Tax Court of Canada

1. Tax Court of Canada Tax Procedures in Canada Chair: Clement Endresen (Supreme Court of Norway) Panel: Wyman Webb (Federal Court of Appeal) David Graham (Tax Court of Canada)

2. Canadian Tax

3. Regional Incentives • At one time a tax credit of 60% of the capital cost of certain assets acquired for use in Cape Breton could be deducted against taxes

4. Cape Breton

5. Cape Breton

6. Cape Breton

7. Incentives for Resource Exploration • A company that is searching for new oil and gas or mineral deposits can issue flow-through shares • This allows the company to raise capital for exploration by renouncing the exploration expenses to its shareholders • Shareholders can claim expenses that were incurred by another person (the exploration company)

8. Jurisdiction • Tax Court of Canada: • determines the validity or accuracy of a federal tax assessment • criminal courts: • tax evasion or fraud • Federal Court: • all matters relating to federal tax other than the above • Provincial superior courts • all provincial tax matters

9. System Overview • Supreme Court of Canada • Federal Court of Appeal • Tax Court of Canada Court Canada Revenue Agency Administrative appeals Audit

10. Audit • Getting into the system: • taxpayer files a tax return • taxpayer fails to file a tax return and is assessed anyway • liability for someone else’s taxes • e.g. director’s liability • e.g. third party conveyance

11. Audit • Limitations on assessment: • normal reassessment period • generally, 3 years for individuals and small companies • generally, 4 years for everyone else • does not start until the taxpayer has been assessed • extensions for carelessness, neglect or wilful default

12. Audit • alternative assessment techniques: • net worth assessments • bank deposit analysis • yield analysis • industry specific techniques

13. Audit • taxpayers are notified that they owe tax using notices of assessment or reassessment

14. Administrative Appeals • timelines: • 90 days to object • possible one year extension on application to CRA or Tax Court

15. Administrative Appeals • procedures: • review by independent part of CRA • may consider new evidence or arguments • procedure is the same for all taxpayers • large corporations have to provide more detail

16. Administrative Appeals • after a certain amount of time has passed, a taxpayer who has filed an objection, can terminate the process and move directly to court

17. Administrative Appeals • potential outcomes: • confirm the assessment • reduce the assessment • increase the assessment • this is rare

18. Tax Court • Overview of the Court • Chief Justice and Associate Chief Justice • 20 full time judges • a number of supernumerary judges • 5 deputy judges • 12 registries across the country • 59 sitting locations across the country

19. Tax Court • timelines: • 90 days to appeal to Tax Court • possible one year extension on application to Tax Court

20. Tax Court • pleadings: • Notice of Appeal • Reply • contains assumptions of fact • Answer • not common

21. Tax Court • informal procedure: • ≤ $25,000 • relaxed rules of evidence • no document exchange or discovery • moves very quickly to trial • very limited costs • taxpayers can appear in person or be represented by an agent • 42% of appeals filed

22. Tax Court • general procedure: • full rules of evidence • document exchange (full or partial) • discovery • generally at least a year to get to trial • taxpayers can represent themselves or be represented by counsel • 58% of appeals filed

23. Tax Court • burden: • balance of probabilities • generally taxpayer bears the burden • Minister may make assumptions of fact • Minister bears the burden if the tax year is statute barred and to support penalties

24. Tax Court • understanding the other side’s case: • informal procedure • the government knows what it learned in the audit • the taxpayer sees the government’s assumptions of fact • the taxpayer has copies of correspondence from the government

25. Tax Court • understanding the other side’s case: • general procedure • the taxpayer sees assumptions of fact • each side files a list of documents • each side undergoes discovery

26. Tax Court • disputes over documents and questions: • parties apply to Tax Court to settle the issue • disputes are heard by a judge who will not be the trial judge

27. Tax Court • judge’s knowledge prior to trial: • the judge will only have seen the pleadings • will not have seen: • any documents from the audit or administrative appeal stage • any documents exchanged during the appeal • will not have heard • the discovery testimony • any disputes prior to the trial will have been handled by a different judge

28. Tax Court • settlement: • can occur at any point in the process • Tax Court will conduct settlement conferences • the settlement conference judge will not be the trial judge

29. Tax Court • settlement: • the government is restricted to settling on a “principled basis” • i.e. a basis that is consistent with the facts and the law

30. Tax Court • trial process: • generally the taxpayer goes first • evidence at trial: • oral testimony through witnesses • may include expert witnesses • limited affidavit evidence on specific issues

31. Tax Court • privacy: • trials are open to the public • limited personal information is redacted from documents • generally financial information is not redacted • may apply to the Court to seal documents or have the proceedings held in camera but this is rare

32. Tax Court • deciding appeals: • apply principle of stare decisis • administrative publications are not binding and are frequently ignored • legislative explanatory notes may be helpful • the Court is bound by federal law but applies provincial laws where applicable • not a court of equity

33. Tax Court • decisions: • judgment itself must be in writing • reasons can be oral or in writing • written decisions are published

34. Tax Court • appeals: • losing party can appeal to the Federal Court of Appeal • can appeal both interlocutory and final decisions • standard of review depends on the issue • appeals last one to three hours

35. Tax Court • appeals: • can appeal a decision of the Federal Court of Appeal to the Supreme Court of Canada with leave

36. Collecting Tax • Tax Court does not have jurisdiction over collection of taxes • taxpayer can pay at any time • interest accrues while unpaid • government cannot collect while taxpayer is at administrative appeal or in Tax Court of Canada • exceptions: • GST/HST • large companies • jeopardy collection orders

37. Challenges for the Tax Court • unrepresented taxpayers • under-represented taxpayers • disputes over document disclosure and questions on discovery • lengthy trials • large group files

38. Questions?