http://decision.tcc-cci.gc.ca/en/2013/2013tcc222/2013tcc222.html 
Hayfron-Benjamin v. The Queen[1] (July 9, 2013) and a related case,
Gorfain v. The Queen[2] (May 1, 2013), are Tax Court of Canada cases dealing with the question of identity theft and its potential impact on income tax appeals. The specific situation dealt with in each case was what happens when an alleged employer issues T4 returns showing income paid to a named individual disclosing their address and SIN number and the individual claims he or she was never employed by that employer.
In
Hayfron-Benjamin the Court described the situation as follows:
[6] In the years in question, Mr. Hayfron-Benjamin worked in the information technology IT and call centre sectors for several different employers. The three employers for which he has been reassessed and the amounts reported as paid to him as their employee are also IT/call centre related.
[7] The three employers each reported the amounts were paid to Jonathan Hayfron-Benjamin and identified him by his correct social insurance number. It is the taxpayer’s position that he never worked for, nor was paid by, any of these three companies and that he therefore must have been the victim of SIN fraud. Further, he maintains he did not receive his copies of the T4 or T5 slips in question.
[8] Having denied that he worked for, or was paid by, any of these companies, Mr. Hayfron-Benjamin correctly notes that it is difficult for him to prove the negative and argues that it should be up to the Crown to prove he did in fact work for and get paid by these companies.
[9] The Crown’s evidence is that each of these companies reported T4 or T5 income to a person having the taxpayer’s name and social insurance number. In addition, with respect to two of the employers, Dell and Resolve (now D+H), CRA obtained later written confirmation and supporting documentation confirming essentially the same information along with other employee and employment related information. With respect to Dell, that included the employee’s bank account information into which the amounts were deposited. CRA had nothing further than the original T4/T5 information in respect of the third employer corporation. CRA did not ask for or try to confirm whether amounts were in fact deposited by any of the three companies into a bank account of this taxpayer. The Crown essentially is left relying upon the taxpayer’s name and SIN for its decision to add the reassessed amounts in question to this taxpayer’s income.
[10] In short, the Crown did not have anyone who could say that this particular taxpayer – as opposed to another person using his name and SIN – actually worked at or for, or got paid by, any of these three companies.
[11] As I said in
Gorfain v. The Queen, 2013 TCC 136, in circumstances where a taxpayer maintains he does not know the alleged payor and that they never worked or got paid by them, it is indeed difficult for a taxpayer to put in much further evidence. Given the prevalence of identity theft and the loss of personal information including names, addresses, SINs and other personal information, including by government departments and agencies, this may have the practical effect of requiring some further persuasive evidence from the Crown in some such cases. In this case, it would have been open to CRA to request or demand from the taxpayer or his bank, his account information to establish payment. It did not make any effort in this regard.
In Hayfron-Benjamin the taxpayer did not succeed with his identity theft argument simply because the Court found him to be a wholly unreliable witness:
[15] Finally, I find that I can not accept any of the taxpayer’s testimony as credible given his letter of June 28, 2012 to this Court. At an earlier adjournment request hearing at which the taxpayer indicated he was awaiting HRSDC/Service Canada’s report following the conclusion of its investigation of his report of fraudulent use of his SIN, he was ordered to communicate with the Court regularly regarding the status of his report. By letter dated May 10, 2012, he was advised by Service Canada that the investigation had been conducted, that no fraudulent use had been detected, and that he would therefore not be issued a new SIN. The taxpayer acknowledged having received that letter in May. Nonetheless, in June he wrote to this Court stating that “… Service Canada has not written me yet. Once I receive a report, I will let you know.”
In Gorfain the taxpayer was successful:
[6] [Mr. Gorfain] has maintained consistently in his objection, in his Notice of Appeal and in his sworn testimony that he has never heard of any of these companies or their principals and shareholders, that he never worked for any of them, and that he never received any money from any of them.
[7] Mr. Gorfain’s position is plausible prima facie evidence contrary to the CRA’s assessing position. Therefore, it was incumbent upon the Respondent to provide evidence to support its position.
[8] The Government’s position has not been upheld with credible evidence and I am allowing Mr. Gorfain’s appeal. It is simply insufficient to tax a person solely because another person under audit points to them and provides their name and address. Names and addresses are readily available publicly and the companies could just as easily have given CRA almost any Canadian’s name, this would include mine.
[9] No reconciliation of the taxpayer’s banking records was conducted and no net worth assessment or similar verification of the taxpayer was completed.
…
[15] The principal of one company and shareholder of another testified that Mr. Gorfain was hired by her as a driver for that company. She said she hired him based upon a referral from someone whom she can no longer recall.
[16] She testified that the company she was president of and which hired Mr. Gorfain did not pay Mr. Gorfain. She suggested that perhaps one of the other companies in the group might have paid him, but she stated she did not know.
[17] In short, it is unfortunately entirely possible that Mr. Gorfain did work for and got paid by these companies. However, the evidence of that, such as it is, falls very short of allowing me to conclude that, on a balance of probabilities, he did.
These decisions open a new window on identity fraud in the income tax context and send a salutary message to CRA as to the standard of proof they must meet in such cases.
[1] 2013 TCC 222.
[2] 2013 TCC 136.
http://decision.tcc-cci.gc.ca/en/2013/2013tcc136/2013tcc136.html 