In Taylor, the issue was whether a signed settlement
agreement under which the taxpayer waived his right to appeal
was binding. In that case, the taxpayer was assessed for income tax
and GST, as well as gross negligence penalties and interest.
He signed a settlement agreement under which the Minister of
National Revenue would vacate the gross negligence penalties and,
in exchange, he would waive his right to object or appeal in
accordance with subsections 165(1.2) and 169(2.2) of the Income
Tax Act and subsections 301(1.6) and 206.1(2) of the
Excise Tax Act. The taxpayer, who did not
have counsel advising him at the time, later claimed that
he was under duress when he signed the agreement. Having
already disposed of the penalties, he went to Tax Court
to challenge the amount of tax assessed.
Justice Judith Woods held that the taxpayer's testimony that
he was "scared" and pressured into signing the agreement
lacked credibility given his qualifications as a Certified
Management Accountant and his extensive business and financial
experience. He had ample time to consult with counsel prior to
meeting with the CRA. The Tax Court held that the settlement
agreement was "freely made" and signed without
"undue pressure." The Tax Court dismissed the taxpayer's appeal (2010 TCC
246) and the Federal Court of Appeal affirmed at 2012 FCA 148. As noted above, the Supreme
Court of Canada has declined to hear Mr. Taylor's
Given that a significant portion of tax disputes are settled and
never reach the courtroom, professional advisors should ensure
that taxpayers understand the implications of
signing settlement agreements under which
they relinquish rights of objection or appeal.
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