Simplifying The Resolution Of Tax Disputes In Canada

• Published date: 10 January 2025
• Law Firm: Fasken
• Author: Timothy Fitzsimmons and Marie-Claude Marcil

Canada has a world-class tax dispute system. For the most part, participants engage in the process in good faith, act with integrity, and treat all parties with fairness. We shouldn't forget this. But our tax dispute process can and should be simplied.

In this article, we present several recommendations for reform. We expect that these measures would enhance eciency and speed the resolution of tax disputes while protecting the broader integrity of the tax system.

Background

Canada's self-assessing tax system is a "pay and chase" model: the CRA processes taxpayers' returns, conrms taxpayers' lings, collects amounts owing, and refunds overpayments. Then the agency reviews and audits selected taxpayer les. If reassessments are issued, the CRA's Appeals Branch may be called on to resolve any disputes through an administrative process. All of this happens before a matter reaches court.

Although the system has served stakeholders well, it is in some respects inecient. As tax compliance grows more complex and the volume of tax litigation increases, policy makers should be seeking ways to create a simpler, fairer, more ecient tax dispute system.

We acknowledge that some progress has been made. The TCC has sought to improve eciency by promoting case management and large group appeals, the use of expert panels, the remote commissioning of adavits, common books of authorities, procedures for virtual and hybrid hearings, and a preliminary ruling docket. But much more could be done to simplify the system. Below are some specic suggestions.

Single Unied Tax Court

In the wake of the SCC decision in Dow Chemical Canada ULC (2024 SCC 23), there is clearly a system of split concurrent jurisdiction in Canada. The TCC hears appeals that challenge the correctness of assessments, while only the Federal Court can review discretionary decisions of the minister of national revenue. The result is a parallel and sometimes confusing system for challenging audit procedure and assessments. Where there is uncertainty about which court has jurisdiction, taxpayers facing a ticking clock may initiate parallel processes to protect their rights.

In Dow, the SCC stated that any streamlining would require parliamentary action. In our view, the time has come for such action. We recommend that the relevant statutes (the Federal Courts Act, sections 18 to 18.5, and the Tax Court of Canada Act, section 12) be amended to give the TCC jurisdiction to undertake judicial review of the minister's...