The Canada Revenue Agency's Voluntary Disclosure Program
(the "Program") encourages taxpayers to voluntarily
disclose unreported income. The Program promises that a taxpayer
who voluntarily discloses previously unreported income will not be
prosecuted for tax evasion and will not have any civil penalties
imposed if the Agency's four Program conditions are met. The
Agency's four Program conditions are: (1) the disclosure must
be voluntary; (2) the disclosure must be complete; (3) the
disclosure must involve the application, or potential application,
of a penalty; and (4) the disclosure must include information that
is at least one year past due.
In many cases, the Minister will not exercise his discretion to
accept a taxpayer's disclosure under the Program citing any
type of enforcement action. The Agency appears to have defined
"enforcement action" as any real or contemplated, direct
or indirect, action that could have revealed the information that
the taxpayer sought to disclose under the Program. In the Federal
Court's Reasons for Judgment in Amour International Mines
d'Or Ltée ("AIMO") v. Attorney
General of Canada, the Court considered the Minister's
decision to deny AIMO's disclosure on the basis that, prior to
AIMO's disclosure, the Agency initiated some enforcement
action. For present purposes, the salient facts in AIMO are as
AIMO applied for judicial review of the Minister's decision
to not exercise his discretion to accept AIMO's disclosure
under the Program. AIMO argued that the Agency's alleged
enforcement action was not sufficiently linked to the subject
disclosure. Counsel for the Respondent submitted that the
Minister's decision was reasonable on the basis that the Agency
initiated an audit of a corporation with which AIMO was associated
("Greymount") and that the Greymount audit constituted
enforcement action that would have revealed the information that
AIMO sought to disclosure under the Program.
The Court noted that the Respondent's argument did not
appear to be supported by any evidence or legal inference capable
of establishing that the Greymount audit would have, in fact,
uncovered the AIMO information. In these circumstances, the Court
asked counsel for the Respondent to explain how the Agency would
have allegedly uncovered the AIMO information. In response, counsel
for the Respondent posited that that "mere mortals would find
it difficult to understand the thought process of a tax
The Court did not accept the Respondent's argument and
supported its conclusion referring to Lord Macmillan Reasons for
Judgment in Jones v. Great Western Railway Co.. In
Jones Lord Macmillian held that "[t]he dividing line
between conjecture and inference is often a very difficult one to
draw. A conjecture may be plausible but it is of no legal value,
for its essence is that it is a mere guess. An inference in the
legal sense, on the other hand, is a deduction from the evidence,
and if it is a reasonable deduction it may have the validity of
legal proof". The Court held that – although the
standard of review is reasonableness – the Minister could
not purport to justify his decision with mere conjecture.
Unsurprisingly, the Court granted AIMO's application for
We believe that AIMO represents a victory for "mere
mortals" providing support for the position that the Minister
should adopt a narrower definition of enforcement action and that
the Minister is required establish a real connection between the
enforcement action and the tax information disclosed.
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.
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