Revenue Canada refuses to pay for million-dollar mistake

Taxpayer led to believe Harper government would compensate him for losses

Last Updated: Thursday, April 23, 2009 | 12:38 PM PT

By Kathy Tomlinson CBC,

A B.C. taxpayer who fought the Canada Revenue Agency over a million-dollar tax bill he didn't owe — and won — says the federal government misled him to believe he would be compensated for his financial losses.

"They're trying to now find a way to shove this under the rug or silence it so that they don't get embarrassed," 64-year-old Prince George resident Irvin Leroux said.

"Promises have been made at the political level," added his wife, Jill Moore, "and still, here we are."

Correspondence suggests Leroux's MP, Conservative Dick Harris, was assured three years ago by the minister responsible that the government was prepared to compensate Leroux for Canada Revenue Agency errors that cost Leroux his business and his home. That settlement has not materialized.

'Promises have been made at the political level.'

—Irvin Leroux's wife, Jill Moore

"They took everything I was, everything I stood for, and destroyed it," Leroux said.

CBC News made several requests to talk to Revenue Minister Jean-Pierre Blackburn about Leroux's case but received no response.

Before their fight with the taxman, Leroux and his wife owned and operated a successful RV park in Valemount, B.C. In 2002, Irvin's RV Park and Campground was awarded the prestigious SuperHost customer service award by B.C. Tourism.

Records lost by auditor, businessman says

Leroux said his tax troubles began in 1996, when an auditor from the tax agency showed up to look at the books. The auditor took Leroux's business receipts and other records, he said, then misplaced those records at the CRA office.

"He told me someone had put them on the pile that was to be shredded," Leroux said.

Without receipts to show his business expenses, numerous CRA audits over several years concluded Leroux owed almost $900,000 in personal income tax, plus over $100,000 in GST, including interest and penalties.

Leroux had to sell his business, Irvin's RV Park and Campground, in Valemount, B.C. (CBC)

"I said, 'You had all of these records. You knew I had paid out those expenses. You lost them, and now you're telling me that you are going to disallow them all?'" Leroux recounted. "I said, 'That's fine, I will seek a tax lawyer. I will see you in court.' "

In 2005, he took his case to the Tax Court of Canada, where the CRA gave up in a so-called consent to judgment, essentially admitting its mistake. That reduced Leroux's personal tax bill to zero and his GST bill to $20,000. Documents show that by 2006, Leroux was actually owed a $24,000 tax refund.

Years before his case got to tax court, however, the CRA had obtained a writ of seizure and sale against Leroux's properties so it could move in and collect on his alleged tax debt, if necessary.

"These individuals have the right to come after every one of your assets without justification on what they are doing," Leroux said.

Because its security was suddenly at risk, Leroux's main creditor — the Business Development Bank of Canada — demanded in 2001 that he pay back his very large business loan.

Forced to sell all his assets

That touched off a chain of events, Leroux said, that forced the sale — at reduced prices — of his business, his home and other assets, valued at approximately $4 million.

"I lost my house, I lost my business, I lost my land, I lost my income, I lost my savings — I lost it all," Leroux said. "Why? Because [the CRA] wouldn't admit to their mistakes. They would sooner destroy me and try to bury me out there than admit they did wrong."

"I've said to him the whole way, I will fight with you," said Moore, his wife. "This is wrong. They can't take it away and not even apologize. They can't take it away and not be held accountable."

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After Leroux's tax bill was cancelled, his MP, 16-year veteran B.C. caucus chair Harris, stepped in and took his case to Ottawa.

Correspondence shows that in 2006, Harris had several discussions with then minister of national revenue Carol Skelton — a member of Prime Minister Stephen Harper's cabinet — urging her to arrange compensation for his constituent's losses.

At first, Skelton assured Harris that if Leroux filed a lawsuit against the government, an out-of-court settlement could be arranged, the documents suggest.

In a letter to the minister, Harris repeated what she had led him to believe: "I was told that 'CRA does not have a mechanism to proactively pay damages … however if Mr. Leroux launches a court challenge with a statement of claim, the department could … settle out of court.' "

In an email to Leroux, Harris wrote: "I am convinced that things are going as we were promised…. [The minister] wants the outcome of your case to be an example of how Revenue Canada must be held accountable for its abuses of Canadians."

'All hell is going to break loose': Conservative MP

Later in 2006, when there was no sign of a settlement in the works, Harris wrote this angry email to the minister's assistant:

"I am livid. This whole episode is the most inhumane treatment I have ever witnessed in my life. And I cannot believe that our own government would treat Canadians in this manner. Mr. Leroux is an honest, principled individual who had been driven to the brink many times by Revenue Canada. If Revenue Canada mount even the slightest objection to the statement of claim filing this week I ASSURE YOU AND THE MINISTER THAT ALL HELL IS GOING TO BREAK LOOSE. This is bulls--t!"

Conservative MP Dick Harris calls the Canada Revenue Agency's treatment of the B.C. couple 'inhumane.' (CBC)

Harris refused a request by CBC News to be interviewed about the affair, however, saying, "I don't consider the work that I am doing for [Leroux], that it should become a news story, somehow."

In March, the CRA tried to have Leroux's statement of claim thrown out of court. Leroux said he would have never filed the claim in the first place if he hadn't been urged to by his MP, because he can't afford a lawyer to pursue it.

Leroux said he now feels betrayed by the Harper government, including the prime minister. When Harper himself was campaigning to be leader of the Conservative party, Leroux said, he spoke to the future PM at length about his fight with the CRA.

"He said to me, 'I guarantee you if I have your support and I get elected in as the leader of this party,' he says, 'I will give you my word I will look into this matter for you and get the matter resolved.' Now, he's forgotten my name."

"We're tapped out," Moore said. "There are no more lawyers we can pay. No more accountants we can hire."

"We don't have a system in place to protect us," Leroux added. "Because I've gone through the system. I've gone through the steps. And every time I walk the steps, I find there's always something there to push me back down. Where is the justice?"

'No compensation will be paid': CRA

Internal CRA emails written by assistant commissioner Rod Quiney in August 2006, obtained by Leroux under the federal access to information law, summarize the agency's position in his case:

"I believe we have been very fair and have in all respects provided the appropriate respect for his position and appropriate redress [by cancelling the debt]," Quiney wrote.

"No compensation will be paid," he concluded.

Leroux is thoroughly disappointed in the Harper government he supported.

"The people we elected to look after this stuff and protect us, they're not there, because the bureaucrats who did all of this stuff are instructing the politicians on what to do."