On November 6, 2013, at the Toronto Centre Canada Revenue Agency & Professionals Breakfast Seminar, representatives from the CRA provided an update on objections and appeals.
Anne-Marie Levesque, Assistant Commissioner of Appeals, presented these slides and made the following comments:
- The Appeals Branch reviews objections to assessments from the
- Compliance programs (audit)
- Assessment and benefit services
- Taxpayer services and debt management (collections)
- The Appeals Branch will not normally contact an assessing branch unless the assessing position is unclear or pertinent information is missing. If this is the case, the practice of the Appeals Branch is to note this in the file.
- The Appeals Branch is aware and concerned about the time required to process large files, which may take a few months to assign, and up to a year to resolve.
- The Appeals Branch manual is available at CRA Reading Rooms. A taxpayer may visit these rooms and ask for a copy, and an appeals officer will provide a copy.
- The Appeals Branch has been "swamped" by objections in the last 5-8 years, most relating to tax shelters. Historically, the Appeals Branch received 50,000 objections per year, but in recent years has received up to 100,000 objections per year. Currently there is a "significant backlog" of objections in the Appeals Branch's inventory.
- The Appeals Branch is distributing certain files to particular offices across the country (i.e., alimony, Disability Tax Credits, Child Care Tax Benefits, GST credits, etc.) to streamline the resolution for less complex objections.
- Large group files (i.e., tax shelter objections) have been concentrated in the Toronto North Tax Services Office.
- The Appeals Branch has designated certain offices as industry specialists: forestry in Vancouver; resources in Calgary; insurance, banking and mining in Toronto North; and manufacturing in Montreal.
- The Appeals Branch has moved away from the practice of granting face-to-face meetings (too expensive and time consuming, requires that objections be assigned to offices located near taxpayer's home or office). While some files may still require in-person meetings, for most files the appeals officer will not meet with the taxpayer or the taxpayer's representative. However, the Appeals Branch is committed to communicating with taxpayers and their representatives over the phone and in writing.
- The Appeals Branch will continue to ask that taxpayers make written submissions. This is to protect the integrity of the decision-making process – both for the Appeals Branch's internal quality standards and for the purposes of any external review by the Auditor General.
- Generally, the Appeals Branch is committed to resolving disputes prior to litigation. Taking a file to the Tax Court is the exception and not the rule for the Appeals Branch.
- The "benefit of the doubt" should go to the taxpayer where there is credible evidence in support of the taxpayer's version of the facts. If the taxpayer's version of the facts makes sense and is reasonable, the Appeals Branch may give the taxpayer the benefit of the doubt even in the absence of documentary evidence. However, in such cases, the Appeals Branch expects that the taxpayer will be diligent about maintaining proper documentation to avoid the same problem in the future.
- The Appeals Branch has had a settlement protocol with the Department of Justice since 2004, which has evolved over time. Recent amendments give Department of Justice counsel additional leeway to resolve low-complexity files without having to obtain instructions from the CRA litigation officer – this would apply to all informal procedure appeals and some general procedure appeals. Conversely, the settlement protocol empowers CRA litigation officers to settle informal procedure appeals without requiring sign-off by the Department of Justice.
- Historically, the Crown is successful in approximately 85% of appeals to the Tax Court. This rate fluctuates over time, but in the last three months the Crown's success rate has increased. The increase may be due to the efforts of the CRA and the Department of Justice to settle those appeals that should not go forward to a full hearing.
- When the Crown loses an appeal in the Tax Court, the reasons for judgment are reviewed by the Adverse Decision Committee, which includes the Assistant Commissioner of the Appeals Branch, Assistant Commissioners from the assessing branches, senior counsel from the Department of Justice, and a senior representative from the Department of Finance. The Committee considers whether there has been an error of law and the chance of success on appeal.
- The Appeals Branch has initiated a pilot project in British Columbia under which appeals officers will be empowered to consider relief from interest and penalties at the same time they are considering the substantive tax issues on objection. The Appeals Branch is still considering how this process may work, due to the different processes by which these decisions may be appealed by the taxpayer (i.e., appeal to the Tax Court for tax assessments, and judicial review of decisions regarding interest and penalty relief).
- Auditors are empowered to "waive" interest and penalties before assessing, while appeals officers may "cancel" interest and penalties after assessment.
- Remission orders under the Financial Administration Act are not dealt with by the Appeals Branch and are granted to taxpayers only in rare circumstances.
- The Appeals Branch would prefer that taxpayers not appeal to the Tax Court immediately after 90 days have passed from the date of filing the Notice of Objection.
For more information, visit our Canadian Tax Litigation blog at www.canadiantaxlitigation.com
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