Toronto

Lobbyist's cash payments to campaigner may be offside with Canadian tax law

Legal expert warns the way major lobbying firm used a loophole in Ontario's Municipal Elections Act "effectively blows a hole in the entire election finance regime."

City watchdogs silent on whether or not they're investigating

Drone shots of an empty Toronto City Hall and surrounding area on April 1, 2020. (Sue Reid/CBC)

A major lobbying firm appears to have violated Canadian tax law when it paid a Toronto man to campaign for nine different councillors during the last municipal election.

Sussex Strategy Group confirmed it paid Kevin Haynes in cash to canvass for candidates without the politicians' knowledge, but a company executive said it didn't need to issue Haynes a T4 tax slip because the amount was so small. 

Sussex claims Haynes was a casual worker, but has provided no documentation to prove that, pointing instead to the communication Haynes revealed on his Twitter account.

Haynes said he was paid around $2,000 with an envelope of $100 bills after election day in 2018. 

Sussex neither confirmed nor denied that amount, and a company executive maintains it has done nothing wrong. 

The Canada Revenue Agency (CRA) said employers must issue a T4 if they pay more than $500. It's unclear what penalty, if any, Sussex might face for what transpired. The CRA said in an email statement it "may assess a penalty if the additional T4 slip is not filed or if it is filed after the return due date."

Sussex said Haynes should contact the CRA if he is worried about his tax status, despite the fact the CRA says employers are the ones responsible for issuing T4 forms.

"Our engagement of Mr. Haynes for casual labour was in accordance with the Municipal Elections Act ... and not in violation of municipal lobbying rules," said Colleen Ryan, the company's vice president of strategic communications.

Here's why this story matters

No official body has said Sussex has done anything wrong at this time, but experts warn the lobbying firm's actions highlight a weakness in rules designed to keep outside influence away from municipal elections.

Lawyer Stephen Aylward, speaking generally and not about this specific case, said the loophole in Ontario's Municipal Elections Act that lets companies pay regular employees to work on campaigns is bad enough, but paying temporary workers in cash just before the vote is a "serious problem."

Right now, he said, any organization — be it a lobbyist, union or even a wealthy individual — could pump as much cash as they want into any municipal candidate's campaign with zero public paper trail through this loophole, even though the province has banned candidates from directly accepting donations from corporations and unions while setting strict limits for individuals. 

"It effectively blows a hole in the entire election finance regime," Aylward said. 

It is still possible Sussex will be found to have broken the rules. Here's how:

  • Experts say if Haynes was an employee, as Sussex claims, what he did was likely allowed under the Municipal Elections Act. However, the lobbying firm may have violated employment and tax rules.
  • If Haynes wasn't a Sussex employee, Sussex may have violated the Act by providing an illegal contribution to the councillors' campaigns.

"They can't play it both sides," said Duff Conacher, of Democracy Watch. Conacher said he plans to file a complaint about Sussex's role in the campaign.

It's also possible that Sussex violated the city's lobbying rules, Conacher said.

However, Conacher said the language in the Act about who counts as an employee is so vague that it may be impossible to find Sussex broke any rules by exploiting what he calls a "loophole in a loophole." 

"You can't find someone guilty of a vague law," he said.

City watchdogs won't say if they're looking into situation

Toronto's lobbyist registrar wouldn't say if an investigation has been launched.

However, a city official with that department pointed to a list of rules on the watchdog's site, which include guidance that registered lobbyists must not "bestow an improper benefit or exert improper influence on a public office holder."

The city's integrity commissioner, the other civic watchdog that might look into what happened, also won't say if it's investigating. 

Brad Ross, the city's chief spokesperson, confirmed staff are aware of the situation.

Mayor John Tory said the issue is "worthy of further examination" at a news conference earlier this week, but his office later clarified in an email that the province should be the ones to look into the matter.

Mayor John Tory asked about election loophole

CBC News Toronto

4 months ago
1:03
Toronto's mayor says part of Ontario's Municipal Elections Act is worthy of further consideration. 1:03

The province, in a statement, said it has received no requests from Toronto to look at changing the Municipal Elections Act.

Toronto's next municipal election is set for the fall of 2022. There is currently a byelection underway to fill a vacant Scarborough seat, with the vote set for Jan. 15, 2021.

john.rieti@cbc.ca


It's been a busy week at Toronto city hall. Here are some other stories you may have missed:

ABOUT THE AUTHOR

John Rieti is the senior producer of digital at CBC Toronto. Born and raised in Newfoundland, John has worked in CBC newsrooms across the country. In Toronto, he's covered everything from the Blue Jays to Toronto city hall. Outside of work, catch him cycling in search of the city's best coffee.

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