As the federal government continues to hunt for more ways to collect taxes, some tax experts note that tax litigation is becoming more acrimonious. The issues that get to court range widely, from simple missed limitation periods to objections from large corporations about fairness.

In the May 2013 decision in Ficek v. the Attorney General of Canada, for instance, the Federal Court of Canada (FCC) considered an application from Winnipeg taxpayer Alice Ficek. She had sought to have her 2010 tax return assessed in a timely manner. There was evidence that the Winnipeg office of the Canada Revenue Agency (CRA) had been deliberately delaying the assessment until it completed the audit of a controversial charitable donation-related tax shelter that Ficek had used. Thousands of other taxpayers had used the same tax shelter, known as Global Learning Gifting Initiatives, and had their tax credits denied.

Ficek’s tax return was assessed a few months before the hearing, but she continued the action, seeking a clarification of the CRA’s obligations. The FCC found, in rendering a clarification that sided with the taxpayer, that the CRA was using the delay to discourage other taxpayers from using the same tax shelter. Delaying assessments for that purpose is not permitted, the FCC found, concluding the CRA had failed in its duty to assess Ficek’s return with all due dispatch, as required by law.

In another decision delivered in May, Hansen v. The Queen, a self-represented taxpayer who was a subcontractor and who testified that he was using payday loans to support his family, appealed his assessment to the Tax Court of Canada (TCC). It was central to Hansen’s case that a CRA auditor had not competently reviewed his affairs and incorrectly concluded that the amounts of the loans were income.

However, Hansen, apparently confused by ambiguous communications from the CRA, missed a crucial deadline for filing a notice of objection to the assessment. Such a notice was a procedural requirement; as a result, the TCC lacked the jurisdiction to make an order to extend the deadline for the notice.

The TCC reluctantly held for the CRA. The decision by Justice Joe Hershfield notes that the assessment process can be a blunt instrument that makes self-defence in the face of a CRA audit difficult, at best, for all but the most meticulous record-keepers.

Hershfield was candid in his assessment of the CRA’s conduct: I also believe [the taxpayer’s] story needs to be told. It’s one that, regrettably, we hear all too frequently.

Large corporations are not immune to what some experts view as some overly aggressive CRA tactics. A February 2013 decision from the Federal Court of Appeal (FCA) deals with complaints by several financial services institutions, including RBC Life Insurance Co. and BMO Life Insurance Co., that arose after the CRA applied for and received orders compelling these companies to release confidential information about clients who had socalled 10/8 plans with these companies.

(For more on 10/8s, see story on page B4.) The applications were made ex parte meaning no notice needed to be given to the companies. The FCC subsequently rescinded the orders when it learned the CRA had withheld relevant facts about the application.

One of the those facts, the FCC noted, was: The Canada Revenue Agency’s decision to send a message to the industry’ by refusing to answer the advance income ruling request [by the plaintiff companies] and to take measures to chill the 10/8 plan business, in part by undertaking an audit blitz’.

On appeal by the CRA, the FCA upheld the FCC’s revocation of the ex parte orders, noting that: The Federal Court did find that a valid audit purpose existed, but it found it to be a secondary or subservient purpose to the primary purpose of chilling the respondent’s business concerning the 10/8 plans.

Ed Kroft and David Ross, lawyers with Blake Cassels & Graydon LLP in Toronto, recently co-authored a paper that refers to many other recent decisions that reflect what they refer to as the acrimonious state of tax dispute-resolution practice in Canada. The paper, entitled Recent Canadian cases on issues in Canadian tax dispute resolution, can be accessed on the law firm’s website,

Perhaps in reaction to this trend, the then minister of revenue, Gail Shea, announced an addition to the federal Taxpayers’ Bill of Rights in June 2013. This addition, Article 16, states: You have the right to lodge a service complaint and request a formal review without fear of reprisal.

Taxpayer ombudsman Paul Dubé recently highlighted Article 16. According to a newsletter that Dubé released this past August, Article 16 means that, if you lodge a service complaint and request a formal review of a CRA decision, you can be confident that the CRA will treat you impartially, and that you will receive the benefits, credits and refunds to which you are entitled, and pay no more and no less than what is required by law. You should not fear reprisal.

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