Canadians may keep financial secrets from their spouses, but not from the Canada Revenue Agency, the Tax Court has ruled.
Blacklock's Reporter says the decision came in the case of a Calgary mining engineer who maintained a secret Swiss bank account to conceal funds from his wife.
“His sole purpose in having the Swiss bank account was to hide funds from his wife,” wrote Judge Edward Cook. However, that was no justification for failing to disclose it to tax authorities, he ruled.
The taxpayer had appealed reassessments and penalties spanning 27 years related to $420,000 deposited in a Swiss numbered account. Court records showed he conducted transactions without paperwork, relying on telephone instructions to buy and sell investments.
“The T1 personal income tax return has a question asking if the taxpayer holds foreign property exceeding $100,000,” wrote Cook. “He knew he owned foreign property above that threshold at all times. Even a cursory reading of the question should have made the issue clear.”
The judge rejected the taxpayer’s argument that he had misunderstood Canada’s tax laws, calling foreign income disclosure “one of the foundational rules of Canadian income tax law.”
The taxpayer had never consulted anyone about reporting foreign assets, which the court ruled demonstrated “neglect or carelessness,” even if his intent was only to keep the account secret from his wife.
Under the Income Tax Act, auditors typically review only the last three years of returns and collect unpaid debts within ten years. However, reassessments can go back much further if officials suspect “carelessness or willful default” in tax filing.
In a 2014 case, the Tax Court upheld a reassessment dating back nearly 30 years after a Manitoba widow discovered her late husband had failed to file their tax returns since 1986.
Parliament extended the reach of tax audits even further in 2023, passing Bill C-47, which allows GST audits dating back to 1991.
The Canadian Bar Association opposed the measure, warning the Senate finance committee that taxpayers “have no way of knowing if their past transactions will be subject to additional taxes in the future.”
