In a Taxpayers' Alert issued in March 2007, the Canada Revenue Agency indicated
Where You Live Matters:
"The Canada Revenue Agency (CRA) is warning Canadians to properly indicate their province or territory of residence on their tax returns. The CRA catches and fines people who attempt to evade taxes by filing a tax return claiming to live in one province but who actually reside in another."
In R. v. Stubbs, the Canada Revenue Agency demonstrated this resolve by prosecuting two taxpayers under the British Columbia Income Tax Act, alleging that they had falsely claimed to be residents of Alberta (to access the lower provincial rate) when they were actually residents of British Columbia. This prosecution was in addition to the civil reassessments for the tax difference and the civil penalties on that difference.
The two defendants were spouses who had been separated for a number of years, but each received a large dividend in 2004 from a family company.
Ms. Stubbs undertook a move to Alberta shortly before December 31, 2004, selling her home in West Vancouver, and renting a furnished apartment in Calgary. She returned to British Columbia in February 2005 and bought a new home shortly thereafter. Based on her testimony which was found credible, the Court rejected the Crown’s argument that her purported move to Alberta was a sham for tax purposes. Although Ms. Stubbs’ move to Alberta lasted only a few months and she was physically only present there for a few weeks (including on December 31, 2004), she took significant steps to change her residence, and it was based on genuine family ties (her daughter’s family lived in Alberta), even though she testified that a tax motivation was a motivating force in her change of residence. The British Columbia Provincial Court acquitted Ms. Stubbs, finding that there was a genuine issue as to where she was resident on December 31, 2004 and that, accordingly, the Crown had not established her liability for tax beyond a reasonable doubt as a B.C. resident.
Mr. Stubbs did not move to Alberta. The Court found beyond a reasonable doubt that Mr. Stubbs’ principal place of residence on December 31, 2004 was British Columbia and, therefore, he made a false statement on his 2004 tax return.
However, he was also acquitted on the basis that the Crown also had to prove fraudulent intent, a necessary element for conviction. The Court found that although Mr. Stubbs was extremely careless in not taking steps to determine whether he met the requirements for Alberta residency and in not reading his tax return, it fell short of fraudulent intent as there was no evidence of any intent to hide his income or his Vancouver address.
This is the first reported decision with respect to prosecutions under a provincial Income Tax Act for falsely claiming residency in a different province