Failure to file your tax returns and tax evasion are offences punishable in the criminal courts. Understanding this, the delinquent taxpayer who chooses to come forward through a voluntary disclosure, to confess and redress the situation is wise to do so only from the protection of lawyer-client privilege.
An audit is another situation where, if significant discrepancies are found, a criminal prosecution can be instituted or gross negligence penalties levied.
The confidentiality of lawyer-client privilege enables taxpayers to openly discuss their serious tax discrepancies or evasion with their lawyer. Because of this legal protection, the CRA cannot compel your lawyer to reveal any information.
Accountants cannot offer such confidentiality. They can be compelled to reveal client information. Accountants can also be required to testify in the tax or criminal court against their own clients.
MORE IS NOT ALWAYS BETTER
But it can get even worse! Where an accountant is also qualified as a lawyer and represents a client in a tax evasion, failure to file matter, or in an audit that subsequently turns criminal, the courts may hold that related accounting work paper(s) done by the hybrid lawyer/accountant and discussion(s) about accounting matters with the client are not protected under solicitor-client privilege. In this situation, it can easily be argued that it is not clear in what capacity the accountant/lawyer is acting. This actually happened in an American tax case. There, the IRS successfully forced the hybrid accountant/lawyer to divulge his accounting papers and explain them in court – all to the detriment of his client.
Can this happen in Canada? The following opinion from an eminent Canadian criminal lawyer confirms that it is equally likely to happen here.
“Where an individual holds dual qualifications, as an accountant/lawyer, the client may convey information to him/her in the context of a legal proceeding. There would be a significant risk that solicitor/client privilege would vanish in circumstances where the hybridpractitioner attempts to give such advice. The reason for this is simple; for example, if conducting practice from an accounting firm, the receipt of information and the giving of advice in a legal context would blur, potentially to the point of extinction, the doctrine of solicitor/client privilege. The practitioner cannot split his brain between advice that is strictly or business or accounting related and that which is legal advice. I cannot be retained as an accountant and provide any legal opinion even if I am also qualified as a lawyer. When the line will be drawn between information received and advice given as an accountant versus as a lawyer will often be impossible to determine. If retained as a lawyer, I cannot use another part of my brain (the accounting side), and claim solicitor/client privilege for work conducted by me, in this context, of an accounting nature.
Accordingly, there are genuine risks to the doctrine of solicitor/client privilege when advice is sought and received from hybrid practitioner. Many clients will not understand this risk, often until it is too late, and confidential information they thought they were conveying to a professional, is compelled to be produced to Revenue Canada.”
Tax delinquents must understand that your accountant can be forced to testify against you. Even worse, in the case of the hybrid lawyer/accountant, more may not be better and, if the hybrid practitioner does any accounting work, can actually harm the client.
Failure to file your tax returns and tax evasion are offences punishable in the criminal courts. Understanding this, the delinquent taxpayer who chooses to come forward through a voluntary disclosure, to confess and redress the situation is wise to do so only from the protection of lawyer-client privilege.
An audit is another situation where, if significant discrepancies are found, a criminal prosecution can be instituted or gross negligence penalties levied.
The confidentiality of lawyer-client privilege enables taxpayers to openly discuss their serious tax discrepancies or evasion with their lawyer. Because of this legal protection, the CRA cannot compel your lawyer to reveal any information.
Accountants cannot offer such confidentiality. They can be compelled to reveal client information. Accountants can also be required to testify in the tax or criminal court against their own clients.
MORE IS NOT ALWAYS BETTER
But it can get even worse! Where an accountant is also qualified as a lawyer and represents a client in a tax evasion, failure to file matter, or in an audit that subsequently turns criminal, the courts may hold that related accounting work paper(s) done by the hybrid lawyer/accountant and discussion(s) about accounting matters with the client are not protected under solicitor-client privilege. In this situation, it can easily be argued that it is not clear in what capacity the accountant/lawyer is acting. This actually happened in an American tax case. There, the IRS successfully forced the hybrid accountant/lawyer to divulge his accounting papers and explain them in court – all to the detriment of his client.
