March 2004

Non-Deductibility of Fines and Penalties

Before the current budget was tabled fines and penalties, other than those levied under the Income Tax Act, were deductible if they were incurred in the ordinary course of business. The budget proposes to deny a deduction for any fines and penalties incurred after March 22, 2004. In their opinion, the effectiveness of such penalties is diminished if a deduction is allowed for tax purposes. Keep in mind that such comments would not extend to penalties levied under the GST portions of the Excise Tax Act and interest charges levied outside of the Income Tax Act.

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