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Can. Sup. Crt. Ruling to Affect Canadian Taxes/Student Loans

 
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Manner of Speaking



Joined: 09 Jan 2003

PostPosted: Fri Mar 07, 2003 5:26 am    Post subject: Can. Sup. Crt. Ruling to Affect Canadian Taxes/Student Loans Reply with quote

The Canadian Supreme Court made a ruling Thursday that could significantly affect the income tax and student loan situation of Canadian teachers working in Korea. Essentially the ruling sets a six-year time limit for Canada Customs and Revenue to collect taxes in arrears. Analysts believe the ruling could be extended to include student loans more than six years old as well.

Full story is available on the Toronto Globe and Mail Website: http://www.globeandmail.com/servlet/story/RTGAM.20030307.wxscoc0307/BNStory/National

Quote:
Tax ruling costs Ottawa $1.26-billion


By KIRK MAKIN
From Friday's Globe and Mail


The federal government lost $1.26-billion in uncollected taxes in an instant Thursday, when the Supreme Court of Canada ruled in favour of a Vancouver stock promoter who defaulted on his back taxes. The estimated loss could easily mount, based on the court ruling that governments, like citizens or corporations, have a limited period to commence collecting debts. It not only means that Joe Markevich, of Vancouver, no longer has to pay nearly a million dollars in tax and interest, but that more than 52,000 other tax defaulters are in the same happy position.

The court said it makes no sense to allow a government to "sleep on its rights." It set a six-year limit for them to start collecting their debts. Ian Worland, the winning lawyer in the case, said in an interview Thursday that the implications of the ruling are even more staggering than the immediate loss to federal coffers. He said that by extension, the six-year limitation period is likely to apply to any type of royalty, student loan, GST payments, fee or fine owed to the government.

The legal principle underlying the ruling boiled down to a common saying: If you snooze, you lose.

"The government cannot wait forever and then suddenly come back to say you owe money," said Edwin G. Kroft, another lawyer who acted in the case. "This is a very big story for Canadians, many of whom may not have paid their taxes. The Supreme Court has shown that the government is just like any other creditor: If you don't collect, you are barred from collection." Government lawyers arrived at the estimated loss of $1.26-billion last year when seeking leave to appeal a Federal Court of Appeal ruling that went against them. They based it on 52,666 tax cases similar to Mr. Markevich's in six provinces for which there were statistics.

The crux of Thursday's ruling revolved around the fact that the Income Tax Act does not mention a limitation period. Mr. Worland argued that the broad limitation periods in other statutes ought to apply to the Income Tax Act as well. The court agreed. "If the minister makes no effort to collect a tax debt for an extended period, at a certain point a taxpayer may reasonably come to expect that he or she will not be called to account for the liability, and may conduct his or her affairs in reliance on that expectation," Mr. Justice Jack Major said. "As well, a limitation period encourages the minister to act diligently in pursuing the collection of tax debts."

Mr. Markevich, 58, dutifully filed tax returns in the early 1980s but failed to pay the amount he owed. By the time Revenue Canada came after him in 1986, he had fallen into financial hardship. He lost his home, and then could pay no more.

Revenue Canada wrote his debt off as uncollectible. However, it turned around in 1998 and attempted to revive the claim. "There is no authority to support the proposition that the Income Tax Act is a complete code that cannot be informed by laws of general application," Judge Major said. "The ITA does not operate in a legislative vacuum.
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howie2424



Joined: 09 Jan 2003

PostPosted: Sun Mar 09, 2003 3:44 pm    Post subject: Reply with quote

thanks for the link, very interesting.
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Captain Obvious 2.0



Joined: 09 Jan 2003

PostPosted: Mon Mar 10, 2003 4:07 am    Post subject: Re: Can. Sup. Crt. Ruling to Affect Canadian Taxes/Student L Reply with quote

Manner of Speaking wrote:
Essentially the ruling sets a six-year time limit for Canada Customs and Revenue to collect taxes in arrears.


Essentially, that's incorrect.

