Fiscal Arbitrator Tax avoidance Scheme Discussion

[Burnaby49]

About a year ago I put together a compilation reference linking to all of Russell Porisky''s Paradigm tax evasion discussions posted on Quatloos;

viewtopic.php?f=50&t=10250

I said at the beginning of the Porisky compilation;

This discussion is somewhat redundant because it just compiles information posted elsewhere on Quatloos but I thought it time to have one omnibus reference point so that anyone seeking information on the Russell Porisky tax evasion scheme and the results for its followers has a starting point to all of the Porisky related information in Quatloos. Part of the problem is my own ineptitude. When I started posting on Porisky type tax evasion cases I often buried the information, almost as casual points of interest, in unrelated discussions. As a result two of the most important evasion convictions, that of Porisky himself, and Eva Sydel, were buried in the "The infection is heading north!" discussion, my first posting in Quatloos.

I've now reached the same point on the Fiscal Arbitrator tax evasion scheme. There are enough of them already reported, with more on the way, to require that I put them in some kind of easily referenced order. The titles I gave the discussions are, in some cases, just stupid. I only realized when collating the discussions that I had two separate topics under virtually identical titles, "Fiscal Arbitrators Strikes Out Again!" and "Fiscal Arbitrators Strikes Again!". So, time to rectify.

First the cases with the names of the individuals involved in the discussion, a brief explanation of the case, and the link to the discussion. I'll include an analysis (as best I can determine it) of the Fiscal Arbitrator scheme at the end of this post but that will have to wait for a bit. I have a backlog of Fiscal Arbitrator decisions to post yet and I'll do an analysis of the scheme along with information on the promoters after they are done.

Essentially Fiscal Arbitrators prepared the returns for the taxpayers and claimed false business expenses for non-existent businesses. The claimed expenses grossly exceeded the taxpayer's incomes. All participants in the scheme were reassessed disallowing the claimed expenses and also assessed gross negligence penalties. The penalties were very costly since they were 50% of the taxes assessed. Virtually all of the cases listed below are in respect to appeals of the penalties. None have succeeded. A few appellants, like Ian Brown and Carrol Strachan, also appealed the disallowance of the expenses. However both of these individuals refused to provide the court with any information on their claimed businesses and refused to substantiate any of the claimed expenses.


Cases

Donna Marie Stancer - A New Age Tax-Avoiding Sovereign
viewtopic.php?f=50&t=9136
Individuals
Donna Marie Stancer
Deanna Lynn Lavalley

In 2010 Stancer and Lavalley started a tax consultation company called DeMara Consulting Inc and filed 363 income tax returns on behalf of 224 clients. The filings claimed $192 million in claims of false business and capital losses. The losses gave rise to claims of $9.9 million in refunds to which clients were not entitled.

Lavalley was found guilty of making false statements in her income tax returns for the years 2007 to 2010, claiming false capital and business losses totaling more than $450,000 and claiming false capital and business losses in the income tax returns of other persons in order to obtain refunds totaling close to $10 million. She was sentenced to a 22 months conditional sentence to be served in her home and a fine of $17,000.

Stancer was found guilty of making false statements in her tax returns for the years 2007 and 2010 by claiming false capital and business losses totalling more than $1.8 million and counselling others to commit fraud in excess of $5,000. She has not yet been sentenced.


A Double Header of Canadian tax dodgers
viewtopic.php?f=50&t=9443
Individuals
Kirk Haynes
Colleen McLeod
Rajpal Bhatti
Alain Chénard
Jan Janovsky
Lucie Brisson

The above individuals are unrelated. This discussion initially started by reviewing Haynes and McLeod and expanded to cover the other individuals. Links to all of their Tax Court decisions are provided in the discussion.


Fiscal Arbitrators Strikes Out Again!
viewtopic.php?f=50&t=9713
Individuals
Mary Khristine Torres
Mary Torres
Eva Torres
Michael McNulty
Andre Gautier
Carrol Strachan
Ansel Hyatali

This was a joint appeal to the Tax Court of Canada. The issue was the gross negligence penalty the taxpayers were assessed in addition to disallowance of all of their fiscal arbitrator claims. The court confirmed the penalties. Carrol Strachan appealed this to the Federal court of Appeal. Her appeal was denied.


Mario Goyette: managing his strawman for your fun & profit!
viewtopic.php?f=50&t=9807&p=166280
Individual
Mario Goyette

It's hard to tell if this is a Fiscl Arbitrator case, the judgment (in French) doesn't refer to Fiscal Arbitrators, but it has all the hallmarks. Mr. Goyette also employed various freeman type arguments in tryig to avoid paying his taxes.


