The CRA Drops the Hammer on Fiscal Arbitrators

[Burnaby49]

Fiscal Arbitrators, which claimed to be a Canadian financial services outfit but really was a facilitator helping Canadian taxpayers claim fraudulent expenses, has been previously written up or mentioned in these discussion threads;

viewtopic.php?f=46&t=9713&hilit=fiscal+arbitrators

viewtopic.php?f=46&t=9443&hilit=fiscal+arbitrators

viewtopic.php?f=46&t=9396&p=158492&hili ... rs#p158492

Until now the Canada Revenue Agency has gone after taxpayers who submitted false returns based on Fiscal Arbitrator's instructions but a news link sent to me by a Quatloos lurker indicated that the CRA is now going after the individuals behind Fiscal Arbitrators;

http://blogs.windsorstar.com/2013/02/21 ... cial-ruin/

A very interesting article. It gives numerous examples of basically small-time taxpayers who fell for Fiscal Arbitrators line and are ending up bankrupt because of it. The CRA is imposing VERY heavy penalties on them. In the case of the two individuals interviewed for the article;

The couple did it, and Pare’s bank records show a $16,000 refund, although Wright’s was denied. It turned out she was lucky – the Canada Revenue Agency reassessed the couple and slapped them with a total of $125,000 in gross negligence penalties and the amount of Pare’s refund, saying the couple should have known the tax preparation method was illegal since they had filed their returns normally in the past.

Even though Wright didn’t get a refund, the CRA is still sending her bills for about $46,000 as a penalty for attempting to evade taxes. Pare owes the penalty on top of his refund, with the CRA demanding about $79,000.

What I really loved was the explanation to suckers as to why they didn't have to pay any tax. A loophole that nobody but Fiscal Arbitrators had noticed!;

According to a document produced by the Fiscal Arbitrators and sent to clients, which was obtained by The Star, the theory behind their tax preparation method is that because the Income Tax Act defines a business as an “undertaking of any kind whatever,” all Canadian taxpayers are technically business owners. The Fiscal Arbitrators took that as justification for claiming personal expenses as business losses to trigger refunds and even recommended clients argue this interpretation of the act in court if challenged by the CRA, according to emails and documents obtained by The Star.

“The [Income Tax Act] is extremely vague and definitely open to interpretation,” the Fiscal Arbitrators’ explanatory document reads. “It has always been acceptable practice for a taxpayer to arrange their affairs in such a manner as to reduce or eliminate the taxes otherwise payable as long as it is lawful and complies.”

However it went past the pretence that personal expenses were tax deductible under Fiscal Arbitrator's interpretation of the Income Tax Act. As the cases in the links cited above show most of the expenses claimed as deductible business expenses were just numbers made up by Fiscal Arbitrators with nothing behind them at all.

[Hilfskreuzer Möwe]

I am delighted to hear the brains (and I use that term loosely) behind Fiscal Arbitrators may be paying the piper.

Burnaby49, you might be interested in this little item concerning Aurelius Carlton Branch:

• Marshak v. Branch, 2004 CanLII 34520 (ON SC): http://canlii.ca/t/1j0t2

It appears Mr. Branch has a past habit of scamming vulnerable persons, and being found guilty for that. I'm glad that will most certainly be a relevant factor when it comes time to sentence him this time around.

SMS Möwe

[Burnaby49]

We may see some trials of the principals in the scheme coming up in the near future. From a law blog;

Mr. Watts has his first court appearance on March 1, 2013. A date is not yet set for Mr. Branch. One of the tax preparers involved in the scheme has also been charged and appears in court Feb 28, 2013. Other agents and tax preparers are still at large or, in the case of one promoter from the Vancouver area, have escaped to foreign tax havens.

https://www.dioguardi.ca/blog/tax-trait ... y-cra.html

Nothing reported in the newspapers here that I've seen about this scheme having significant west coast participation. So far they seem to be largely Ontario.


After posting the above I found an article from the Vancouver Sun I probably read and forgot about giving details and names on the Vancouver connection. David Baines says in the article that Fiscal Arbitrators flogged a Porisky type "Natural Person" argument. They apparently based the claimed right to deduct personal living expenses on the incredibly stupid argument (which apparently thousands of taxpayers bought) that the fictitious "legal person" is the actual taxpayer but, to keep the legal person alive to pay tax the "natural person" had to incur personal expenses (you know food, shelter, trips to Disney World). Since these expenses were necessary to maintain the existence of the taxpaying legal man they were tax deductible. So any time you Americans start getting arrogant that you have the stupidest most gullible taxpayers in the world just think back to this posting. We Canadians are a length ahead of you on that track!

