In the recent decision of Guindon v. Canada, 2015 SCC 41, the Supreme Court of Canada ruled that administrative penalties assessed against Julie Guindon for false statements she made in the context of a leveraged donation program do not offend her constitutional rights.
The program involved donations of Turks and Caicos timeshare units to a registered charity at a fair market value greater than the cash payment made by the participants to acquire the timeshares. Ms. Guindon, a non-tax lawyer, provided an opinion letter on the tax consequences of the program on the basis of a precedent provided by the promoters of the program. The opinion stated that she had read the supporting documents despite the fact that she had not done so. She was also the president and administrator of the recipient charity of the donated timeshares and signed tax receipts that were issued to the participants. The total receipted amount was approximately $3.9M.
The donation scheme was determined to be a sham: no timeshare units were created and no transfers from the donors to the charity occurred. The Canada Revenue Agency (CRA) assessed third-party planner penalties under section 163.2 of the Income Tax Act (Canada) against Ms. Guindon for each of the tax receipts issued in excess of $540,000.
Ms. Guindon appealed the CRA's assessment and argued, in part, that section 163.2 creates a criminal offense and therefore, she had been deprived of various Canadian constitutional procedural safeguards that are afforded to persons who are charged with a criminal offense.
The Supreme Court of Canada upheld the penalties and concluded that section 163.2 is a noncriminal provision that is essential in securing compliance with the administrative scheme of the Income Tax Act (Canada). This decision affirms that tax planners and preparers, and even directors of registered charities, could face extremely high penalties for failing to comply with the requirements of the Income Tax Act (Canada).