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How the Rich Stay Rich – Brian Mulroney Part II  :CRA SOTW

So I'm sitting in my office trying to figure out how Brian Mulroney
pulled it off.
I'm no expert, but I know a bit about tax policy and the Canada
Revenue Agency. And I'm asking myself how I might be able to pay no
tax at all on a couple of hundred grand for several years, then have a
lawyer 'fess up on my behalf and get my tax bill knocked down to half
of what it would've been if I'd paid it right away.

That's not the kind of outcome I've ever seen in my long-running
series on taxpayer abuse.

Anyway, I was dreaming of a scheme where folks like me and you, Dear
Reader, could get a similar deal ... and that's when the phone rang.
It was Sandie Noble. She's a former stay-at-home mom who has found
herself living a nightmare since her marriage broke up and the family
lost its businesses -- two downtown Vancouver coffee shops -- under
the weight of almost $200,000 in debt to the CRA.

The specifics of this debt are quite different from Mulroney's. The
former prime minister faced a straightforward income tax liability;
the debt that's dragging Noble down was incurred when her husband, who
ran the businesses while she stayed home with the kids, failed to
remit GST and payroll deductions. CRA takes this obligation to turn
over money held in trust seriously -- and for good reason.

But I see common threads in the two stories. Neither person, they tell
us, did anything wrong, although both admit to doing something dumb.
And neither is likely to do it again.

The Mulroney story you already know from the testimony at the Oliphant
commission. You can make up your own mind -- or wait for the
commission report -- on what to believe.

In Noble's case, you'll have to decide based on what I tell you. But
her story rings true to me.

She was listed as a director of the family company. But, she says,
this was strictly nominal -- her name on the documents -- and she had
no other role. Nonetheless, as she has now learned at great cost, the
law is stern on directors' liability. I'm pretty sure CRA's case
against her is solid. (This is another commonality with Mulroney
since, as I understand the law, even bigwigs with cash-stuffed
envelopes must pay tax -- although it turns out to be less tax than
I'd have guessed.)

This is where, when you look at how these two stories play out, the
similarities end.
Mulroney's lawyers, in due course, chatted with CRA bureaucrats, and a
solution -- a convenient one for the bureaucracy, and a great bargain
for the man with all that previously undeclared cash -- was struck. It
was, oh, so civilized.

Meanwhile, Noble, who only found out about the mess around the time
her marriage collapsed, scrambled to try to make good on the debt. She
got her husband dropped as a director of the business -- a mistake, as
it turns out, as CRA does not appear to be pursuing him now for the
money still owed. She tried to run the business part-time while
remaining a full-time mom, and she managed to make seven or eight
monthly payments of $5,000 each.

Then the landlord forced the closure of one restaurant. CRA stepped in
and sold all the moveable assets -- about $12,500 worth. Every cent
went to pay the tax debt.
CRA okayed the sale of the other restaurant as a going concern,
although it went at a bargain-basement rate. The bank took nearly half
the proceeds, and CRA took the rest -- about $114,000 to go toward the
debt.

CRA got another $1,000-plus by seizing Noble's bank accounts, an
income tax refund, and a child-tax credit (which a CRA spokesman tells
me is usually considered the kids' money and thus not to be touched).

In all, CRA got about two-thirds of its money from Noble -- much
better than it did with Mulroney. But, thanks to interest and
penalties, Noble is still being pursued for $100,000-plus.

Now she's being threatened with "legal action" -- she's not certain
what that means, and neither am I -- as of Monday morning.

I heard a CRA official defend the decision to drop half the
government's claim against Mulroney on the grounds that it was a
cheaper solution than trying to chase down the money.

This logic doesn't seem to have been applied to Noble's case.

"I rent my house. I lease my car. I work in a cafeteria for minimum
wage," she told me. "I don't have any assets."

Her accountant, once paid to do the business's books and now a friend
who volunteers his help, confirms that she's broke.

"She simply doesn't have the coin," said Larry Bisaro. "She isn't
going to come up with it, no matter how hard they squeeze."

So why do they keep at it? They've got all the value to be had from
the business. Any further legal proceedings may make her life a little
more miserable, but the cost of court action will be money down the
drain.

"They've gone nine rounds with her," Bisaro said. "Why pummel her more
in the 10th?
"She's a smart, entrepreneurial woman, but they've made her
unproductive for the last five years. It's time to stop."

So what do you think are the odds? Any better than the likelihood
Mulroney will lend her his Oliphant inquiry legal team, whose $2
million in fees, by the way, are being paid by the government he used
to head?

dcayo@vancouversun.com


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