Beyond Decriminalization: Sex-work, Human Rights and a New ...

PIVOT LEGAL SOCIETYA. Yeah I was going to say that many of the sex trade workers got into the, when theystarted they got into this type of work through unfortunate circumstancesA. And it, when it was to uh, you know desperate measures for food or for drugs or whatever,so they shouldn’t, that unfortunate shouldn’t be exploited to take taxes out of it.A. So that person has already suffered enough as it is.- male street-level sex workersUnder Revenue Canada’s Voluntary Disclosure Program an individual can make a voluntarydisclosure to Revenue Canada that allows him or her to avoid the penalties and prosecution thatwould otherwise be imposed under the ITA for outstanding taxes. 19 A voluntary disclosure occurswhen a person contacts Revenue Canada and provides information to correct inaccurate or incompleteinformation, or to disclose information not previously reported. If a valid voluntary disclosure 20is made, Revenue Canada does not have the authority to waive the taxes owed, but can refrain fromassessing interest and penalties. 21Where a taxpayer is unable to meet his or her tax obligations because of extraordinary circumstances,such as financial hardship, it is also possible to make a “fairness application.” 22 Under afairness application, an individual can ask Revenue Canada to waive the penalties and interest owing.Both of these options require being able to navigate the many complex aspects of our income taxsystem, and being prepared to pay taxes owed to Revenue Canada.Concerns about calculating incomeAnother issue participants discussed concerned how income from prostitution would be calculatedand recorded for tax purposes. The ITA defines “business” as “including a profession, calling,trade, manufacture, or undertaking of any kind whatsoever and includes an adventure or concern inthe nature of trade but does not include an office or employment.” 23 This broad definition encompassessex work. In reporting business income, the ITA requires a taxpayer to calculate income usingcommercially accepted accounting practices. 24 This means sex workers would need to keep properrecords of the income received from customers, as well as expenses incurred. 25 As most paymentis received in cash and customers do not require receipts, it may be difficult to prove sex workers’income. However, even without receipts, if sex workers could record the amount of money theyreceive and the expenses they incur, this may be sufficient for tax purposes.If Revenue Canada suspects that a person is under-reporting their income, then it performs anassessment to figure out a taxpayer’s net worth. 26 From the net worth assessment, Revenue Canadacalculates the taxpayer’s tax liability. Once Revenue Canada makes a net worth assessment, it is up to19 CCRA Information Circular 00-1R Voluntary Disclosure Program, September 30, 2002, online: Revenue Canada < http://www.cra-arc.gc.ca/E/pub/tp/ic00-1r/ic00-1r-e.html>.20 For a valid voluntary disclosure a person must be facing a penalty and the information provided must be complete and givenvoluntarily.21 Supra note 1, s. 220(3.1) gives Revenue Canada the authority to waive or cancel penalties and interest.22 Ibid., s. 152(4.2).23 Ibid., s. 248(1).24 Ibid., s. 9.25 Ibid., s. 230(1): Every person carrying on business and every person who is required, by or pursuant to this Act, to pay or collecttaxes or other amounts shall keep records and books of account (including an annual inventory kept in prescribed manner) atthe person’s place of business or residence in Canada or at such other place as may be designated by the Minister, in such form andcontaining such information as will enable the taxes payable under this Act or the taxes or other amounts that should have beendeducted, withheld or collected to be determined.26 Ibid., s. 152(7). “The net worth assessment is calculated by determining the taxpayer assets and liabilities at the end of the taxationyear and at the end of the last previous year for which tax could be determined; and assuming that the taxpayer’s income was equal tothe increase in his or her net worth in the period plus an estimated amount spent for personal and living expenses” (Canadian MasterTax Guide, 59th ed. (2004) at part 12100).168