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Sami Fruits ordered to pay 31 million to the tax authorities



Cash sales. Employees paid on the black. Medieval accounting. And the refusal to collaborate with Revenu Québec.

A judgment of the Court of Quebec describes the singular methods of the Maison Sami TA Fruits to evade the payment of its taxes. And concludes that the SME and its owner Sami Al Asmar must pay what is claimed by Revenu Québec, that is 31 million dollars.

The facts described in the 47-page judgment are shocking in this era when the state is under great pressure to support the economy, businesses and the health system.

Sami Fruits is this well-known fruit and vegetable store in the Montreal region, founded in 1973 by Sami Al Asmar, shortly after his arrival in Canada. The businessman learned the basics of fruit and vegetable trading from his father and grandfather in Lebanon, according to the company’s website.

“Fraud and gross negligence”

The sums at stake are astronomical for a fruit and vegetable SME: 55 million in undeclared sales and more than 30 million in salaries paid on the black market, according to estimates by Revenu Québec.

In total, the agency has therefore claimed 31 million dollars from the company and its shareholder, which includes heavy penalties for “fraud” and “flagrant negligence”, indicates the judgment, obtained at the Montreal courthouse.

Of this amount, 13.8 million are demanded from Sami Al Asmar personally and 16.2 million from the company, half of which for having failed to make deductions at source on the pay of employees (and therefore their subsequent payment to the taxman). The judgment is silent on what the company might also owe to the Canada Revenue Agency.

The case concerns the three businesses in Montreal, Laval and LaSalle, in addition to the warehouse, which were open at the time of the tax years in dispute, i.e. from 2007 to 2012. The judgment was rendered 10 years later because the Revenu Québec’s investigation and the claims were first made out of court, before being challenged in court by Sami Fruits in 2016 and 2017, then argued in court, with the many inherent procedures.

The judgment is now being appealed, says Sami Fruits’ lawyer, Jean Groleau, who says he notified Revenu Québec. The lawyer for the firm Groleau Gauthier Plante does not want to comment or indicate whether or not his clients have started to pay the tax debt in dispute.

For its part, Revenu Québec says that no appeal has been filed to date and that the deadline is April 7. This is a big win for the organization. The last known of such magnitude is that against the real estate developer Sylvan Adams, of the firm Iberville (101 million).

Two safes

According to the facts described in the judgment, Sami Fruits systematically destroyed its cash register tapes at the end of each day, in addition to having neither a price list nor a documented inventory. In addition, the sales of the years in dispute were made in cash, so that Revenu Québec had no means of verifying the income and therefore of calculating the taxes payable.

However, the tax law imposes adequate record keeping, an obligation confirmed by case law. The only register offered by the company: cash bank deposits at TD Bank which came from a safe deposit box at each branch of the company.

However, the investigation showed that the company had a second safe in the branches and a second bank account, this one at HSBC.

When the Revenu Québec inspector wanted to check the operating mode in the businesses, he was able to make a first visit, then was refused access. ” [Le comptable de l’entreprise] declares to the Tribunal that it has received instructions from Sami not to allow Revenu Québec to proceed with any other visits to the stores or meetings with employees,” wrote the judge.

Revenu Québec therefore had to use an alternative method to establish Sami Fruits’ financial profile. Based on data from Statistics Canada for the fruit and vegetable market, Revenu Québec established that the company probably had a gross margin of 29% and not 13% for an annual turnover of around $50 million. dollars. And again, “the margin retained by the auditor is to Sami’s advantage”, writes the judge.

Since the company did not provide adequate employee records (timesheets, time clocks, reliable payroll records, etc.), Revenu Québec once again had to make an estimate. The agency went to the site to observe and count the number of employees. And based on the hours of operation, she was able to infer that the organization likely had 220 employees, rather than the 178 reported.

The agency then dissected the personal file of Sami Al Asmar. “Since the audit of Sami Fruits finds significant discrepancies and that these sums are not found in the coffers of the company, Revenu Québec considers that there is appropriation of funds by Mr. Asmar”, is- he writes in the judgment.

All of these alternative methods enabled the agency to establish the 55 million in undeclared sales from 2007 to 2012, as well as the millions not collected from employees or not declared by the owner personally.

Revenu Québec’s alternative methods have been strongly contested in court by Sami Fruits’ lawyers, but case law allows the tax authorities to “guess or deduce” when the taxpayer’s explanations are unreasonable, explains the judge. The accounting negligence of the company and its refusal to cooperate weighed in the balance.

“At no time did Mr. Asmar bother to meet with Revenu Québec’s auditors. He placed between him and Sami’s administrative staff external accountants and representatives who could not answer the auditors’ questions and who did not have all the information,” wrote the judge.

Particular, anyway. We bet that the competitors of Sami Fruits will be happy…

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