Freemen on the Land Don’t Pay Taxes, They Go To Jail – Canadian Tax Lawyer Analysis
The murder of constable Daniel Woodall by a self styled Freeman on the Land is the latest tragedy by a member of one of the groups that tries to opt out of normal societal conventions and laws. In September 2013 Calgary police arrested Andreas Pirelli, another Freeman on the Land, who had claimed his rental property was an “embassy” and refused to pay rent or grant his landlord access to the property. One of the hallmarks of these movements is their refusal to comply with tax obligations.
While most Canadians will file their tax returns by April 30 every year and pay the taxes owing, some may be tempted not to file on the basis of schemes being marketed saying that Canadians don’t have to submit tax returns or pay taxes. This is wrong and will lead to heavy fines and to jail time.
Donald Baudais was sentenced in 2014 to pay fines equal to 100% of the income tax evaded, 100% of the GST tax evaded, and 6 months in jail, despite the fact that his spouse is suffering from the aftermath of brain cancer and chemotherapy, for counseling people not to pay taxes using the discredited and bogus Paradigm Educational Group teachings that "natural persons" do not have to pay income tax, a theory referred to as "nonsense" by the courts.
A detailed summary of most known de-taxer tax evasion scams (used as a general term for all tax evasion schemes based on the concept that there is no obligation to file or pay taxes) was given in the September 2012 family law judgment of Meads v Meads by Alberta Associate Chief Judge Rooke. He said that all de-taxer tax evasion schemes essentially boil down to making a claim that an individual does not have to pay taxes because they are neither under the court’s nor government’s jurisdiction. Put another way, all de-taxer arguments are “different shades of lipstick on the same pig”. Rather than attack the court’s authority, de-taxer arguments merely try to evade or confuse it. Consequently, de-taxer claims can be seen as intrinsically frivolous and vexatious.
He goes on to say that these schemes are marketed under various names (de-taxers, freemen-on-the-land, sovereign citizens, the church of the ecumenical redemption international [“CERI”], practitioners of Moorish law) and utilize different back-stories such as using magic phrases that trump the government, believing in the availability of opting out of societal obligations, or believing that everything in life can constitute a contract (including things said in normal conversation).
De-taxer Canadian tax evasion schemes will often use atypical punctuation in the spelling of their names, or add copyright or trademark indications to mark their names. De-taxers may also mark their letters or documents with thumbprints, multiple signatures in different colors, or by using multiple postage stamps on different corners of a letter.
These schemes are marketed online, through books and DVDs, and “Gurus” will even host websites and paid speaking engagements. Different de-taxer scams target different demographics: everyone from your next-door neighbor to sophisticated business owners can get caught in the web of lies. De-taxer scams are also sometimes multi-level marketing schemes that operate as for-profit enterprises for the promoters and the sales team under them.
The most well-known de-taxer tax evasion program is Paradigm, through which Mr. Baudais operated. The originator of Paradigm, Russell Porisky, was convicted in 2012 of tax evasion and counselling others to commit fraud, and sentenced to 4.5 years in prison. In 2014 Russell Porisky’s appeal was allowed by the British Columbia Court of Appeal and a new trial by jury was ordered on the basis of uncertainty surrounding whether Russell Porisky had elected to be tried by judge alone. Described by the court in Mr. Baudais’ judgment as a pyramid scheme, Paradigm is one of the de-taxer schemes marketing itself as a multi-level marketing organization. These de-taxer strategies sell products such as DVDs, books, and precedential templates. Paradigm “educators” sold all three of those products, then charged a fee for their assistance (in Mr. Baudais’ case, the fee was typically 7% of an individual’s personal income, or 3% of a business’ payroll). Thus, Paradigm’s “students” were not only being led into committing tax evasion; some were duped into a multi-level marketing scheme.
Other high profile groups have seen their founders (and acolytes) face severe fines and prison sentences. Douglas Preston Amell, a naturopath practitioner, was sentenced to 15 months in prison for tax evasion and counselling in 2010. Tania Kovaluk, a dentist, was sentenced to 30 months in prison for tax evasion and counselling in 2012, and Warren Fischer, a doctor practising Chinese medicine, was sentenced to 6 months in prison for tax evasion in 2013. A denial of tax obligation is considered a form of tax evasion. Even honestly held beliefs that taxation is unconstitutional will not constitute a misunderstanding; it has been held to indicate a conscious intention to disobey and the de-taxer will be found guilty of tax evasion.
Time served in prison and fines do not end the story. The obligation to file and the tax liability will continue to exist and remains outstanding until it is paid off. Our firm has helped individuals who were duped into a de-taxer tax evasion scheme, including some who have served jail time, to come back into the income tax system by ensuring that they are fully compliant with their past and ongoing filing and reporting requirements.
Associate Chief Judge Rooke provided in his reasons for Meads a list of questions for potential de-taxers to direct to promoters of tax evasion plans that deserve repeating:
- Why do these de-taxer promoters seem to have little, if any, wealth, when they say they hold the proverbial keys to untold riches?
- Why do those tax evasion promoters not go to court themselves, if they are so certain of their knowledge? If they say they have been to court, ask them for the proceeding file number, and see if their account is accurate. Those are public records.
- Can that de-taxer promoter identify even one reported court decision where their techniques proved successful? If not, why then are all successes a tale of an unnamed person, who knew someone who saw that kind of event occur?
- How are their ideas different and distinct from those surveyed and rejected in these (Meads v Meads) Reasons?
- How are these advisors different from the other de-taxer promoters who have been unsuccessful and found themselves in jail? What did Porisky, Warman, and Lindsay do wrong?
- Will your advisors promise to indemnify you, when you apply the techniques they claim are foolproof? If not, why?
- If they cannot explain these points, then why should you pay them for their legal nonsense?
Canadians can and should claim all of the deductions and tax credits to which they are entitled. But becoming involved with dubious schemes that promise no tax obligations is the path to fines and jail.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."