Readers of Blaneys on Business may
recall an article in the December, 2011 issue suggesting that,
while there is generally no requirement to pay taxes owing
immediately, the process of delaying payment can prove to be an
expensive proposition, considering the interest that accrues on
Two recent court decisions, however, provide
a vivid reminder that timing obligations are not the taxpayer's
alone. The Canada Revenue Agency (CRA) has them,
Once again, the process begins with filing an
income tax return (both for individuals and corporations) within
the time prescribed in the Income Tax Act (the Act). The
Act then requires the CRA to examine these returns "with all
due dispatch" and then issue a Notice of Assessment. A Notice
of Assessment will indicate what taxes are payable as well as any
interest that is owing on taxes unpaid at the time. This interest
continues to accrue on a daily basis until the taxes are
The CRA may then review and reconsider a
return and reassess the taxpayer by issuing a Notice of
Reassessment within three years from the date of the original
assessment. (There is no time limit if there is fraud or
misrepresentation). Where an assessment or reassessment is issued,
if the taxpayer disagrees, he may file a Notice of Objection and
the CRA must again, "with all due dispatch," reconsider
and then vacate, confirm or vary the assessment or
But what if the CRA delays the performance of
its obligations in either the assessment or objection
Two recent developments are very interesting
in this regard. First, in a 2013 case in Winnipeg, the CRA was
sanctioned by the Federal Court for unwarranted delay in issuing
Notices of Assessment and refunds in cases where investors had
invested in a certain tax shelter.
The court found that the CRA had abused its
authority by attempting, through this delay, to discourage
taxpayers from investing in tax shelters.
More recently, the Ontario Superior Court of
Justice found that the CRA was not entitled to collect the
interest that had accumulated on unpaid taxes where the CRA had
failed to deal with the Notice of Objection on a timely basis and
essentially had "sat on the file" for approximately three
While the court did not specifically discuss
the CRA's motives in this latter case, it was apparent that the
intent, again, was to discourage tax shelter investments that the
CRA did not like.
None of this is to suggest that taxpayers
should not pay their taxes on time. But it does point out that the
CRA has obligations to the taxpayer and that the taxpayer has
certain judicial remedies where the CRA does not discharge its
obligations in an appropriate manner.
In essence, the courts are saying that, when
it comes to discharging tax obligations, it's a two-way street
and both sides have to play fair.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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