The taxpayer provided a legal opinion to the participants in a charitable donation "scheme [which] was a sham" (para. 8) on the tax consequences to them, in which she falsely represented that she had reviewed the relevant documentation. In her capacity of president of a registered charity which was involved in the scheme, she signed tax receipts. The Minister assessed the taxpayer for penalties of $546,747 under s. 163.2(5), calculated as 50% of the purported federal tax savings of all 134 participants in this program.
The Tax Court had found that her conduct was "culpable" under s. 163.2, but that as s. 163.2 created an offence, her assessment should be vacated as she had not been given the rights guaranteed by s. 11 of the Charter.
The Court exercised its discretion to consider the Charter question before it even though notice of that question had not been given to the federal and provincial Attorneys General in the Court proceedings below. However, s. 163.2 did not create an offence for purposes of s. 11. Rothstein J noted (at para. 62) that the purpose of proceedings by CRA to impose the s. 163.2 penalty "is to promote honesty and deter gross negligence, or worse, on the part of preparers, qualities that are essential to the self-reporting system of income taxation assessment," found that such proceedings do not "bear…the traditional hallmarks of a criminal proceeding," i.e., "the laying of a charge, an arrest, a summons to appear before a court of criminal jurisdiction, and…a criminal record" (para. 63), stated that although "if the amount at issue is out of proportion to the amount required to achieve regulatory purposes, this consideration suggests that it will constitute a true penal consequence" (para. 77), "the magnitude of penalties under s. 163.2(4) is directly tied to the objective of deterring non-compliance with the ITA" (para. 84) and found after referencing her "dishonesty" and "complete disregard of the law" that "the magnitude reflects the objective of deterring conduct of the type she engaged in" (para. 88).
See summary under s. 163.2(1) – culpable conduct.