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The Vancouver Sun (BC)
Sunday, January 19, 2003
Section: Money
Byline: Michael Kane

Tax myths and realities

Some groups and individuals claim you don't have to pay taxes or file an income tax return. Don't believe them, Michael Kane says.
 

VANCOUVER - A Vancouver couple who failed to file tax returns after attending seminars on opting out of the tax system have been fined a total of $3,000 in provincial court.

Their case draws attention to various tax myths promoted by groups and individuals who claim that people can lawfully refuse to pay taxes or file a return.

Dolton Cashmen was fined $2,000 after pleading guilty to failing to file his tax returns for the years 1995 and 1996, and Celeste Cashmen was fined $1,000 after pleading guilty to failing to file her return for 1997. The court ordered the couple to pay back taxes with interest.

"We both went into this together," Dolton Cashmen said in an interview. "We went to a couple of 'de-tax' seminars and it sounded good, so we tried it ourselves.

"There is a way of getting around paying taxes, but as a wage earner I can't legally opt out of the system. I have to pay my taxes because I receive benefits."

Canada Customs and Revenue Agency says people who do not file tax returns are cheating more than the tax department.

"They are hurting honest Canadians who end up having to pay more than their fair share," said Sharon Gill of the Vancouver Tax Services Office. "To ensure fairness for all taxpayers, the CCRA will continue to prosecute people who fail to file their tax returns."

She added that the CCRA will not prosecute taxpayers who owe money if they make full disclosure before the tax department starts any action or investigation against them. They will only have to pay the taxes owing, plus interest.

Here are eight widespread tax myths, and the truth behind them:

Myth: Federal income tax is unconstitutional because only the provinces can levy direct taxation.

Fact: The Constitution states that both levels of government can raise money "by a mode or system of taxation."

Myth: The income tax system is based on "voluntary compliance" because the government knows the law is unconstitutional and cannot be enforced.

Fact: The Income Tax Act and other laws provide a range of penalties for failure to pay taxes.

Myth: The Income Tax Act is unenforceable. (Some individuals claim not to have filed tax returns for years and say the government has been unable to force them to do so.)

Fact: People who fail to file a return as required are liable to a fine of $1,000 to $25,000 and up to 12 months' imprisonment, as well as having to pay their unpaid taxes with interest.

Myth: Resisting tax laws will force the CCRA to lower or even eliminate taxes.

Fact: The CCRA enforces tax laws passed by Parliament and provincial assemblies. It has no power to lower or eliminate taxes.

Myth: Some individuals are exempt from the Goods and Services Tax.

Fact: Actually, that one is true: Individuals with Indian status under the Indian Act may not be required to pay GST under certain conditions. But don't be fooled by "pay no GST" sales promotions. The vendor in these cases discounts the price so that the final, tax-inclusive cost is the same as the advertised, pretax price.

Myth: Common Law rights dating back to the Magna Carta make all taxes on individuals voluntary.

Fact: This myth has been rejected by Canada's courts.

Myth: You can make tax-free withdrawals from your self-directed RRSP by investing in private companies that in turn agree to lend you your own money.

Fact: If an RRSP is used as security for a loan, the value of the RRSP is added to the taxpayer's taxable income.

Myth: The CCRA uses e-mail to conduct "e-audits."

Fact: It does not. Fake questionnaires in the U.S. have been used to obtain confidential information that is then used to plunder bank accounts.

Source: CCR Web site, www.ccra.gc.ca

© Copyright 2003 The Ottawa Citizen

Edition: Final
Story Type: Crime, Finance

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