Deem – How Canada’s Laws Presume You Guilty

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Deem – How Canada’s Laws Presume You Guilty

Deem is a powerful word in law. TV and movies show deeming innocence until proven guilty. That applies mainly to criminal matters. In civil (non-criminal) matters, Canadian law can deem you guilty until you prove otherwise. An example could be not reporting worldwide income, such as a stock trading account that you may have offshore.

Deem is a powerful word in law. TV and movies deem people innocent until proven guilty. That applies mainly to criminal matters. In civil (non-criminal) matters, Canadian law can deem you guilty until you prove otherwise. Picture of Judge Jed S. Rakoff, who wrote the book, “Why Innocent People Plead Guilty”. Judge Rakoff says plea bargaining can be unfair to innocent people. Picture credit:
(Jefferson Siegel/New York Daily News)

Summary

Deem is a powerful word in law. TV and movies deem people innocent until proven guilty. That applies mainly to criminal matters. In civil (non-criminal) matters, Canadian law can deem you guilty until you prove otherwise [1]. An example could be not reporting worldwide income [2], such as a stock trading account that you may have offshore. Canada’s tax laws deem you owe income tax on that undeclared offshore income. This article explains how they can do this. (This earlier blog article explains how Canadian law can tax your worldwide income).

Deem – the Legal Definition

Duhaime’s online law dictionary defines deem as:

To accept a document or an event as conclusive of a certain status in the absence of evidence or facts which would normally be required to prove that status.

Background

Outside Quebec, common law principles forms the basis of Canada’s legal system. This is due to Canada formerly being part of the British Commonwealth. One principle is deeming innocence until proven guilty. Another is court cases must follow higher court decisions[3]. The Supreme Court of Canada (SCC) is the highest court in Canada. This means all Canadian courts must follow SCC decisions.

Deem is on Artificial Persons

Since deeming innocence until proven guilty is a common law right, deeming guilt cannot be on an individual with inalienable human rights (i.e., a private person). However, an officer (you holding an office) is not a private person. The law sees officers as artificial persons. Deeming guilt on artificial persons, such as officers, is perfectly legal.

Deem in Case Law: Johnston v MNR

The landmark case of Johnston v. MNR [4] was decided in 1948. 329 other cases cite this case. The Supreme Court of Canada said (at page 490) the Minister of National Revenue’s (“MNR”) is allowed to deem (make assumptions) in their assessment:

since the taxation is on the basis of certain facts and certain provisions of law either those facts or the application of the law is challenged. Every such fact found or assumed by the assessor or the Minister must then be accepted as it was dealt with by these persons unless questioned by the appellant … the onus was his to demolish the basic fact on which the taxation rested.

Deem in the Legal System

In 1938 the United States replaced their common law pleading system with a notice pleading system called the Federal Rules of Civil Procedure (FRCP). The FRCP also merged the rules for cases in law and in equity. Quoting Wikipedia:

The FRCP is based upon a legal construction called notice pleading, which is less formal, is created and modified by legal experts, and is far less technical in requirements. In notice pleading, the same plaintiff bringing suit would not face dismissal for lack of the exact legal term, as long as the claim itself was legally actionable. The policy behind this change is to simply give “notice” of grievances and to leave the details for later in the case.

In English, Please!

In plain English, FRCP allows prosecutors to charge people with offences without “the exact legal term” (i.e., no definition of words needed) and through “far less technical requirements” (i.e. through deeming without any hard evidence). As a result, innocent people, such as the Central Park Five, often plead guilty in exchange for lighter sentences. This is called plea bargaining. In reality, plea bargaining often is agreeing to so-called “facts” that have nothing to do with the truth. That is why New York judge Jed S. Rakoff (pictured above) authored, “Why Innocent People Plead Guilty”. In Canada, that is why National Post crime reporter Christie Blatchford wrote, “Life Sentence – How I Fell Out of Love with the Canadian Justice System”.

Tax System Deems Income Amount and Status

In “Federal Income Tax Litigation in Canada”, tax lawyer Christina Tari says the Tax Court of Canada (civil litigation) uses a fact-based pleading system [5].(Click here to download the page).

