Once a year Canadian taxpayers are required, by law, to file an income tax return in the prescribed form: $150(1).
For individuals: $150(1)(d) ITA, they must do so by April 30 of the following year, provided that they owe any taxes or if they are served with a requirement to file: $150(2) ITA.
There are other rules for corporations, trusts, partnerships and deceased individuals.
If any taxpayer is required to file under $150 then they are also required to estimate the amount of the taxes payable: $151 ITA.
Caesar's Reply
Once the taxpayer has filed their return, the Minister of National Revenue ("MNR") shall examine the return and assess the tax for the year, the interest and penalties, if any, payable: $152(1) ITA.
If the ministerial delegates don't agree with what the taxpayer has filed, then the MNR may at any time make an assessment, reassessment or additional assessment for a taxation year: $152(4) ITA.
Not filing won't prevent the MNR from making an arbitrary assessment: $152(7) ITA.
Some writers have concluded that Canada's self-assessment system is based on 'voluntary compliance;' however, CRA on its website, under "Tax Myths" (No 2) clarifies that the system is voluntary only in the sense that you can choose to comply. The consequences of not complying are entirely involuntary and Draconian.
Non-Filing And Late Filing
Not filing will, not surprisingly, have consequences, such the imposition of penalties: e.g., $$162(1), 163(1) ITA. Interest will also accrue (at a rate prescribed quarterly) and the taxpayer may be charged with non-filings as an offence: e.g. , $238(1) ITA.
Whether a taxpayer can be convicted of the criminal offence of tax evasion, under $239(1)(d) ITA, if they haven't filed is problematic: R. v. Paveley (1976), 30 C.C.C. (2d) 483 (Sask. C.A.); but any taxpayer who find themselves in such circumstances should immediately retain legal counsel to take advantage of the voluntary disclosure programs offered by CRA; attempting to do so without experience legal assistance may prove risky.
I Object!
Under $165(1)(a)(ii) of the ITA, a taxpayer who has been assessed, or re-assessed, may file a Notice of Objection (Form 400A) setting out their reasons for objection and all relevant facts, within 90 days.
$166.1(1) ITA does provide that were a taxpayer hasn't filed their Objection in time, that an application can be made to the MNR for an extension, but such wholly discretionary remedies are to be avoided if at all possible.
Some of the most complex statutory provisions known to mankind are found in the ITA and taxpayers who endeavour to prepare and file Objections without professional accounting or legal help are too often engaging in a forlorn hope.
If a taxpayer doesn't object then they lose their rights to complaint about that assessment.
In other words, if you want relief, you are compelled to object.
Charter $7
There is no provision in the ITA to allow taxpayers who have been charged with an offence under $239(1) ITA with an automatic extension, or a right not to appeal, pending the resolution of their criminal charges.
This element of compulsion under $165 ITA, as it applies to taxpayers charged with offences under $239(1) ITA, "owing to the threat of imprisonment": R. v. Jarvis, [2002] 3 S.C.R. 757, may violate $7 of the Charter of Rights and Freedoms.
Whether this potential violation of Charter $7 crystallizes depends on whether what access CRA Investigations has to the information contained in the Objections, and whether the prosecution 'could' use it.
CRA's Policy
CRA's publication RC 4213 "Your Rights" at page 9 of 13, under the caption "Your right to a formal review" states that,
"?appeals representatives who were not involved in the original decision are available to conduct a formal and impartial review" and again under caption "How do we ensure redress processes are impartial?" where it states that, "[T]he Appeals Branch operates independently in relation to other CCRA branches;" "Appeals Branch staff have a mandate to resolve disputes?by impartially reviewing CCRA decisions" and "The representative who reviews your case will not have been involved in the original assessment?"
The Concise Oxford Dictionary defines, "independent" as being "not depending on authority of? unwilling to be under obligation to others" and it defines "impartial" as being "?unprejudiced."
From the language used CRA is warranting to taxpayers that they have these Rights. It is therefore CRA's public policy to consider its Appeals Division (where Objections are filed) to be "impartial" and "independent" of the rest of CRA - including Investigations.
Most taxpayers would expect that CRA Investigations wouldn't have access to their Objections filed with Appeals, because communication between the divisions wouldn't be fair or impartial.
CRA's Practices
Violations of the Charter aren't established on CRA's best practice scenarios, they are based on what actually happens in practice.
Since reassessments and the criminal charges will generally proceed hand in hand this problem will continue to reoccur. Taxpayers are compelled to file an Objection, or lose their rights; but if they do file then what they have filed can immediately be used by the prosecution against them.
It may surprise taxpayers to know that CRA's Appeal Division has been known to give Objections filed by taxpayers charged under $239(1) ITA to the Investigation Division; it may astonish taxpayers to know that those materials were then used by the Crown against those taxpayers facing prosecution for tax evasion; but it should shock taxpayers to learn that when this violation of CRA's policy concerning Appeals "impartiality" and "independence" was brought to them, no one in CRA considered this the least bit objectionable - not locally and not in Ottawa.
A Clear Violation
How widespread the practice is, as yet, unknown but that it should be permitted to exist at all is, in this writer's opinion, a clear violation of Charter $7: R. v. White, [1999] 2 S.C.R. 417; Blencoe v. B.C. (Human Rights Commission), [2000] 2 S.C.R. 307.
If you are aware of any such instances, please email TER at with the particulars.
Staff Writer
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