Tax rules protect the tax collector. They are not intended to protect taxpayers. Taxpayers who do not comply with the rules lose all their rights. The Charter does not protect taxpayers.
Rule 1: Taxpayers must voluntarily self-assess their tax payable and file their tax returns without request or notice within the time limits established in the Income Tax Act (ITA).
The Canada Revenue Agency (“CRA”) will verify the mathematical accuracy of the returns and ensure that they comply with legal requirements. For example, the Minister will compare an individual’s tax return with the information slips that his employer or stockbroker files in the tax return slips.
Rule 2: The Minister will send the taxpayer a notice of assessment, which determines the amount of tax, if any, the taxpayer owes. The assessment is judge be made on the day it is mailed or transmitted electronically. The CRA may post the notice to the taxpayer’s My Account or My Business Account and, once downloaded, it is considered “available” to the taxpayer.
Rule 3: The Minister is required to issue the notice of assessment “with due diligence” and send it to the address shown on the taxpayer’s return either by mail, electronically or, in rare case, by personal delivery.
Rule 4: The requirement to assess taxes with due diligence is hollow. The taxpayer may seek judicial review in Federal Court for the Minister’s delay in assessing. In practice, the courts interpret the legal obligation with such leniency that the minister can take as long as she wants. The probability of obtaining an order of mandamus [Latin for “we command”] is practically nil. It is better for the taxpayer to sit on their hands and wait. Here, we find the DNA of procedural tax rules.
Rule 5: No notice of objection, no appeal, just pay. The assessment triggers the objection period that applies to the taxpayer. It’s a red flag. The notice of objection is the first procedural step in contesting the Minister’s assessment. The general rule is that the taxpayer must file their objection in writing within 90 days of the date it was sent to the address shown on the return or made available to the taxpayer. It is not enough to call the CRA, even if you can reach the CRA.
Rule 6: What happens if the taxpayer never receives the notice of assessment because Canada Post, or an electronic service, does not deliver it, or the taxpayer changes their email address. The taxpayer is usually unlucky and loses the right to appeal. The CRA only has to establish that the assessment was sent to the correct address. The taxpayer is then deemed to have received it.
[There is a discretionary provision available if an individual
files an adjustment request after the limited period].
Rule 7: The CRA decides first, then decides again. The notice of objection triggers an administrative appeal to the CRA, which reconsiders its own initial decision to assess. Both the Assessing Officer and the Appeals Officer are employees of the CRA. However, there is no judicial review for the decision maker who rules on his own prior decision.
Rule 8: The CRA is not bound by its own errors. A notice of assessment is judge be valid and enforceable notwithstanding any error, defect or omission or in any proceeding under the ITA.
Rule 9: The administrative appeal to the CRA can last from 12 months (single appeals) to 6 years [rules during Covid-19
extend these timelines]. During this time, the taxpayer is liable for non-deductible interest, compounded daily at a prescribed rate (approximately 6%) on any amount assessed. Therefore, it is prudent to pay upfront before any legal action, which can easily add 4-5 years in simple cases and more during Covid.
Rule 10: Any interest refunded following a successful appeal is fully taxable as income.
Rule 11: When filing his notice of objection, the taxpayer has two choices:
- He can wait months (or years) for the minister to confirm or reassess his statements; Where
- He can appeal to the Tax Court of Canada if the minister does not respond within 90 days of being served with the objection.
Rule 12: A taxpayer who receives a decision on their objection has 90 days (plus any Covid-19 related extension) to appeal to the Tax Court of Canada. The court office must receive the notice of appeal on time.
The twelve rules protect the Crown. They are not intended to protect taxpayers, who have minimal procedural rights.
Taxpayers who do not file objections and appeals in a timely manner lose all rights.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.