We saw from Johnston v MNR how the MNR can deem virtually anything as so-called “facts” (assumptions)[6]. First, the MNR always deems you received a certain amount of ‘income’. Second, Canada’s Income Tax Act (“ITA”) does not define what ‘income’ means (“lack of the exact legal term”). Apu’s Theory concludes the ITA deems your ‘income’ status, which starts in your hands as your private property, to be Canada’s “public money” that belongs to the ITA “office”. You then must pay a privilege access fee (income tax) for accessing that office’s privileges. This second deemed “fact” is obfuscated. The statutes below explain how.

Deem in Canadian Statutes

Deem in Canada’s Income Tax Act

The ITA, section 6(3) says,

an amount received by one person from another … shall be deemed … to be remuneration for the payee’s services rendered as an officer

In other words, Canada’s ITA gives the MNR authority to deem you are receiving taxable “public money” income while holding the ITA “office” (as an ITA “officer”). This is because any office and its officer are conceptually divisible but legally indivisible.

A CPA (and former CRA auditor of 17 years) says his professional accountant association and CRA never taught or explained to him what Section 6(3) means. This is not just hidden from you. It seems many professional accountants and CRA officers also do not know this.

Deem in Canada’s Financial Administrative Act

Canada’s Financial Administrative Act (“FAA”) regulates income tax paid into the Consolidated Revenue FundThe FAA, s.82 says,

Books, etc., property of Her Majesty

82 All books, papers, accounts and documents kept or used by, or received or taken into the possession of, any officer or person who is or has been employed in the collection or management of the revenue or in accounting for the revenue, by virtue of that employment, shall be deemed to be chattels belonging to Her Majesty, and all money or valuable securities received or taken into the possession of that officer or person by virtue of his employment shall be deemed to be money and valuable securities belonging to Her Majesty.

Apu’s Theory concludes the law deems you collecting or receiving Canada’s “public money” as income while holding an ITA “office”. The FAA, s.82 deems all books, papers, bank accounts, documents and money of such an officer as Her Majesty’s chattels (property). This gives CRA, as agent of Her Majesty, the legal authority to look at all books, documents and bank accounts since the FAA deems them “belonging to Her Majesty.”

Deem in Canada’s Interpretation Act

Canada’s Interpretation Act, s.25(1), says this about documentary evidence:

25 (1) Where an enactment provides that a document is evidence of a fact without anything in the context to indicate that the document is conclusive evidence, then, in any judicial proceedings, the document is admissible in evidence and the fact is deemed to be established in the absence of any evidence to the contrary.

In plain English, the FAA, s.82 “provides that” accounting books or records are “conclusive evidence” you are receiving taxable “public money” income while holding the ITA “office” as an ITA “officer”. That is how books and records in a tax evasion trial become “conclusive evidence” of taxable income. Those books and records do not even have to say the income is “public money” for the ITA “office”.

Conclusion

Case law, legal process, and statutes all give the MNR the power to deem you receiving taxable “public money” income as an ITA “officer”[7] . Moreover, the law does this without having to define what ‘income’ means for the ITA (or its status). In conclusion, this is how Canadian law can deem you guilty of not reporting all your worldwide income, and also deem such income status as taxable as Canada’s “public money”.

This is a Cornerstone Article. Find the others by clicking on it within “Tags” near the top right hand corner of this article.

  1. [1] The legal term is “reverse onus”.
  2. [2] Apu’s Theory concludes tax evasion is both a crime (criminal matter) and a tort (civil matter). That is why for the crime of tax evasion, you are presumed in Provincial Court as innocent until proven guilty, but later in Tax Court (civil matter), you are deemed guilty unless you can prove otherwise.
  3. [3]The legal term is “stare decisis.”
  4. [4] Johnston v. Minister of National Revenue, [1948] SCR 486, 1948 CanLII 1 (SCC).
  5. [5] Federal Income Tax Litigation in Canada, LexisNexis, Chapter 6, Pleadings, paragraph 6.95: “The Tax Court rules are premised on a fact-based pleading system. The policy behind a fact-based system of pleading is disclosure”.
  6. [6]This is how the MNR can assess outrageous amounts without any truthful basis. They can “just leave the details for later” (wait for you to demolish the MNR’s assumptions).
  7. [7]This is also how the MNR can bring new “facts” (assumptions) into court that were not used in the reassessment. See Anchor Pointe Energy Limited v. The Queen, 2002 TCC 2071 (T.C.C.), affirmed [2003] F.C.J. No. 1045 (C.A.).
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