Canada Revenue Agency (CRA) Offers Advice for Settling Tax Dispute Claims, Part 1

July 31st, 2014 by

By Ivan Merrow, Summer Law Student

On June 19, 2014 the Canadian Tax Foundation (“CTF”) held an event titled “Tax Dispute Resolution: an Inside Look from the Government’s Perspective.” Devry Smith Frank LLP (“DSF”)’s tax litigation team attended the event to better assist its corporate and personal clients to resolve their disputes with the Canada Revenue Agency (“CRA”).

Part one of this three-part article series begins with Ms. Anne-Marie Lésvesque, Assistant Commissioner of Appeals for the CRA:

CRA has a two-year backlog of ongoing donation tax credit disputes

Ms. Lésvesque, speaking for the CRA, explained that the timely resolution of disputes is made more difficult by an imbalance between resources dedicated to the CRA’s appeals unit and the number of ongoing disputes. As an example, Ms. Lésvesque explained that the CRA is currently dealing with a glut of 175,000 donation tax credit disputes. In a regular year, the number is closer to 50,000 to 60,000.

Ms. Lésvesque estimated that it would take one to two years to eliminate this backlog. In the meantime, tax litigation lawyers like those at DSF can work with you to protect your rights while moving your tax dispute closer to resolution with the CRA.

Avoid commonly used arguments that are commonly unsuccessful

Speaking from the CRA’s perspective, Ms. Lésvesque also suggested that repetitive appeals such as the “natural persons argument” have increased in popularity but are not succeeding at the appeal level or in tax court. Toronto tax lawyers like DSF’s own save their clients time and money by refusing to put forward “fad” arguments that are unlikely to be successful.

Cases of legal interpretation are more likely to go to trial

Ms. Lésvesque also shared that while the CRA appeals process must be viewed as impartial, it is legally bound to follow the CRA’s published interpretation of the Income Tax Act(the “Act”). Settlement in cases where the CRA’s and taxpayer’s interpretation of the Act are different are more likely to go to trial.

In contrast, the CRA is far less likely to go to trial where the facts are in dispute. Ms. Lésvesque explained that where there are issues of credibility, the taxpayer should have the benefit of the doubt, at least in his or her first dispute with the CRA.

Tax lawyers at DSF can help taxpayers put forward their best case when explaining why the CRA has made errors in its tax reassessments or enforcement measures. Ms. Lésvesque suggested that the CRA’s success rate at trial is currently 80%. Having a great lawyer on your side can increase the odds both for early settlement and success at trial in your tax law case.

Stay tuned to the Devry Smith Frank LLP tax litigation blog for part two of this series that discusses what the Department of Justice’s former Senior Counsel had to say about settling tax dispute claims at this event.

As always, for any tax law related matters in Toronto, Ontario Canada, contact Devry Smith Frank LLP at 1-416-446-1400 or Eldad Gerb at 1-416-446-3327.

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