Quebec Court rules that prostitution revenue is taxable
by Paul Delean, Montreal Gazette
Revenue generated from prostitution is taxable, a Quebec Court judge has reconfirmed in a judgment upholding $1.2 million in Revenue Quebec assessments against Michel Catudal, the former operator of local male-escort agency Hot Boys Enr.
Catudal, who actually worked on contract for Revenue Quebec in the 1980s doing tax verification, appealed the assessments, claiming responsibility for collecting the 15-per-cent sales tax fell on the prostitutes who worked for the agency, the tax department used erroneous figures that didn’t include business costs such as salary, automobile and “bad debts,” and the proceeds of crime aren’t taxable in any event.
Revenue Quebec said jurisprudence clearly establishes that the proceeds of crime are taxable, sales tax did apply and it was his job to collect it, and stiff penalties were justified because Catudal consciously omitted declaring all his income.
Court was told Catudal declared annual earnings that averaged $13,261 between 1995 and 2005 while actually receiving more than $600,000 as his cut from Hot Boys Enr., a business that collected more than $2.4 million over that period.
He was arrested by Montreal police in 2005 and they seized the company’s books and the client list, which had 2,900 names. Dates, services, preferences and transaction costs were listed for each name. Revenue Quebec said it arrived at its numbers by adding up those amounts, attributing a quarter of the gross revenue to Catudel.
It found he under-reported his business income by $470,860. Penalties and interest brought the total up to $1.2 million.
Convicted of procuring and sexual exploitation in 2006, Catudal received a 40-month sentence. He also surrendered to the government $224,700 in cash found in his sister’s safety-deposit box.
Quebec Court Judge Armando Aznar was not impressed by Catudal’s argument the money wasn’t taxable, particularly since he’d even worked for the tax department.
“How can the plaintiff seriously declare he didn’t believe revenue from illegal sources was taxable while at the same time affirming he couldn’t declare it for fear of being arrested or charged criminally?” Judge Aznar wrote.
“At the very least, he’s shown negligence and carelessness.”
Judge Aznar said the Canadian and Quebec tax systems put the onus on the citizen to voluntarily declare all revenue from all sources. And revenue from illegal activity has been included for decades, he said, citing a 1928 decision pertaining to illegal alcohol.
Prostitution revenue is taxable in Quebec
