OTTAWA — The favourable tax deal that former prime minister Brian Mulroney's lawyer scored for him when he finally declared to tax authorities his cash payments from Karlheinz Schreiber is no longer available, a federal inquiry was told Thursday. Christiane Sauve of the Canadian Revenue Agency said the federal and Quebec governments have stopped the practice of allowing Quebecers to pay tax on only half of the income they declare under a "voluntary disclosure." "We no longer have that policy," Sauve testified. Sauve said the policy has been reworked so that individuals pay tax on the total income they declare in a voluntary disclosure. She told reporters later the policy was changed in 2008. The voluntary disclosure provision of the tax code catapulted into the spotlight Tuesday after the inquiry into Mulroney's dealings with Schreiber heard about the advantageous tax treatment Mulroney received when he used the option in 2000 to deal with the $225,000 he says Schreiber gave him in 1993 and 1994. Following negotiations involving federal and Quebec tax authorities and Mulroney's lawyer, Wilfrid Lefebvre, the former prime minister wound up paying taxes on only $112,500 of the $225,000 he says he was paid to promote the German-Canadian deal-maker's corporate interests on the world stage.
The identity of taxpayers seeking to use the "voluntary disclosure" option is withheld until the final deal is sealed. The cash transactions between Mulroney and Schreiber were revealed publicly for the first time in a 2003 article in the Globe and Mail. Mulroney did not publicly admit to accepting the cash until he appeared before the Commons ethics committee in 2007. He called the dealings with Schreiber a big mistake. But he refused then to provide the committee with any documents relating to his tax treatment. "I declared it all, $225,000, and paid full tax on it," he said at the time.
Sauve described the "voluntary disclosure" provision of the tax code as an option available to people who want to correct or clear up omissions in their tax record without fear of being hit with punitive penalties. It's good for the governments because it gives them a chance to collect revenue that might otherwise not be declared. She said later the decision to end the 50-per-cent discount rate for Quebecers was spurred in part by a desire to have more uniformity across the country. "At that time, we wanted consistency across Canada, in the application of our guidelines," said Sauve, who has headed the revenue agency's voluntary disclosure division since 2001.
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