Another Fiscal Arbitrators DOA
viewtopic.php?f=50&t=9949
Individual
Ian Brown

Mr. Brown lost appeals at both the Tax Court of Canada and the Federal Court of Appeal.


More Fiscal Arbitrator Fallout
viewtopic.php?f=50&t=10024
Individual
Brian Bolduc

In 2009 Bolduc claimed business expenses of $427,337 and business income of $100,210. There was no business. He tried to defend himself against the gross negligence penalty by claiming that he was acting in a reasonable manner because so many people, other than himself, fell for the same scheme. He apparently abandoned his appeal before a hearing.

What is of interest in this case is that the scheme he followed was promoted by Solutions 21 Financial. It is my understanding that Solutions 21 was a successor to Fiscal Arbitrators that was sold as "The Solution". There was a hub promoter and a number of subordinate gurus who promoted "The Solution". As I understand it "The Solution" was promoted in large part to people who had tried Fiscal Arbitrators and been reassessed.

A google search shows this Better Business Bureau report on Solutions 21;

BBB file opened: 25/02/2011

Contact Information
Principal: Alex Di Mauro Ingram Jeffrey Eshun (Director)

Business Category
Investment Securities

Alternate Business Names
DSC Lifestyle Services, Trem DY Group, Tax Arbitration Bureau, Fiscal Arbitrators

According to information in the BBB files, it appears that the company is no longer in business. The phone numbers the BBB had for this company are disconnected, and directory assistance does not have a listing for this company. The BBB's mail to this company has been returned as undeliverable. If you have an unresolved dispute with this company you may wish to seek legal advice. - See more at: http://www.bbb.org/kitchener/business-r ... P4RrU.dpuf

Fiscal Arbitrators Strikes Again!
viewtopic.php?f=50&t=10041
Individuals
Rasper I. Atutornu
Peace Q. Atutornu

A married couple appealing the gross negligence penalty. The appeal was Dismissed.


A Bussload of Fiscal Arbitrators Takes on the Tax Court
viewtopic.php?f=50&t=10196
Individuals
When I said bussload I meant it! Fifty-four appellants; so I'm not listing them. You can find the names in this link to the Tax Court docket.

http://cas-cdc-www02.cas-satj.gc.ca/tcc ... _id=156009

These individuals are not appealing the disallowance of the fake business expenses that Fiscal Arbitrators included in their income tax returns. It appears that they are only appealing the gross negligence penalty. While most of the Fiscal Arbitrator appellants are self-represented this group had banded togethe to retain legal counsel. The last entry on the docket was June 2014 so the appeals may have been dropped.


Another Poriskyite Loser, in French!
viewtopic.php?f=50&t=9981&hilit=Girard
Individual
Christian Gerard

As you can tell from the title I originally posted this as possible application of Russell Porisky's Paradigm tax avoidance scheme. At the time all I had was the French version of the decision, hence the title. After reading the decision in English I've concluded that it is more likely a Fiscal Arbitrator application. Gerard claimed deductions from his taxable income for expenses that included food, fuel, housing, health care and travel. This is more in line with Fiscal Arbitrators than Paradigm because the Paradigm position that individuals are not taxable at all so expenses would be irrelevant.


Myrtle Robichaud - Single mother gets help from Fiscal Arbitrators
viewtopic.php?f=50&t=10980
Individual
Myrtle Robichaud

Myrtle claimed a false $354,351 business loss against her taxable income based on Fiscal Arbitrator bullshit. The CRA denied the loss and hit her with a gross negligence penalty of $46,699. She appealed the imposition of the penalty and her appeal was dismissed with costs awarded against her.

[Burnaby49]

Time to try and explain how the Fiscal Arbitrator tax scan was supposed to work. As good a description as any was given in this quote from a recent Tax Court case.

[5] The Appellant attended presentations given by Mr. Joanisse regarding FA. These presentations were meant to explain a tax savings scheme that would result in maximized refunds. The Appellant understood that he could claim all his personal expenses so as to offset revenues based on some theory of principal and agent. He understood that an individual could be split into two entities for tax purposes — André Mallette, the natural person who is the agent, and André Mallette, a fictional entity created by his social insurance number who is the principal. The agent generates revenues for the principal and the agent can deduct the expenses that were used to generate these revenues. Apparently, these expenses are all in the nature of the Appellant’s personal expenses that are spent to allow André Mallette, the principal, to earn revenues. The Appellant agrees that he was both the principal and the agent. The Appellant agrees that this was not any kind of a business relationship. FA charged an initial fee of $500 and the Appellant was also to pay to FA 20% (less the initial $500) of any tax refunds received by him. The Appellant recognized that FA were proposing a scheme that would result in not paying any income taxes over four years and there was even a possibility of being able to extend this tax holiday for 10 years back. He stated that at the time it all made sense to him to claim a large business loss on his tax return that he never even incurred. Describing this deduction as a business loss was the only way the CRA would accept it since the tax return forms did not permit of any other kind of description. The Appellant did not know who FA were and he had never heard of them before. He did some Internet searches on both FA and FF and he did not find anything negative so he assumed that they were on the level. However, he never did seek the advice of a tax accountant, a tax lawyer or the CRA regarding the legitimacy of this tax savings scheme.