What the court ruled was that the government must make the same effort as any individual. Let's say I lend you five million Won to put down on a key deposit. Every couple years I say "Hey, about that money, you going to pay me back now?", that's sufficient to keep the debt from expiring. We could do conversation every two years for twenty years. The debt is still valid.

Now let's say I also lend another person five million Won for his apartment. Only I never see him again for twenty years. I finally see him on the street one day and I say "dude, where's my money?" The debt had expired because I had not tried to make an effort to claim it for more than six years.

Specifically, the case the court ruled that since the government had not even mailed a letter to the guy in twelve years, the debt had expired. Had they mailed him an occasional letter saying "we haven't forgotten about you", the debt would still be valid.
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Chonbuk



Joined: 28 Jan 2003
Location: Vancouver

PostPosted: Mon Mar 10, 2003 5:13 am    Post subject: debts Reply with quote

What happens if they contact you and you don't respond-

Would the debt still be alive then??

Chonbuk
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Circus Monkey



Joined: 10 Jan 2003
Location: In my coconut tree

PostPosted: Mon Mar 10, 2003 11:38 pm    Post subject: Reply with quote

Chonbuk,

I would think that the government would have a record of letters sent. In other words, if you tried to say "I didn't get it" they would probably turn around and show the registered letter receipts. From what I know, if your debts are in arrears, they send a person out to your house and then you sign a form stating that you received it. Usually the other debt collector is in the car with the motor running as people don't like to get such notices. Whether they would go to these lengths for people in a different country seems doubtful. The government, based on that article Manner of Speaking showed, might toughen up regulations in other areas. In other words, I don't know if they currently check a person's financial status before issuing a passport, but it would seem to be a logical step. No passport unless you pay up.

Captain,

I don't see what your saying really applies here. It seems that the debt was written off as uncollectable, and then Rev Canada changed their mind. So if I lent you 5 million won and you weren't able to pay me back, I then tell you, "Don't worry about it" you'd conclude that I don't have to pay you back, right? So if I show up a few years later and say, "Where's my money?" you'll think I'm untrustworthy and crazy.

CM
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Captain Obvious 2.0



Joined: 09 Jan 2003

PostPosted: Tue Mar 11, 2003 6:14 am    Post subject: Reply with quote

Circus Monkey wrote:
Captain,

I don't see what your saying really applies here. It seems that the debt was written off as uncollectable, and then Rev Canada changed their mind. So if I lent you 5 million won and you weren't able to pay me back, I then tell you, "Don't worry about it" you'd conclude that I don't have to pay you back, right? So if I show up a few years later and say, "Where's my money?" you'll think I'm untrustworthy and crazy.


Revenue Canada never said "don't worry about it". They just stopped pursuing the person because government employees are on the payroll. If an agent concludes it's unlikely they will ever get money out of the person, they just stop trying because it costs money to try. So basically the bleeding stops.

Take for example my business before I came to Korea. I have a number of accounts of people I've forwarded to collections, and the collection company has concluded they are uncollectable because the person is a no-hope deadbeat living on welfare with no hope of every getting a job. So they stop sending letters that cost money and making phone calls that cost money.

However a note has been put on his credit file. If one day a bank calls up to confirm the note, they'll look into seeing if the person is no longer uncollectable.

The government does not say "don't worry about it". If they had, then you would be correct however.
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Circus Monkey



Joined: 10 Jan 2003
Location: In my coconut tree

PostPosted: Tue Mar 11, 2003 4:32 pm    Post subject: Reply with quote

Captain,

Okay. I was addresssing your idea of sending notices in order to keep the debt active. If a person stopped getting collection letters then that person would conclude that the debt was written off. That's the way it works for individuals and collection agencies. The law of limited returns, correct? But apparently the government didn't think so. It seems arbitrary unfair to an individual that the government should revive an long ago debt.

If I'm understanding you correctly, even if your debt is written off a note has been made on your file which could conceivable hinder future transactions, correct? So it wouldn't be completely wiped clean?

Personally, I welcome the change. However, I can also see the government taking more aggressive action earlier since they now have a deadline.

CM
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