By David J. Rotfleisch
Special to the Financial Independence Hub
When “de-taxers” use best business practices such as franchising and friends and family of multi-level marketing (MLM) techniques, you know that even fringe thinkers are watching and learning from the likes of “Dragon’s Den” and “Shark Tank.” Entrepreneurialism, it seems, has caught on in the tax evasion industry.
They’re running seminars and courses, and selling books, CDs, and DVDs, to teach fringe thinkers and gullible Canadians that it’s their God-given right not to pay taxes and here’s how to do it: commit fraud by evading tax. They are “educational,” setting up schools to do this.
And they do this for fees, of course.
Two de-taxer founders now in jail
De-taxers have been on Canada Revenue Agency’s radar for a long time and the founders of two different tax evasion schemes have been jailed recently. Tax protestors have gone from nuisance to serving jail time, plus hefty fines, in short order.
In July 2016, Russell Porisky of Chilliwack, B.C., founder of Paradigm Education Group, was sentenced to five and a half years in jail, and a fine of $259,482 for counseling others to evade taxes and for income tax evasion. Paradigm operated through a franchise model and sold books, DVDs, and CDs, organized and taught fee-based seminars which educated people on how to structure their affairs in a way to illegally avoid taxes.
What is alarming is the numbers of people that have been conned into these de-taxer schemes. In the case of Paradigm, it’s not eight, or eighty, it’s 800 Canadians resulting in an estimated loss of $11 million of tax revenue. The Law Society of B.C. estimated the total membership of Freeman-on-the-Land in Canada, another de-taxer, to be 30,000.
To-date, 31 people have been convicted of criminal tax evasion offences and received significant fines directly related to their participation with Paradigm. This includes “franchisee” Donald Baudais who was sentenced in 2014 to pay fines equal to 100% of tax and GST evaded, and 6 months in jail, for promoting Paradigm, even though his spouse is suffering from the aftermath of brain cancer.
Another highly marketed tax evasion scheme is Fiscal Arbitrators, which also operated as a franchise using DSC Lifestyles Services. The owner and operator of Fiscal Arbitrators, Lawrence Watts of Markham, Ontario, was sentenced in June 2016 to six years imprisonment plus a fine of $149,129. Fiscal Arbitrators had no bogus theories to rely on – they just sold phony tax losses.
In September 2013, Calgary police arrested Andreas Pirelli, a Freeman-on-the-Land, who claimed his rental property was an “embassy” and refused to pay rent or grant his landlord access to the property.
A detailed summary of most known de-taxer tax scams was given in the 2012 family law judgment of Meads v Meads by Alberta Associate Chief Judge Rooke. He said that all de-taxer tax evasion schemes boil down to making a claim that an individual does not have to pay taxes because they are neither under the court’s nor government’s jurisdiction.
Signs of de-taxer schemes
De-taxer schemes often use strange punctuation in the spelling of their names, or add copyright or trade-mark indications to mark their names. De-taxers may also mark their letters or documents with thumbprints, multiple signatures in different colors, or by using multiple postage stamps on different corners of a letter—hallmarks of a frat house.
Different de-taxer scams target different demographics: everyone from your next-door neighbour to sophisticated business owners can get caught in the web of lies.
Douglas Preston Amell, a naturopath practitioner, was sentenced to 15 months in prison for tax evasion and counselling in 2010. Tania Kovaluk, a dentist, was sentenced to 30 months in prison for tax evasion and counselling in 2012, and Warren Fischer, a doctor practising Chinese medicine, was sentenced to 6 months in prison for tax evasion in 2013.
Our Canadian tax law firm has helped various taxpayers including building contractors and medical professionals who were duped into de-taxer tax evasion schemes, including some who have served jail time, to come back into the income tax system.
A denial of tax obligations is considered a form of tax evasion. Time served in prison and fines do not end the story. The obligation to file and the tax liability will continue to exist and remains outstanding until it is paid off.
David J Rotfleisch, CPA, JD is the founding tax lawyer of Rotfleisch & Samulovitch P.C., a Toronto-based boutique tax law firm. With over 30 years of experience as both a lawyer and chartered professional accountant, he has helped start-up businesses, resident and non-resident business owners and corporations with their tax planning, with will and estate planning, voluntary disclosures and tax litigation. www.Taxpage.com and firstname.lastname@example.org