When the tax trial of the century wrapped up in Ottawa this past week, George Harris, Canada’s mild-mannered crusader for tax fairness, had a lot to feel good about.

Five years ago, angered by a news report that Revenue Canada has allowed one of Canada’s wealthiest families to move $1-billion out of the country on a tax-free basis, Harris decided to take the government to court and force it to reassess the family.

If Harris wins, the Canadian government will land a windfall worth more than $300-million.

At the time, all the experts told him that his case did not stand a chance. The courts would never allow one taxpayer to use the courts to have another taxpayer reassessed, even if it could be shown that it was in the public interest. Harris, and his lawyer Arne Peltz, proved them wrong.

And, last week, Canadians got a peek behind the closed doors of Revenue Canada. They heard how, for six weeks, senior Revenue Canada officials recommended against granting the family a positive tax ruling.

But just days after the family’s adviser told bureaucrats that he was going over their heads, the Deputy Minister of National Revenue, Pierre Gravelle, and his senior adviser decided to override that recommendation.

In the trial, Gravelle told the court that at the time he made the recommendation he had not read any of the documents dealing with the request. His adviser told the court that the only two documents he had read were memorandums that recommended against making the ruling.

Bob Beith, the deputy minister’s senior policy advisor, told federal court that he only became involved in the ruling on Friday, December 20, 1991. Shortly after 11 a.m. on Monday December 23, he recommended to Gravelle that the government go ahead and grant the advance ruling.

By giving the ruling, the government gave up its right to hundreds of millions of dollars in tax revenue. Beith testified in court that before making the ruling:

  • he had not read the family’s original request;
  • he had not read the Revenue Canada rulings department document recommending against granting the request;
  • he had not read the decision of the Revenue Canada rulings review committee recommending against the request;
  • he had not read or even known of an alternative proposal submitted by the family;
  • he had not become aware of the reservations that Revenue Canada staff had with side deals that were incorporated into the final ruling.

As one of Harris’s lawyers, Norm Cuddy, argued at the outset of the trial, the evidence indicates that this was a rush to judgment that cost the Canadian government hundreds of millions of dollars.

The trial will conclude on October 17, 18 and 19, when the closing arguments are made in Winnipeg.