Anti-tax crusading B.C. couple loses Tax Court battle with CRA

A federal tax court judge has dismissed a bid to avoid paying income tax and GST by a B.C. couple who made more than $1.4 millioncounselling Canadians on the evils of taxation.

According to a decision posted last week, Russell Porisky and Elaine Gould travelled the countrydistributing books and videos, running seminars and training "educators"who taught as many as 800 students the merits of an "illogical and unreasonable" method of tax avoidance.

Poriskytold Tax Court Justice Susan Wong that "in his view, income tax was actually a labour tax resulting in a form of slavery which in turn was a crime against humanity."

Not surprisingly, Wong took a different viewdismissing the couple's appeals of assessments dating back 20 years andfinding the Paradigm Education Group, which Porisky viewed as a "passion-driven duty," was, in fact,a business subject to the goods and services tax.

'Hard to describe'

Wong's decision marks the latest chapter in a battle between the Canada Revenue Agency and a couple whose theories have proven the bane of the tax collector's existence not to mention the downfall of many of their followers.

Both Porisky and Gould have been jailed for their activities; Poriskygot five-and-a-half years in 2016 for counselling fraud, and Gould was handed six months for tax evasion.

More than two dozen Paradigm educators and students across the country have also been prosecuted in criminal courts, resulting in both jail time and substantial fines.

The ruling provides a window into the growth of an enterprisethat took over the lives of Porisky, Gould and the seven children that made up their blended family.

The B.C. Supreme Courtjudge who sentenced Poriskyin 2016 said his scheme was"hard to describe" the problem being that trying to set out "the Paradigm theory in a logical manner is impossible and inadvertently lends credence to it."

"Generally, Mr.Porisky and his Paradigm theory was based on the concept that, as natural persons as opposed to artificial persons, no tax on income was payable," wrote Justice Miriam Gropper.

"As a natural person, Mr.Porisky, Ms.Gould, his educators and students could arrange their affairs by using contracts for hire, confidentiality clauses, amendments to the signature box on tax returns, disclaimers, and withdrawing from government benefit plans by using forms that Mr.Porisky and Paradigm prepared and provided to them."

A family affair

Porisky who now works as a handyman said he started Paradigm because he felt "it was his duty" to share what he believed he had learned through extensive reading of Canada's Income Tax Act and Excise Tax Act, and "people wanted to hear what he had to say."

He said he would work on Paradigm in the back room of a house where three of his children were being home-schooled. Gould said that by 2004, she attended most out-of-town seminars and "sometimes took their children, who sat with her at the welcome table."

"In addition to greeting people at the door, she sometimes made the video recording for future DVD distribution, although that task was more regularly done by the educators," Wong wrote.

"She and the children then watched Mr. Porisky's completed videos to catch technical glitches."

Inevitably, Porisky, Gould and the Canada Revenue Agency came into conflict.

Wong's decision says Gould filed no tax returns between 2004 and 2008; she claimed she didn't earn any taxable income and "did not want any income tax benefits."

Porisky told the tax court he filed a return for 2004 in March 2006 because he received a request to do so; he reported no income and no taxes payable.

The CRA assessed them anyway setting the couple's business income at $1.42 million between 2004 and 2008 andholding them liable for more than $67,000 in GST.

"Porisky stated that he did not dispute the assessed amounts because they were based on concepts that did not apply to his situation," Wong wrote.

"He explained that in his view, Paradigm was not a business, so it was not an income source for tax purposes; accordingly, there would be no need to deduct business expenses or collect GST."

'At the heart of gross negligence'

The Supreme Court of Canada has set a two-part test to determine ifan income source isa business, asking whether the activity in question isin pursuit of profit or a personal endeavour and if it is for profit whether the source of the cash is a business or a property.

Wong found it was "clear" Paradigm turned a profit "in a manner consistent with objective standards of business-like behaviour."

She also said while Porisky's "passionate views" on his "convoluted and head-spinning interpretation of the tax legislation" might be considered "a calling," Paradigm fell "within the definition of business" all the same.

The judge pointed out that Porisky and Gouldused their earnings "to pay for every aspect of their lives, including purchasing (among other things) a Las Vegas timeshare, a townhouse, a second house, gold, and a family vacation to Disneyland."

They put both of their residences in Gould's name and characterized the money used to buy them as a "gift."

"It appears that while the appellants were avoiding their tax obligations by relying on their flawed reading of the tax legislation, they were also trying to engage in tax planning," Wong wrote.

The judge also found Porisky could be held liable forgross negligence a decision that could result in a substantial penalty.

"He either demonstrated an indifference as to whether the law was complied with or not, or a deliberate preference not to comply," Wong wrote.

"It is at the heart of gross negligence."