Can this happen in Canada? The following opinion from an eminent Canadian criminal lawyer confirms that it is equally likely to happen here.
“Where an individual holds dual qualifications, as an accountant/lawyer, the client may convey information to him/her in the context of a legal proceeding. There would be a significant risk that solicitor/client privilege would vanish in circumstances where the hybridpractitioner attempts to give such advice. The reason for this is simple; for example, if conducting practice from an accounting firm, the receipt of information and the giving of advice in a legal context would blur, potentially to the point of extinction, the doctrine of solicitor/client privilege. The practitioner cannot split his brain between advice that is strictly or business or accounting related and that which is legal advice. I cannot be retained as an accountant and provide any legal opinion even if I am also qualified as a lawyer. When the line will be drawn between information received and advice given as an accountant versus as a lawyer will often be impossible to determine. If retained as a lawyer, I cannot use another part of my brain (the accounting side), and claim solicitor/client privilege for work conducted by me, in this context, of an accounting nature.
Accordingly, there are genuine risks to the doctrine of solicitor/client privilege when advice is sought and received from hybrid practitioner. Many clients will not understand this risk, often until it is too late, and confidential information they thought they were conveying to a professional, is compelled to be produced to Revenue Canada.”
Tax delinquents must understand that your accountant can be forced to testify against you. Even worse, in the case of the hybrid lawyer/accountant, more may not be better and, if the hybrid practitioner does any accounting work, can actually harm the client.
DioGuardi offers solutions for tax problems such as:
Unreported income
Unfiled tax returns
Payment arrangements
Unpayable tax debt
Tax dispute litigation
Criminal tax defense
Wills, Estates & Trusts
DioGuardi Law offers these will, estate and trust services for individuals and business-owners:
Wills
Preparation of trust agreements
Powers of attorney
Estate administration
Probate
Representation in estate driven litigation
Real Estate
DioGuardi Law can assist you with all your real estate needs including:
Newly constructed/Resale
Purchases and Sales
Title transfers
Leases
Private mortgages
Refinancing
Condominiums
Vacant land
Tax Debt Relief
When your tax balance is too large to be affordable, DioGuardi Law can protect your home, your cash flow and your financial assets from the Taxman. It is essential that we begin planning a strategy before the CRA registers a lien against your properties or seizes financial accounts, and before you engage with an insolvency trustee.
Business & Tax Planning
DioGuardi Law has the experience to provide:
Resident and non-resident corporate restructuring
Optimum use of holding corporations
Continuity and succession planning
Tax-free transfers
Losses and ABIL planning
Making interest tax deductible
Small business planning
Corporate & Commercial Law
DioGuardi Law have represented business clients for the last 50 plus years and have supported their legal requirements on an on-going basis by offering the following services:
Incorporations and corporate governance
Corporate reorganizations and transactions for the directors and shareholders
Negotiation and drafting of agreements, professional corporations, minute book maintenance
Brigitte DioGuardi
B.A., LL.B
Brigitte obtained her Law Degree from the University of Sheffield in the United Kingdom. Upon her return, she qualified for the Bar and was called to the Law Society of Ontario (formerly the Law Society of Upper Canada) in 2002. She was also a member of the Bar of British Columbia and headed up the Vancouver office of DioGuardi Tax Law. Fluently bilingual in English and French, Brigitte has broad experience in the areas of:
Joyce Bruno has worked as executive legal assistant to Paul Dioguardi for 35 years and continues to offer her expertise and experience to the Dioguardi Law firm. Joyce’s role has evolved over the years and has acquired and developed many skills. She is an invaluable asset in case management and ensures the smooth running of our office.
Paul DioGuardi
B.A., LL.B, KING’S COUNSEL, SENIOR COUNSEL
Paul obtained his Law Degree from Queen’s University in 1964. He is a member of the Bars of Ontario, British Columbia and the Turks and Caicos Islands, a British tax free territory in the West Indies. He has over 50 years of experience and was trained at the Ottawa head offices of Revenue Canada and the Tax Litigation Section at the Department of Justice. Paul has had and continues with an extensive career in various areas of law such as:
