Former Liberal minister Pierre Paradis wanted to deduct from his tax return the legal fees he paid in 2017 to defend himself against allegations of sexual misconduct. of the Canada Revenue Agency (CRA).
Posted at 5:00 am
In January 2017, Pierre Paradis was the subject of a complaint from a former political associate for sexual misconduct. He resigned from his position as Agriculture Secretary in the Coillard administration, but remained a deputy. Six months later, the Director of Criminal and Criminal Prosecution (DPCP) decided not to initiate criminal proceedings in this case, as he was not “reasonably convinced that this person was guilty”. Mr Paradis was not up for re-election in 2018, having served as a Liberal MP for Brome-Missisquoi from 1980 to 2018 (he sat as an Independent MP from January 26, 2017 to August 16, 2018, before returning to the Liberal caucus).
Pierre Paradis wants to deduct his $37,055.91 attorney’s fees paid “in connection with his defense of the allegations” of sexual misconduct brought against him, according to Mr. Paradis’ appeal to the Canadian Tax Court. The federal tax authorities refuse him these deductions.
Tax laws allow employees/civil servants (e.g. a member of parliament) to deduct attorney fees spent to establish an entitlement to wages or to reclaim their wages from their employer. The deduction is also possible for a pension allowance or a pension scheme.
But in this case, Mr. Paradis did not pay these legal fees to be entitled to or recover his compensation paid by the National Assembly as a member. He was still paid as a member of the National Assembly (at least $93,827 a year in 2017) during the police investigation and file study by the DPCP.
His argument in court? For tax purposes, Mr. Paradis says he incurred these $37,055 legal fees “to maintain his seat as a member of the National Assembly and the fees associated with this office,” he writes in his appeal. The ex-minister states that his salary as a Member of Parliament (including his transition payment) has become “precarious” and “uncertain” in the context of a police investigation. If he had been convicted of a criminal offence, he would not have been able to be an MP or receive his salary, he says. Mr. Paradis indicated that his legal costs were not reimbursed by the National Assembly.
The CRA objects to the deduction of Mr. Paradis’ attorneys’ fees because they were not made to establish a right or collect any amount owed to him as salary or pension allowance in connection with his office of deputy.
Canada’s tax court last month rejected Mr Paradis’ appeal and ruled in favor of the CRA. Oral judgment was given at the hearing. There are no written reasons.
“No costs [criminelle] has not been worn […] after investigation,” said Pierre Paradis in a written statement emailed to: The press† He indicates that he “cooperated with the investigation, which resulted in costs for him. These expenses are routinely reimbursed by the government (or otherwise potentially deductible) for representation expenses if charges are imposed. However, since the expenses were incurred without ever being charged, the question of the deductibility is less clear. It is therefore in full transparency and through the mechanisms envisaged that Mr. Paradis has validated this aspect with the tax authorities. He obviously accepts any decision and cannot comment on the technical aspects of the file as it is not his speciality.”
The CRA did not comment on Mr Paradis’s case. As this was an informal procedure, there is no appeal.
Costs of criminal lawyers are not deductible
In his written statement sent to: The pressMr Paradis believes that his legal fees would have been “possibly deductible” or reimbursed by the National Assembly if criminal charges had been brought against him.
However, tax laws generally do not allow an employee/public servant (for example, a member of parliament) to deduct legal costs in the event of a criminal charge, said Annick Provencher, a professor of tax law at the University of Montreal. The deduction of attorneys’ fees is limited to situations to determine or reclaim his entitlement to wages, retirement allowance, or retirement benefits from his employer.
This deduction does not apply in the context where an employee claims to protect his job from criminal prosecution.
Annick Provencher, professor of tax law at the University of Montreal
In general, criminal defense attorneys’ fees are not tax-deductible, the professor recalls.
Over the years, the IRS has allowed the deduction of criminal attorney’s fees in (very) rare exceptions where a taxpayer with corporate income had to defend against criminal charges to safeguard the company’s ability to earn an income.
As to Mr. Paradis’ other claim that his attorney fees would have been reimbursed by the National Assembly had charges been brought, it should be noted that the National Assembly reimburses the costs of a Member of Parliament’s attorney in criminal matters under the law. cases on two conditions: 1) he was acquitted or the charges dropped and 2) the criminal charges related to “an act that he did or failed to do in the performance of his duties” as a deputy. The Bureau of the National Assembly takes the decision after advice from the lawyer.