Why taking the tax man to court can come back to haunt you
By now, most Canadians will have filed their 2016 tax returns (self-employed individuals and their spouse or partner still have until June 15 to file). That means that you have likely received your Notice of Assessment from the Canada Revenue Agency. If you disagree with the assessment, you can file an objection and, if ultimately, that isn’t resolved in your favour, you are entitled to your proverbial “day in court” and you can appeal to the Tax Court of Canada.
In its 2015-16 Departmental Performance Report released last fall, the CRA disclosed that, last year, it received 81,109 tax disputes. It resolved 96,098 disputes (some carried over from prior years) and 5,197 appeals were filed before the Tax Court.
But before you go running off to court, it’s important to keep in mind that the court is an open forum. Not only can the public generally attend your trial — a notice of all Tax Court cases, along with hearing dates and locations, searchable by a taxpayer’s name, is easily available online — but, as the court’s website warns, “if reasons for judgment are issued in your appeal, they may be published on the Internet and/or in other publications, as the public has a right to this information.”
If you’ve done something particularly dodgy on your tax return that you’re ashamed of or might be embarrassed if your employer, a co-worker, client, friend, relative or even ex-spouse were to see, you may want to think twice about whether the dollars involved in your appeal are worth the public exposure.
Take the recent case, decided last week, in which a taxpayer brought a motion requesting a publication ban of the Tax Court’s reasons contained in a prior case involving the taxpayer on the basis that if the reasons for judgment were published on the Court’s website, “the personal information and unflattering descriptions of his business acumen, contained in those reasons, would attract the attention of criminals resulting in financial and physical harm to himself, his family and the public.” He also requested a ban of any reasons published for this motion.
The prior case, which the taxpayer lost, involved the disallowance of various business expenses against the taxpayer’s employment income in 2010 and 2011. The judge issued his reasons on June 10, 2016, and dismissed the appeal because the alleged business activities were not carried on in a sufficiently commercial-like manner to constitute a source of business income for which business losses (and expenses) could be claimed.
A few days later, the taxpayer called the Court and sent a one-page fax asking the Court to “not put any info or details re this matter (or) my name on the Tax Court Website and the Internet.” The Court denied this request.
A second request for a publication ban was made on June 22, 2016, in which the taxpayer claimed that since his name became listed on the Court’s website, “unknown individuals had been contacting him to find out more information about him.” He claimed that if the reasons respecting his case were published on the website, “these individuals could then access personal information to perpetrate crimes against him.” If this were to occur, the taxpayer threatened to “notify the media, file a complaint with the RCMP and commence legal action against (the) Court.” The Tax Court then advised him to submit this request by way of a motion, which he did.
The judge hearing the motion reviewed the appropriate test for granting publication bans and sealing orders, which are generally in contradiction of the “open court principle” which “forms the hallmark of a democratic society and a cornerstone of the common law.”
In a prior case, the Supreme Court of Canada wrote that “Public access to the courts guarantees the integrity of judicial processes by demonstrating ‘that justice is administered in a non-arbitrary manner, according to the rule of law.’… Openness is necessary to maintain the independence and impartiality of courts. It is integral to public confidence in the justice system and the public’s understanding of the administration of justice. Moreover, openness is a principal component of the legitimacy of the judicial process and why the parties and the public at large abide by the decisions of courts.”
A taxpayer who wants to limit openness to court proceedings and freedom of expression has to prove that such a limitation is justifiable, given the circumstances of their case. The courts have found that purely personal risks, such as negative media publicity, damage to personal reputation, embarrassment or potential economic harm, are not sufficient to dislodge the open court principle. Citing a prior case, the judge wrote that “the personal concerns of a litigant, including concerns about the very real emotional distress and embarrassment that can be occasioned to litigants when justice is done in public” are not, on their own, sufficient grounds to justify a publication ban.
The taxpayer argued that his sole intention for requesting a publication ban was to protect himself, his family and the public from financial and physical harm that could result from the disclosure of personal information. Furthermore, he specifically denied that the motion was motivated by a desire to avoid potential embarrassment from publication of the Tax Court’s decision.
But the judge wasn’t buying it and felt that the taxpayer’s concerns were “purely personal” and that he “failed to establish a direct nexus between the risk for identity theft and fraud and the availability of his decision on this Court’s website.”
The judge refused to grant the publication bans, which is why you’re able to read about it today.