Federal Appeal


Income tax

Administration and enforcement

Taxpayer who fails to pay tax debt pending determination of related case not normally entitled to relief from interest

Taxpayer entered into departure trade transaction with bank before move to Malta in 1998, creating interest deduction of over $47 million to reduce tax arising on emigration. Minister reassessed taxpayer under Income Tax Act, taking various positions in multiple reassessments that included denial of interest deduction and increase of capital gain on basis that he had not terminated Canadian residency. Litigation ensued, with taxpayer’s appeal held in abeyance pending outcome of similar case. After Minister’s position was upheld in similar case, taxpayer settled his claim twelve years after reassessment and paid total tax debt of $38,067,818. Taxpayer’s request for cancellation of interest was refused. Taxpayer’s application for judicial review was dismissed. Taxpayer appealed. Appeal dismissed. Decision of Minister’s delegate to deny relief was reasonable. Taxpayer did not establish that inconsistent reassessments were extraordinary circumstances or outside his control, as CRA’s approach did not prevent him from beginning to address his tax debt. Taxpayer was given advance warning of second reassessment that dramatically increased his tax liability and he could have taken action if he was concerned about interest running. Reassessments did not provide basis for taxpayer’s failure to make payments or forward requested information to CRA. Taxpayer did not establish that there was undue delay by Crown or CRA. Precedent holding that taxpayer who knowingly failed to pay tax debt pending determination of related case could not normally obtain relief from paying interest applied, as quantum alone did not remove this from normal situation where taxpayer had options available to reduce interest exposure. In light of Minister’s discretion under s. 220(3.1) of Act and delegate’s consideration of multiple factors, there was no error in finding decision reasonable.

Walsh v. Canada (Attorney General) (2018), 2018 CarswellNat 8359, 2018 FCA 229, Gauthier J.A., Stratas J.A., and David G. Near J.A. (F.C.A.); affirmed (2017), 2017 CarswellNat 1809, 2017 CarswellNat 6790, 2017 FC 411, 2017 CF 411, James Russell J. (F.C.).

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