Crown Appeals Tax Court Decision in Guindon – Are Advisor Penalties “Criminal”?

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On October 31, 2012, the Crown filed a Notice of Appeal with the Federal Court of Appeal against the judgment of the Tax Court of Canada in Julie Guindon v. The Queen (2012 TCC 287). In that decision, the Tax Court held that the advisor penalties imposed under section 163.2 of the Income Tax Act were criminal in nature, and therefore attract constitutional protection under the Canadian Charter of Rights and Freedoms. The Court also held that the standard of “culpable conduct” in section 163.2 was a higher standard than “gross negligence” as the latter has been interpreted in the context of subsection 163(2) penalties. For a more detailed review of the Tax Court decision, see: http://www.canadiantaxlitigation.com/crime-and-no-punishment-guindon-v-the-queen.

In particular, the Crown has appealed the Tax Court’s finding that the Charter applies to section 163.2 penalties, and the determination of the Court that “culpable conduct” is a different standard than “gross negligence”.

The advisor, who was found to have engaged in culpable conduct (and therefore would have been subject to the assessed penalty had the court not found the penalty to be criminal in nature) has yet to file a cross-appeal on that point.

Stay tuned to www.canadiantaxlitigation.com for further updates on this important appeal.