A homebuilder whose firm was implicated in a $15 million tax-avoidance scheme has been named to another term as director of Canada Mortgage & Housing Corporation.
Jason Kenney, minister responsible for the mortgage insurer, would not comment on his reappointment Monday of Mattamy Homes’ chief operating officer to the CMHC board. Mattamy was cited last year by a federal judge for “extremely careless” conduct in avoiding millions in GST payments.
“No corporation should get away with something that an average Canadian can’t get away with when it comes to paying their taxes,” said MP Nathan Cullen, Opposition House leader. “There shouldn’t be two standards – as there shouldn’t be two standards between friends of the government and everybody else.”
Brian Johnston, COO of the Oakville, Ont.-based homebuilder, was travelling out of the country and unavailable for comment, the company said. “This is a very old and complex case involving issues he would not normally deal with,” said Brent Carey, Mattamy spokesperson.
Mattamy Homes was cited by auditors over a plan to avoid millions in GST payments on some 15,000 new homes in fifty subdivisions nationwide. Mattamy rates itself Canada’s largest new homebuilder with developments in Ottawa, Greater Toronto and Calgary.
Under the scheme Mattamy used “ambiguous” contracts to have homeowners personally pay GST-free municipal development charges for roads, utilities and transit service – all costs that homebuilders typically pay themselves, then add to new home prices that are GST taxable.
The resulting loss of tax revenue for the Government of Canada “exceeds $15 million”, Tax Court Justice Judith Woods concluded: “Mattamy’s actions were extremely careless.” The builder was also cited for crediting its customers with inflated GST rebates on their purchases.
“Even though the GST is imposed on homebuyers and not builders, Mattamy could potentially benefit from this plan because it sold homes at a lump sum price which included GST,” the judge wrote. “Therefore, any reduction in GST could potentially go to Mattamy’s bottom line, in whole or in part.”
CMHC said Johnston, a chartered accountant, was blameless in the tax scheme though he remains a senior executive.
“Please note that all of the activity in question occurred six years before Mr. Johnston began working at Mattamy,” said Charles Sauriol, CMHC spokesperson. Tax Court records indicate Mattamy ran its GST scheme from 2001 to 2006, when the firm was audited. Johnston then was an executive with rival homebuilder Monarch Corporation, and was named to the CMHC board in 2008.
However Johnston had moved to Mattamy by June 4, 2012 as the builder fought Canada Revenue’s reassessment at tax hearings in Toronto, and was chief operating officer when the firm lost its Tax Court application last February 12, according to Court and company records.
“Certainly he would be aware of a $15 million case,” said Cullen, MP for Skeena-Bulkley Valley, B.C. “If that is the conduct the government is looking for, that’s worrisome.”
“It seems that using loopholes improperly and getting out of paying millions in taxes would be a disqualifying characteristic for appointment to such an important board like Canada Mortgage and Housing Corporation,” Cullen said.
Employment Minister Jason Kenney did not respond to Blacklock’s repeated requests for an interview. Kenney earlier praised Johnston as “very experienced and talented”, but would not say if he was aware of Mattamy’s tax troubles.
By Tom Korski