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Canada: SCC upholds tax preparer penalties, says they are not criminal in nature


Sabrina Wong

Evan Schmid

On July 31 2015 the Supreme Court of Canada (SCC) issued its decision in Guindon v Canada, 2015 SCC 41. The substantive legal issue before the SCC was whether the penalty under section 163.2(4) of the Canadian Income Tax Act (ITA) was a criminal sanction such that procedural protections in the Canadian Charter of Rights and Freedoms (Charter) should be engaged and the penalties vacated.

The SCC upheld significant penalties assessed on Ms Guindon by the Minister of National Revenue. These penalties can be imposed on persons, including lawyers and accountants, who knowingly, or in circumstances amounting to culpable conduct, make or participate in the making of, a false statement that could be used by another person for tax purposes. Following this decision, it is clear that these penalties are constitutionally valid and can be used as an alternative to the criminal sanctions in the ITA (with a lower standard of proof and without the constitutional protections guaranteed to a person charged with an offence).


Ms. Guindon is a lawyer with no expertise in income tax law. She was assessed for penalties totalling C$546,747 ($420,000) for making false statements concerning the tax status of a charitable programme for which she provided a tax opinion. This programme, which was a sham, resulted in participants claiming C$3,972,747 in unwarranted tax credits. She argued that the tax preparer penalty was criminal in nature, and accordingly that she was entitled to procedural protections in the Charter.

The SCC found that the penalty is not a criminal sanction because it is neither criminal in nature nor imposes a true penal consequence.

The court determined that the process by which the penalty is imposed is administrative in nature. The fact that the conduct could also result in criminal sanctions under the ITA does not alter the provision's administrative nature.

The SCC also concluded that the large penalty imposed on Ms Guindon was not a "true penal consequence", as the magnitude of the penalties under ITA section163.2(4) was tied to the legislative objective of deterring non-compliance with the relevant provisions of the ITA, was fixed without regard to other general criminal sentencing principles and was appropriate given the actions of Ms Guindon. In this light a sizeable penalty was justified to ensure that "the penalty is not simply considered a cost of doing business".

Sabrina Wong ( and Evan Schmid (, Toronto
Blake, Cassels & Graydon

Tel: +1 416 863 2645 and +1 416 863 4341


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