Why Joint and Several Liability For Income Tax Liens

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Why Joint and Several Liability For Income Tax Liens

Joint and several liability, like income tax liens, can arise from co-signing a bank loan. However Tage Kendall owned his car free and clear. Royal Bank still seized it. He is suing the bank.

Joint and several liability, like income tax liens, can arise from co-signing a bank loan. But Tage Kendall owned his car free and clear. Royal Bank still seized it. He is suing the bank. (Martin Diotte/CBC)

Summary

Joint and several liability for income tax liens comes from applying for a Social Insurance Number. This means not applying for one is never having joint and several liability. Or perhaps rescind that number?

Background

Canada’s Income Tax Act (“ITA”) makes individuals have joint and several liability[1] for income tax liens and debts. But why is that? How is that even possible? Doesn’t that violate my human rights? After all, it doesn’t sound fair!

Definition – Joint and Several Liability

Duhaime’s online legal dictionary defines “joint and several liability”[2] as:

Liability of more than one person for which each person is liable to pay back the entire amount of a debt or damages.

For example, joint and several liability arises from co-signing a bank loan.

Tage Kendall’s Bank Lien

RBC admits it made a mistake when it instructed the Surrey repossession company to seize the car. The bank says when it realized the error, it returned the car to the owner. (Martin Diotte/CBC)

RBC admits it made a mistake when it instructed the Surrey repossession company to seize Kendall’s car. The bank says when it realized the error, it returned the car to him. (Martin Diotte/CBC)

Tage Kendall is suing Royal Bank for repossessing his car. He’s never had a bank account there, or borrowed money from them. He owns his car free and clear.

According to this CBC news story, the repo firm says “the basis for the seizure was a default on a debt by a person who named him as a co-signer on the Subaru.” One small problem: “Kendall says he was not a co-signer.”

Co-signing Creates Joint and Several Liability

Hilary Clinton thinks it's funny U.S. co-signing parents, and students, can no longer discharge student loans through bankruptcy.

Hilary Clinton thinks it’s funny U.S. co-signing parents, and students, can no longer discharge student loans through bankruptcy.

The CBC news story shows co-signing a bank loan is one way to have joint and several liability. Another is parents co-signing student loans. They often need to co-sign because students usually have few assets. Also, some may be underage and so cannot be held legally liable. (However, in the U.S., Hilary Clinton was instrumental in passing a law making it no longer possible to discharge student loans through bankruptcy.)

Income Tax Lien

Canadian income tax liens also have joint and several liability.

Joint and Several Liability: From SIN Application

Two things create joint and several liability for income tax liens. The first is applying for a Social Insurance Number.

Applying for a SIN Card

You are told that you need to apply for a SIN card[4] first before you can access many federal benefits. However, the SIN application, Form NAS2120[5], also warns you that,

Participation is voluntary… The information may also be shared … for the administration and enforcement of the legislation….

But it does NOT tell you the second thing: how, for income tax liens, “the administration and enforcement of the legislation…” makes you jointly and severally liable. To do that, we use Apu’s Theory, our income tax research.

Joint and Several Liability: Due to Benefits from Public Money

The law[6] says,

public money means all money belonging to Canada received or collected by the Receiver General

Consolidated Revenue Fund means the aggregate of all public moneys that are on deposit at the credit of the Receiver General

Apu’s Theory shows all benefits listed on a T1 are paid from, and to, public money, the Consolidated Revenue Fund. Confirming this is easy. Page 4 of CRA’s 2017 T1 form[7] says:

By providing my banking information I authorize the Receiver General to deposit in the bank account number shown below any amounts payable to me by the CRA …”

In addition, up to 2013[8], the T1, page 4, says:

Attach to page 1 a cheque or money order payable to the Receiver General …”

This makes everyone who has applied for a SIN card (and received benefits listed on a T1) jointly and severally liable for income tax liens. This is because that public money pool, the Consolidated Revenue Fund, affects all such people. Therefore, it becomes a trust and/or agency relationship with fiduciary duties and liabilities, and not a contractual relationship.

Other Joint and Several Liability for Income Tax Liens

Bank Tellers

That is how the law makes a bank teller have joint and several liability for an account holder’s income tax liens. It’s how a CRA garnishee order, aka Requirement to Pay works.

Federal Spouses

That is also how the ITA makes individuals not at arm’s length[9], such as federal spouses, also have joint and several liability.

In short, it is the type of income (being Canada’s public money) that makes such people have joint and several liability. (Is that why the ITA does not define income?) Legally, it’s similar to co-signing a bank loan.

Conclusion

Canada hides how it makes you have joint and several liability for income tax liens. The answer seems to be the ITA deems us as handling Canada’s public money instead of our private property.  In conclusion, being able to make taxpayers have joint and several liablity for income tax liens corroborates Apu’s Theory.

 

  1. Canada’s Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.), Section 159(1), https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-1-5th-supp/latest/#sec159subsec1
  2. http://www.duhaime.org/LegalDictionary/J/JointandSeveralLiability.aspx
  3. Put into text body.
  4. Canada no longer issues SIN Cards, but just a letter with the 9-digit number.
  5. https://catalogue.servicecanada.gc.ca/apps/EForms/pdf/en/nas-2120.pdf
  6. From Canada’s Financial Administration Act, R.S.C., 1985, c. F-11, http://laws-lois.justice.gc.ca/eng/acts/F-11/page-1.html#docCont
  7. https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years.html
  8. https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/5000-r/5000-r-13e.pdf
  9. ITA s.160: http://laws-lois.justice.gc.ca/eng/acts/I-3.3/page-187.html#s-160

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