Nova Scotia

Waycobah loses tax case

A Cape Breton First Nation band has been hit with a $3.2-million federal tax bill that it says will take up to 30 years to repay, CBC News has learned.

Owes Ottawa $3.2 million

A Cape Breton First Nation band has been hit with a $3.2-million federal tax bill that it says will take up to 30 years to repay, CBC News has learned.

The Waycobah band submitted its repayment plan to the Canada Revenue Agency earlier this month and is expecting a response to its offer within days.

"What it comes down to is we are paying money that we never collected," Waycobah Chief Morley Googoo told CBC News Wednesday.

The band is being penalized for its failure to collect taxes from non-natives who purchased gasoline, tobacco and other products from a Rod's One Stop gas station the band bought in 2000.

The Canada Revenue Agency is seeking tax, interest and penalties from a five-year period. It would not comment on this case.

The band says at the time the collection of taxes from non-natives was a "grey issue." It began collecting and remitting taxes when the issue was settled in a separate court case.

It will be painful for the band to repay the money, Googoo said.

"We don't have those monies. Now you are forcing us to take money that's designated for housing, education and other basic needs in the community out of that to pay for an imaginary assessment," he said.

"We'll be making a payment arrangement over the next 20 to 30 years to get rid of that debt."

He would not reveal the amount of the monthly payments.

The band has been fighting its tax bill for years on the grounds it was an unreasonable hardship. It had the support of the Nova Scotia government.

But the band lost in the Federal Court of Canada. In November 2010, the court dismissed an application for remission; in effect, forgiveness of what it owed the taxman.

Mr. Justice Yves de Montigny ruled a deputy commissioner of the CRA acted fairly in denying the band remission. 

"There was a history of non-compliance by the Applicant stemming from its deliberate decision to ignore its tax obligations," the judge noted.

The result is a hefty tax bill.

"What this court case does is bring us back to a $3 million deficit," Googoo said.

The repayment number was calculated after consultation with a newly elected band council and the accounting firm of Grant Thornton, which co-manages the bands finances because of its high debt ratio.

"We were on the way out of co-management. But losing this court case requires us to stay in co-management," Googoo said.

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