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: Deductibility of fines and penalties by businesses
Position: Follow the principles enunciated by the Supreme Court in 65302 British Columbia Ltd.
Reasons: Supreme Court decision
May 22, 2003
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your letter of April 19, 2003, concerning a Globe and Mail article about the deductibility of fines and penalties.
Prior to the Supreme Court's decision in the case of 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 Court ruled that in the absence of a specific provision in the Act indicating otherwise, this position had 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 and hence could not be deductible.
The role of the CCRA is to administer and enforce the Act as passed by Parliament, and interpreted by the courts. Your concerns 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 concerns you raise regarding the need for an amendment to the Act to reduce the effect of this decision.
I appreciate the opportunity to respond to your concerns.
Yours sincerely,
Bill McCloskey
Assistant Commissioner
Policy and Legislation Branch
John Oulton
May 6, 2003
957-2098
2003-001609
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