per year. She then explained that
she paid an additional $25 per month to cover times when she ran late. To
explain the $12,000 claimed in 2006, Ms. Amoako-Boatey said that she had paid
Ms. Dansowaah $50 per day, which was $250 per week, which was $1,000 per
month, which was $12,000 per year. Neither of these supposed systems of payment
makes mathematical sense. Both systems assume that there are four weeks in each
month when, in fact, there are more than four weeks in all months other than
February. Ms. Amoako-Boatey did not explain how Ms. Dansowaah was compensated
for the remaining work days in those months. The result of those extra days
each month is that there are 52, not 48, weeks in a year. Ms. Amoako-Boatey
did not explain how Ms. Dansowaah was compensated for the other four weeks in
the year. She made no mention of statutory holidays or of what happened when
she did not have to go to work. Either Ms. Dansowaah was compensated by the
day, in which case I would expect her compensation over the course of the year
to be less of a round figure, or she was compensated by the week regardless of
the number of days worked in the week, in which case I would have expected an
explanation of what happened to the other four weeks in the year, or she was
compensated by the month regardless of the number of days worked in the month,
in which case I do not understand why Ms. Amoako-Boatey described her as having
a daily rate of pay. In view of the foregoing, I conclude that Ms. Amoako-Boatey
either did not pay Ms. Dansowaah at all or did not pay her in the manner
described.
[16]
Ms. Amoako-Boatey should not have had to make up
an explanation if she had actually paid Ms. Dansowaah the amounts that she
claims to have paid her. The truth should have been enough. Her apparently fabricated
explanation is enough to convince me that the reason she does not have
documents and witnesses to support her story is that those documents do not
exist and those witnesses would not have supported her.
[17]
Based on the foregoing, I am satisfied on a
balance of probabilities that Ms. Amoako-Boatey made a misrepresentation in
claiming child care expenses on her 2005 tax return. I am also satisfied that
that misrepresentation was at least due to carelessness. The Minister is
therefore able to reassess the otherwise statute barred year to deny the child
care expenses.
[18]
In view of all of the foregoing, I find that Ms.
Amoako-Boatey is not entitled to deduct child care expenses in either 2005 or
2006.
Donations
[19]
Ms. Amoako-Boatey claimed charitable donations
of $1,640 on her 2004 tax return. The Minister denied all of those donations.
During the trial, the Respondent conceded that a $60 donation carried forward
from 2003 and a $380 donation to Ms. Amoako-Boatey’s church should be allowed.
The only donation in dispute is therefore a $1,200 amount that Ms. Amoako-Boatey
claims to have donated to a charity named Holy Alpha and Omega Church of
Toronto (“Holy Alpha”).
[20]
Mr. Amoako-Boatey claimed charitable donations
of $6,400, $7,200, $6,000 and $2,650 in 2003, 2004, 2005 and 2006 respectively.
At trial Mr. Amoako-Boatey claimed that all of those donations had been
made to a charity named New Hope for Africa (“New Hope”).
[21]
Mr. and Ms. Amoako-Boatey both had their tax
returns prepared by a man named William (“Billy”) Ankomah. In 2009, Mr.
Ankomah pled guilty to criminal charges of fraud over $5,000 for claiming false
charitable donations on behalf of his clients in exchange for a portion of
those clients’ tax refunds.
[22]
Sergeant Roy Steinebach of the RCMP testified on
behalf of the Respondent. Sgt. Steinebach worked in the RCMP’s financial crime
unit. He was the lead investigator in the investigation of Mr. Ankomah. I found
Sgt. Steinebach to be a credible witness. He explained that the
investigation had found that Mr. Ankomah was issuing false receipts for a number
of charities. Those charities included Holy Alpha and New Hope.
[23]
A CRA Appeals Officer named Lucy Amatuzio also
testified on behalf of the Respondent. Ms. Amatuzio is the coordinator of what
is called the “Billy Project”. In that role she oversees all of the objections filed by former
clients of Mr. Ankomah. I found Ms. Amatuzio to be a credible witness. Ms.
Amatuzio explained that Mr. Ankomah had charged his clients a fee equal to 10%
of the amount of the false donation claim he provided.
[24]
An invoice from Mr. Ankomah to Ms. Amoako-Boatey
was entered into evidence. The invoice had been seized by the RCMP during the
execution of a search warrant at Mr. Ankomah’s office. The invoice showed that,
in addition to a $70 fee for tax return preparation, Mr. Ankomah had charged
Ms. Amoako-Boatey $120 for something called an “advanced payment due”. That $120
amount would be exactly 10% of the $1,200 donation that Ms. Amoako-Boatey
claims to have made to Holy Alpha in 2004. A similar invoice to Mr. Amoako-Boatey
was entered into evidence. The invoice showed that, in addition to a $70 fee
for tax return preparation, Mr. Ankomah had charged Mr. Amoako-Boatey $720 as
an “advanced payment due”. That $720 would be exactly 10% of the $7,200 donation that Mr. Amoako-Boatey
claims to have made to New Hope in 2004. These two invoices very strongly
suggest that Mr. and Ms. Amoako-Boatey participated in Mr. Ankomah’s fraudulent
scheme.
