Businessman calculating and checking articles of agreemen

The Canada Revenue Agency (CRA) and Revenu Quebec (RQ) should be held financially liable when auditors’ mistakes harm small businesses, says the Canadian Federation of Independent Business (CFIB).

Last week, CFIB submitted an affidavit in support of Restaurant Le Relais de Saint-Jean and its owner Gary Chionis’ petition to have their case against the tax authorities for compensation heard by the Supreme Court of Canada (SCC).

The business and its owner are petitioning the SCC to review a decision by the Quebec Court of Appeal on whether CRA and RQ are liable for errors committed by their auditors and collection agent.

In 2005, an audit by RQ claimed the business owed $1 million in sales taxes. The business and its owner incurred $350,000 in accountants’ and lawyers’ fee expenses over five years to establish the claim was made in error, the CFIB says. The restaurant, which has now been shuttered, and its owner were never compensated by the CRA or RQ.

“When tax authorities make a mistake of this magnitude, it puts a huge financial strain on the business owner, causes them personal stress, hurts their reputation and sometimes leads to the permanent closure or winding down of the business” said Corinne Pohlmann, the CFIB’s senior vice-president of national affairs. “We urge the Supreme Court to do the right thing and review the Relais decision by the Quebec Court of Appeal.”

The CFIB is asking the SCC to provide guidance and establish a proper threshold for when the CRA and RQ will be held liable for audit and collection actions that have proved to be damaging.

“There is a big imbalance of power between tax authorities and the small business owners they audit,” Pohlmann said. “There needs to be greater accountability on the part of CRA and RQ when an error in the audit process causes undue damages to small business owners.”