Civil & Criminal Tax Law: Keep Admissibility of Evidence in Mind

Those involved in criminal tax evasion cases are advised to bear civil tax consequences in mind when negotiating plea bargains and making admissions because the Tax Court of Canada (TCC) may admit evidence that may be otherwise inadmissible, if unchallenged in prior criminal proceedings.

In the recent decision of Piersanti v The Queen (2013) TCC 226, the TCC held that evidence, the admissibility of which was not challenged in a previous criminal proceeding, could be used against taxpayers in the TCC even if the evidence would have been held inadmissible if properly challenged in the criminal proceeding. 

This case involved unpaid GST liabilities. The appellant argued that the Canada Revenue Agency (CRA) was improperly relying on documents that were obtained without judicial authorization in the course of a criminal investigation. She further argued that her rights under sections 7 (life, liberty and security of the person) and 8 (protection from unreasonable search and seizure) of the Charter were violated. The appellant submitted that the documents should therefore be excluded in the TCC appeal, pursuant to section 24 of the Charter.

The TCC refused to exclude the documents, despite finding that the predominant purpose of the CRA’s investigation was the determination of penal liability. In the TCC's view, the question to be determined was whether the appellant's Charter rights were violated when documents obtained pursuant to the Excise Tax Act requirements were used as a basis for Income Tax Act reassessments. It was held that issuing the requirements was standard audit practice.

If the evidence had been excluded in the criminal investigation it would have likely also been excluded from the civil proceeding because the TCC could not disregard an order from a Superior Court.

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.