Agency says it reassessed Charles Shaker but it’s unclear whether it ever sent any notice
A British Canadian money manager who's been at odds with the Canada Revenue Agency for more than a decade wants a judge to toss out a nearly $5 million bill for back taxes, saying the CRA never sent it to him and now it's too late.
Whether Charles Shaker, 44, has to pay up may hinge on the proficiency of the CRA's mail department.
An auditor concluded in March 2017 that the former Ottawa-area resident owed $3.8 million in extra taxes for 2008 and 2009, according to court records, based on calculations that he had derived millions of dollars in undeclared personal benefits like car and condo fee payments from a financial planning and consulting company he owned. With penalties and interest, the amount has grown to $4.8 million.
But in addition to disputing those numbers,Shaker alleges the CRA omitted a basic step: It never properly sent him notice that it had reassessed him, or any indication of the amount it wanted him to pay. He's contesting the bill in Tax Court, asking a judge to set it aside.
"The CRA has proffered no evidence that it gave Mr. Shaker any notice whatsoever of the alleged tax debt," his lawyers wrote in a separate but related proceeding last year.
"The CRA is legally required to provide the debtor with proper notice…. Accordingly, there is not, and never has been, any valid tax debt owed by Mr. Shaker."
The CRA wouldn't comment directly on its dispute with Shaker, citing the ongoing court case and taxpayer privacy. It hasn't yet filed its response in Tax Court and has obtained three extensions to the normal deadline.
CBC News emailed Shaker and his tax lawyer Jeff Pniowsky last month and earlier this month requesting comment. Criminal defence lawyer Brian Greenspan replied a week later — saying he'd "been requested to respond" — and that Shaker "vigorously and unequivocally denies any suggestion of impropriety or wrongdoing and will take appropriate action with respect to any renewed attempt to tarnish his reputation by an innuendo of suspicion."
CRA could be 'out of luck'
The CRA does indeed have to send a notice of assessment or reassessment — within required time frames — before it can start trying to collect on any debt, says David Rotfleisch, a Toronto accountant and tax lawyer who isn't involved in the litigation.
"The CRA has the onus of proving, 'Yeah, we sent it,'" he said. "It's not a hard onus. They just have to show that someone mailed it," to the most recent address that the taxpayer provided.
Otherwise, "the CRA is out of luck."
Shaker appears to have landed on the CRA's radar in 2010 largely because his name was on a leaked list of 130,000 people and entities with ties to confidential accounts at HSBC's private bank in Geneva, according to court records from an earlier case.
A CBC News investigation last year found records in a number of tax-haven data leaks showing he at one point owned or was a director of several offshore companies in the British Virgin Islands and Barbados.
After the CRA spent more than five years looking into his dealings, it issued a notice of reassessment to Shaker on March 31, 2017, a tax officer says in a sworn statement filed in one of his earlier court cases.
But no such notice is included as an exhibit, and so far there's no indication in any of the three separate court disputes between him and the tax agency that it mailed one to his address in London.
Shaker says in his sworn statement that he never received anything and that the first time he learned of his supposed debt was last year, when the CRA moved to seize proceeds from two downtown Toronto penthouses that had just sold for a combined $4.3 million. The agency claimed Shaker had an interest in the properties that could be recouped toward his alleged debt. But a judge disagreed, finding that his name was only on title for the condos because he was one of several trustees for the real owner.
That said, the onus is on taxpayers to provide the CRA with an up-to-date mailing address, says tax litigator Jenny Mboutsiadis, of the Toronto-based firm Fasken. Mboutsiadis, speaking generally, says it's quite common for taxpayers to claim that they didn't receive a notice of reassessment — and therefore have time to object to it. But the CRA doesn't have to go far to rebut that.
"If the address on the reassessment is the same as the address on record with the CRA, then it's valid," she said. "The CRA will show a printout from its database showing the address they have for the taxpayer, and they'll show another printout showing where it was mailed."
Mishmash of addresses
In Shaker's case, the court records show that CRA personnel were mailing notices and requests to a mishmash of addresses in London after he moved there in late 2009. In his sworn statements, he says he received some of that correspondence but far from all of it, since often the addresses were out of date.
Shaker's lawyers don't hold back in their pointed criticism of the agency's efforts both in auditing him and in postal proficiency.
At one point, the CRA was addressing mail to Shaker's apartment building on Hertsmere Road in London but omitting the actual suite number, and the mail was being returned to Canada.
"The apparent oversight … is, at its worst, a deliberate omission, and at its best, sheer incompetence," the lawyers write in their court submissions.
In other correspondence filed in court, a lawyer for Shaker says: "There is a persistent lack of professionalism in the entire approach… We must question both the competence with which the audit is being carried out and the bias of those doing so."
The lawyers are trying to have Shaker's 2008 and 2009 reassessments set aside. A Tax Court judge will likely eventually rule whether the reassessments were properly sent, and if not, whether the CRA can exceed the normal three-year time limit for sending them.
Normally, the Income Tax Act requires the CRA to send out reassessments within three years of its initial assessment of someone's tax return. After that, it has to show special circumstances like fraud or misrepresentations due to neglect or carelessness.
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ABOUT THE AUTHOR
Senior Writer, CBC Investigations Unit
Zach Dubinsky is an investigative journalist. His reporting on offshore tax havens (including the Paradise Papers and Panama Papers), political corruption and organized crime has won multiple national and international awards. Phone: 416-205-7553. Twitter: @DubinskyZach Email email@example.com
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