Former F1 champion Jacques Villeneuve has just settled his dispute with Revenu Québec amicably. But unlike an F1 race, it is impossible to know the outcome and to know if he has paid the bill of $ 257,728 demanded from him by the Quebec tax authorities.
Jacques Villeneuve said he was “satisfied” with the agreement, his lawyer said by email
On the track, Jacques Villeneuve wore the colors of Canada, but he resided in tax havens for a large part of his adult life. Mr. Villeneuve resided in Quebec after his career in F1, between 2007 and 2013. The dispute with Revenu Quebec concerned these years of tax residence in Quebec.
Since 2013, he has resided in Andorra, a tax haven covering the area of the island of Montreal located between France and Spain.
This amicable settlement comes two months after Jacques Villeneuve’s name found its way into documents from the Pandora Papers, a leak of confidential documents on taxpayers and companies in tax havens. As part of the Pandora Papers, Mr. Villeneuve has been the subject of a Radio-Canada report on his tax situation since the start of his career.
The notice of settlement reached with Revenu Québec at the end of November does not specify the terms of the “transaction”. The two sides did not respond to Press, who wanted to know if Mr. Villeneuve paid some or all of the taxes initially claimed. The Quebec tax authorities alleged that Mr. Villeneuve had failed to report income of $ 659,328 from two bank accounts and his Restaurant Newtown business. He was asking him taxes of $ 257,728 on these sums.
Revenu Quebec did not want to specify the details of the agreement, considering that this information “is part of the tax file and is therefore confidential” under tax laws.
“The details cannot be made public,” said Jacques Villeneuve’s lawyer.
Originally, Jacques Villeneuve had declared modest income during his years of tax residence in Quebec: $ 13,884 in 2009, $ 6,431 in 2010, $ 3,224 in 2011 and $ 5,782 in 2012. Citing documents from the litigation, Radio-Canada revealed that Mr. Villeneuve had requested in 2010 the solidarity tax credit, a measure to help low-income families.
Six years of tax residence in Quebec
When he began his F1 career in 1996, Jacques Villeneuve moved to Monaco, a tax haven where there was no income tax. Several F1 drivers reside in tax havens, particularly in Monaco. In his best years, Jacques Villeneuve was making at least $ 10 million a year. During his F1 career, from 1996 to 2006, he lived in Monaco and then in Switzerland, a country with favorable taxation for wealthy foreigners.
After his retirement from F1, Jacques Villeneuve moved to Quebec, where he lived from 2007 to 2012-2013. During these six years, he must pay Quebec tax on all of his income in the world.
After his departure, Revenu Québec carried out a tax audit, which turned out to be more complicated than expected. The production deadlines for certain documents are “long”, certain documents are never given to Revenu Quebec, and Jacques Villeneuve forgets to identify a bank account in Switzerland, alleges Revenu Quebec in a legal document.
No tax on the sale of his F1 car
At the end of the audit, Revenu Québec considers that Jacques Villeneuve has not declared some of his income.
In its first draft tax assessment in 2014, Revenu Québec alleges that Jacques Villeneuve failed to declare 6.9 million between 2008 and 2013. In 2015, the tax authorities reduced his contribution to taxes on undeclared income by 1.6 million in 2010 and 2.3 million in 2012. The tax authorities also impose penalties of 50% on taxes due, for knowingly failing to declare these sums.
Mr. Villeneuve’s lawyers argue that a significant portion of these sums come from non-taxable income. Like loan repayments. The sale of his main residence (which is not taxable). And the sale of his F1 Williams FW19 single-seater – yes, the car he won his world title with ahead of Michael Schumacher. Revenu Québec agrees that the profits on the sale of this car are not taxable.
Ultimately, the tax authorities tax Jacques Villeneuve on undeclared income of $ 659,328 over two years. And he removes the penalties. The case ends up before the Court of Quebec.
Keep the regulations confidential or not?
At the end of November, Jacques Villeneuve and Revenu Québec settled this dispute amicably. As is the practice with Revenu Québec, the details of the settlement remain confidential. In Ottawa, the tax authorities have a different attitude. When settling a case already in court, the Canada Revenue Agency generally makes the details of the settlement public by submitting a Consent for Judgment approved by the Tax Court of Canada. We can therefore know how – and to whose advantage – the cause was resolved.
These totally opposite ways of doing things both respect tax laws. But Quebec would have an interest in showing “more transparency”, believes André Lareau, associate professor in tax law at Laval University. “From the moment a taxpayer decides to challenge in court, the conclusion of the dispute should be public in nature,” he said.
We will not know if Jacques Villeneuve paid $ 257,728 in Quebec taxes. But we know that in theory, Revenu Québec was not allowed to simply cut the pear in half as the case approached in court. “According to case law, the tax authorities cannot manage risks, they are obliged to apply the law. It takes a legal basis for it to settle, ”says Khashayar Haghgouyan, professor of tax law at Laval University.
With the collaboration of Hugo Joncas, Press