Inside N.S. businessman John Risley's huge tax fight with the CRA

One of Nova Scotia's most prominent and wealthy businessmen is locked in a massive income tax battle with the Canada Revenue Agency, one that spans two decades and includes a sprawling seaside mansion, a high-performance dressage horse operation and three luxury yachts.

The federal government is claiming seafood baron John Risley didn't report $89 million in income in the form of "benefits" he received from 2000-2019 through some of his companies, which the CRA says funded living expenses, hobbies and "personal endeavours."

The 76-year-old Risley is best known as the co-founder of Clearwater Seafoods, but he also made a bundle in the nutrition and communications sectors.

He is appealing the CRA's reassessments in the Tax Court of Canada and maintains he reported what he believed were the correct amounts on his taxes. He denies making misrepresentations or false statements.

Under the Income Tax Act, the value of "benefits" conferred by a corporation to a shareholder is considered part of their income and should be taxed. For instance, if a company pays for a vacation, the value of that trip is considered taxable income.

Part of the dispute, according to court records, involves a 121-hectare property near Chester, N.S., owned by a Risley company. In 1998, Risley and his former wife built a 16,693-square-foot house on the land using millions in interest-free loans from an investment and holding firm he headed.

In appeal documents, a lawyer for Risley claims he only "partly" used the house for personal purposes, and that from 2000-2011 the property hosted charity events, business development functions for his companies, and was used to "entertain" unnamed "Canadian and Nova Scotian government dignitaries."

Risley did report or concede $33 million in taxable benefits related to the reassessments under appeal over the 20-year period. However, the heart of the conflict appears to be whether that amount is high enough, and how the CRA has parsed the personal from the business.

The agency has claimed, for instance, a Simmental cattle operation on the Chester property that included cows bred by the powerful U.S. Rockefeller family was simply a personal hobby funded through a Risley holding company that earned little or no revenue. Risley has argued the property, including the cattle farm, was only used for business purposes.

Risley has filed three separate appeals in the Tax Court, including two in 2018 and one this summer, which say he relied on a team of accountants and tax specialists to advise him and prepare his returns.

In a phone call with CBC, he initially agreed to an in-person interview. He said he doesn't dispute that he should pay tax on shareholder benefits. Instead, the problem with the CRA surrounds the high value it has assessed those benefits and the agency's methodology in calculating them.

But he later declined the interview, writing in an email that his lawyers had "found out" he intended to be interviewed, and had warned him it was "extremely unwise" as "the court will take a dim view of me arguing my case in a public forum."

"I am often minded to ignore my lawyers and do what I think I should, but in this case you can imagine upsetting the court which will [be] the ultimate arbiter of what is fair is not in my best interest," he wrote.

The CRA declined an interview request, as did Cecil Woon, the Department of Justice lawyer handling the appeal.