[25]
Mr. and Ms. Amoako-Boatey claim that they never
received the above mentioned invoices and that they never purchased false
donations from Mr. Ankomah. I do not believe them.
[26]
Documents called tax summaries were entered into
evidence for all of Mr.
and Ms. Amoako-Boatey’s years in issue. Sgt. Steinebach
testified that documents of that nature were seized from Mr. Ankomah’s office
and were provided to the CRA. Ms. Amatuzio testified that the specific
documents for Mr. and Ms. Amoako-Boatey were obtained from the RCMP.
These documents show a number of inconsistencies. Mr. Amoako-Boatey’s tax summary for 2003 indicates that he donated $6,400 to the
Canadian Foundation for Child Development rather than, as he testified, to New
Hope. The Canadian Foundation for Child Development was another charity used by
Mr. Ankomah in his fraudulent scheme. Mr. Amoako-Boatey’s tax summaries for
2005 and 2006 state the amounts of his donations but do not state the name of
the charity. The place where the name would be is simply left blank. Only the
tax summary for 2004 indicates that Mr. Amoako-Boatey donated money to New Hope.
Collectively this evidence suggests that it did not matter which charity was
recorded on the tax summaries because no donation had actually occurred.
[27]
No donation receipts were entered into evidence
for any of the donations in question. Mr. and Ms. Amoako-Boatey testified that
they were never given donation receipts. They stated that they gave Mr. Ankomah
cash throughout the year, that he recorded that cash in a book and that, at the
end of the year, he told them the total that they had donated. They explained
that Mr. Ankomah recorded that total as a donation on their tax returns and
that he told them he was going to hold on to the donation receipt in case the
CRA required him to produce it. I find it difficult to believe that Mr. and Ms.
Amoako-Boatey would have given Mr. Ankomah sizeable amounts of cash
throughout the year without receiving receipts let alone that they would not
have received a donation receipt at the end of the year. They stated that,
because the CRA seized all of Mr. Ankomah’s documents and Mr. Ankomah had gone
out of business, it was no longer possible for them to obtain their receipts. I
do not believe that story. On the contrary, it appears that the seizure of
documents from Mr. Ankomah’s office is a convenient excuse for their not having
donation receipts.
[28]
Mr. and Ms. Amoako-Boatey did not enter into
evidence any bank statements showing the withdrawal of the cash that they had
purportedly donated. In Mr. Amoako-Boatey’s 2003, 2004 and 2005 tax years his
donations amounted to approximately one-fifth of his income, so I would have
expected him to be able to trace at least some of the withdrawals to his bank
statements.
[29]
Mr. and Ms. Amoako-Boatey both described the
good work supposedly done by New Hope and Holy Alpha. However, neither of them
had had any contact with anyone from either charity other than Mr. Ankomah and
neither of them knew of their respective charity prior to meeting Mr. Ankomah.
Both placed a great deal of emphasis on the fact that Mr. Ankomah had framed
copies of the charities’ registrations on his wall. I cannot believe that Mr.
and Ms. Amoako-Boatey went to see their accountant, that he told them
about those charities, that he pointed to the charities’ registrations on the
wall and that, despite their never having heard of the charities before, that
was enough for Mr. and Ms. Amoako-Boatey to decide to donate significant sums
of money to them. It seems far more likely to me that Mr. Ankomah met with Mr.
and Ms. Amoako-Boatey, told them that he could obtain sizeable tax refunds
for them using false charitable donations, told them that the price for those
refunds was 10% of the face value of the donations, assured them that they
would not be caught because the charities were real and showed them copies of
the charities’ registrations to prove his point.
[30]
Mr. Amoako-Boatey’s 2003, 2004 and 2005 tax
years are statute barred. Ms. Amoako-Boatey’s 2004 tax year is statute barred.
I find that the Respondent has produced sufficient evidence to prove that Mr.
and Ms. Amoako-Boatey made misrepresentations in claiming charitable donations
on their tax returns in those years. I further find that Mr. and Ms. Amoako-Boatey
made those misrepresentations knowingly. I conclude that, in an effort to
obtain greater tax refunds, they paid Mr. Ankomah 10% of the face value of
false charitable donations that they were buying from him. On that basis, I
find that the Minister can reassess the otherwise statute barred years to deny
the donations in issue. Furthermore, having concluded that Mr. and Ms.
Amoako-Boatey knowingly claimed false donations, I have no difficulty in
concluding that the gross negligence penalties assessed against them should be
upheld.
Conclusion
[31]
Based on all of the foregoing, Mr. Amoako-Boatey’s
appeal is dismissed and Ms. Amoako-Boatey’s appeal is allowed and the matter
referred back to the Minister for reassessment to give effect to the
Respondent’s concessions.
Signed
at Ottawa, Canada, this 1st day of December 2016.
“David E. Graham”
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