The Supreme Court of Canada has dismissed the appeal of the taxpayer and determined that the tax advisor penalty in section 163.2 of the Income Tax Act is administrative in nature.

The Court's 4-3 decision in Guindon v. The Queen (2015 SCC 41) (Docket No. 35519) has far-reaching implications for Canadian taxpayers and their professional advisors.

While the majority of the Court (Rothstein, Cromwell, Moldaver and Gascon) exercised its discretion to consider the taxpayer's constitutional arguments despite the taxpayer's failure to provide notice of constitutional question, the Court held that the penalty under section 163.2 was not criminal in nature:

[89] We conclude that the proceeding under s. 163.2 is not criminal in nature and does not lead to the imposition of true penal consequences. We agree with Stratas J.A., writing for the Federal Court of Appeal, that "the assessment of a penalty under s. 163.2 is not the equivalent of being 'charged with a [criminal] offence.' Accordingly, none of the s. 11 rights apply in s. 163.2 proceedings": para. 37.

[90] Finally, we note that even though s. 11 of the Charter is not engaged by s. 163.2 of the ITA, those against whom penalties are assessed are not left without recourse or protection. They have a full right of appeal to the Tax Court of Canada and, as the respondent pointed out in her factum, have access to other administrative remedies: R.F., at para. 99; see, e.g., ITA, s. 220(3.1).

In a concurring opinion that dissented on the issue of the notice requirement, Justices Abella, Karakatsanis and Wagner held that the taxpayer's failure to provide notice of constitutional question in the Tax Court or Federal Court of Appeal was fatal to her appeal.

See our previous posts on the Guindon case here and here.

For more information, visit our Canadian Tax Litigation blog at www.canadiantaxlitigation.com

About Dentons

Dentons is a global firm driven to provide you with the competitive edge in an increasingly complex and interconnected marketplace. We were formed by the March 2013 combination of international law firm Salans LLP, Canadian law firm Fraser Milner Casgrain LLP (FMC) and international law firm SNR Denton.

Dentons is built on the solid foundations of three highly regarded law firms. Each built its outstanding reputation and valued clientele by responding to the local, regional and national needs of a broad spectrum of clients of all sizes – individuals; entrepreneurs; small businesses and start-ups; local, regional and national governments and government agencies; and mid-sized and larger private and public corporations, including international and global entities.

Now clients benefit from more than 2,500 lawyers and professionals in 79 locations in 52 countries across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia and the CIS, the UK and the US who are committed to challenging the status quo to offer creative, actionable business and legal solutions.

Learn more at www.dentons.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Specific Questions relating to this article should be addressed directly to the author.