http://decision.tcc-cci.gc.ca/tcc-cci/d ... 8/index.do

As far as I can tell the Fiscal Arbitrator scam is a variant in Russell Porisky's Paradigm scheme which I've written about here;

viewtopic.php?f=50&t=10250

I quoted a Canada Revenue Agency publication in that discussion;

Natural vs Legal Person

One of the most common false arguments tax protesters use is the natural vs. legal person argument, in which they treat themselves as two separate people for income tax purposes. They define the natural person as the individual that performs the labour required to earn income, and the legal person as the legal entity that the federal government creates through the issuance and use of the social insurance number (SIN). Tax protesters allege that the legal person has to file an income tax and benefit return, and that income received belongs to the natural person and is therefore not subject to Canadian income tax.

Canadian courts have repeatedly and consistently rejected all arguments made in these tax protester schemes.

So Fiscal Arbitrators concocted a scheme, I believe based on Porisky's bullshit, that essentially mirrored it apart from one critical detail. Both Porisky and Fiscal Arbitrators said that natural persons are not taxable. However, Porisky advised (as far as I can tell) that there was no requirement that the actual physical person file income tax returns since the natural person, the inhabitant of the physical body, wasn't taxable. The legal person was just a fiction and it wasn't the responsibility of the natural person to make sure that the legal person filed tax returns (Don't PM me telling me this is moronic, I didn't think it up). So most of his suckers just stopped filing tax returns and many went even a step further and hid their income as best they could. This went over the line from honest but misplaced tax beliefs to income tax evasion, a criminal offense.

Fiscal Arbitrators, on the other hand, advised its suckers to file tax returns and declare their income. However they also claimed that there are two of you. The Principal (Porisky's legal person) filed the tax returns but the natural person, acting as agent for the Principal, did all the bullwork of earning it. So the natural person was actually a business run by the Principal and, like all businesses, there were expenses. Specifically everything spent by the natural person to maintain life and lifestyle. Fiscal Arbitrator said that these lifestyle costs were deductible against income since they were necessary to keep the money-earning natural man alive and at the grindstone. One problem. Nobody wants to document every single dollar they spend day in and out for the entire year just to show the tax man. In any case unless you spent way more than you earned there would not be enough real expenses to wipe out your current tax burden and get refunds for prior years. So Fiscal Arbitrators threw their bullshit theory overboard and just gave the suckers a number to claim as a business expense without even a fig leaf of justification behind it. You need $300,000 to get everything back? Fine, go ahead and claim $300,000 as an expense. Never mind where the number comes from.

Apparently, since the FA suckers declared their income (almost impossible not to if you are an employee) the Canada Revenue Agency chose not to charge them with tax evasion although, in my opinion, it is a very close call because fake expenses are often the basis for evasion charges. The classic case is a contractor who has his company build him an extension to his house or put in a swimming pool. He then buries the labour, material, and equipment expenses in with his company's normal business expenses and writes them off against business income. If he's particularly aggressive he'll have his suppliers make him accommodation invoices giving the wrong addresses for materials delivery and have his company worksheets list the employees work locations at legitimate company jobsites. These can be, and often are, prosecuted as income tax evasion.

I'm guessing that the CRA didn't go the evasion route for a few reasons;

1 - The individual amounts were quite small. Most of the FA followers weren't making much so not much in the way of taxes at risk.

2 - It was so blatantly obvious. No attempt to conceal, no accommodation receipts, nothing at all except a number on an income tax return, huge in relation to declared income, claimed as a business loss. As soon as the CRA asked about it the story fell apart.

3 - Available resources to prosecute. There were just way too many of them. It is expensive to prosecute taxpayers for evasion. The huge mass of Poriskyites already convicted or currently in process is unique to my experience and is probably stretching the Department of Justice to it's limits. They just didn't have the capacity or resources to take on the Fiscal Arbitrator followers too.

So the Fiscal Arbitrator taxpayers were all just reassessed and, as punishment, hit with a 50% gross negligence penalty under subsection 163(2) of the Income Tax Act. The bulk of the Fiscal Arbitrator appeals have been to fight the penalty, not the reassessments. All have lost.