Don’t Believe Everything Revenue Canada Tells You

I have at times had people in my office who have “spoken to someone at Revenue Canada” (or another government agency for that matter) and received advice that they are determined to follow. Sometimes they even obtain the name of the government person they spoke to. The person feels that he or she is “protected”. In fact, nothing could be further from the truth.

Take the case of Tara Rogutski who was accepted into the Royal Ballet School in London, England. Even though she was also accepted at the Royal Winnipeg Ballet, she, together with her parents, decided to have her go to England for a cost of over $100,000.00.

The Income Tax Act allows persons to receive tax relief if they attend a “university, college or other educational institution providing post-secondary education in Canada”. There is also tax relief available for certain foreign universities that qualify under theIncome Tax Act and are listed.

Mr. Rogutski, Tara’s father, contacted Revenue Canada (now known as Canada Customs and Revenue Agency) to determine whether the Royal Ballet School qualified as a foreign university under the Income Tax Act. When the Revenue Canada official checked the computer database, it showed the Royal Ballet School to be a qualifying foreign university. In fact, the school was not a qualifying university and only showed up as such due to a computer programming error. Without being aware of the error, Mr. Rogutski then sent his daughter off to England.

When Mr. Rogutski claimed the tuition expense, Revenue Canada denied it. Mr. Rogutski appealed to the Tax Court of Canada. The judge was sympathetic but had to follow the law and ruled in favour of Revenue Canada, denying the deduction which would have been available had Mr. Rogutski sent his daughter to the Royal Winnipeg Ballet, despite the fact Mr. Rogutski had followed Revenue Canada’s advice.

Revenue Canada does have the right to provide relief in this situation under the Financial Administration Act but has no obligation to do so.

The facts set out in the Rogutski case are, unfortunately, not as rare as might be hoped. Although information received from the government is usually correct, there have been a number of situations in which I have contacted various government agencies and, in researching the validity of their positions, found them to be wrong. The opinion of a government official may have some persuasive value to a later government position, if it differs, however, don’t presume it is binding. It is best to get it in writing and then be sure the official is right.

One other thing to remember is that most agents of the Crown are immune to lawsuits, even if you could afford to take on the government. Remember, if you are relying on the opinion, get it in writing and double check it with your lawyer and accountant, especially if it comes from Revenue Canada.

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