The article says;

To generate business, Watts and Branch employed several different agents. According to DiRito’s affidavit, one of those agents was John Gillespie, a Richmond businessman who has promoted all sorts of bogus tax shelters over the past 25 years. They include the Canadian Literacy Enhancement Society, and the Global Learning Gifting Initiative. Each offered huge tax deductions that were subsequently disallowed by CRA.

the Canadian Literacy Enhancement Society and Global Learning were both big volume tax scams that would give taxpayers purportedly tax deductible charitable donation receipts for about six times as much as the actual cash the taxpayers donated. Great deal for the taxpayers had it worked, they would have made a profit on charitable donations. Unfortunately it all ended very badly for them with all claimed deductions disallowed.
http://www.vancouversun.com/business/Da ... story.html

[friendofafriend]

So, how does it end you ask?

NB this is also a follow up to Burnaby's thread on Fiscal Arbitrator's Aurelius Carlton Branch's "run away bravely" (aka flee to Costa Rica) found here:
http://www.quatloos.com/Q-Forum/viewtop ... 7&p=274157

Now, almost hot off the presses, on 27 February 2020, the Canada Revenue Agency informs us that not only was Aurelius Carlton Branch extradited back to Canada from Costa Rica in February 2019, but he's now a Guest of Her Majesty for the next 4.5 years after being convicted and sentenced for 2x criminal fraud.

Without further ado, take it away, Canada Revenue Agency:

https://www.canada.ca/en/revenue-agency ... fraud.html

The Canada Revenue Agency (CRA) announced that Aurelius Carlton Branch of Brampton, Ontario, was sentenced on February 27, 2020 in the Ontario Court of Justice in Newmarket to four and a half years in jail, and to fines totalling $394,772. Branch pleaded guilty on November 21, 2019 to two counts of fraud under the Criminal Code of Canada.

A 28-month CRA investigation revealed that Branch and his partner, Lawrence Watts, operated Fiscal Arbitrators, a Canada-wide tax preparation firm that promoted a tax protester scheme based on a fraudulent concept of a “created person,” leading clients to believe they could legally file tax returns claiming large false business losses, even though no such businesses existed. The fictitious losses enabled 241 clients to receive or attempt to receive approximately $10 million in federal tax refunds. Branch, a former CRA employee from 1976 to 1980, knew that the scheme was fraudulent, and used his knowledge of the Income Tax Act and of CRA operations to assist his clients with obtaining unwarranted refunds.

Branch also failed to file his individual income tax returns for 2009 and 2010 and failed to report $926,213 of business income he derived from Fiscal Arbitrators, resulting in the evasion of $245,643 of federal income tax.

Criminal charges were laid against Branch and Watts on November 27, 2012. Watts was tried and ultimately convicted on October 22, 2015, and subsequently sentenced to six years of incarceration and a fine. Since Branch could not be located, a Canada-wide arrest warrant was issued on January 29, 2013, and Interpol published a “Red Notice” on April 12, 2013, identifying Branch as wanted for prosecution in Canada. In co-operation with Costa Rican authorities, Branch was arrested on September 21, 2017 and was extradited to Canada on February 26, 2019 with the assistance of the Royal Canadian Mounted Police.

[notorial dissent]

So he was convicted in 2015 for his part in the Fiscal Arbiters scam, and then fugatized to Costa Rica. Eventually got caught and brought back to Canada and then he plead guilty to the latest batch of fraud??? And is now in jail for his efforts?

So is that the last of them or isn't there still one of them in the wind?

[Burnaby49]

Beats me if there are any left, I've lost track of it all. Poriskyites that I've either forgotten about or didn't know about in the first place keep popping up from time to time. Justice goes very slowly in Canada and, as Friendofafriend just posted, some of these clowns come back into the news years after their scams fell apart.

[notorial dissent]

Fiscal Arbitrators, the gift that keeps on giving.

[TBL]

I'm just imagining the roughly year-and-a-half in a Costa Rica jail. It gives me the warm and fuzzies.

[The Observer]

Well, it certainly will give you the fuzzies.