Under the federal Income Tax Act, the Canada Revenue Agency must consider a taxpayer’s objection and must vacate, confirm or vary the underlying tax assessment. This review must be completed “with all due dispatch”.
Unfortunately, no specific timeline is required for the CRA’s review of an objection (unlike the many specific deadlines imposed on taxpayers pursuant to the Income Tax Act or otherwise). Generally, a taxpayer’s only recourse in a case of excessive delay is to request interest relief or make a service complaint to the Office of the Taxpayer’s Ombudsman. The CRA has stated that it is aware of these potential delays, and has implemented service standards in respect of the various types of objections it receives each year
On November 29, 2016, the Office of the Auditor General of Canada released its report on the CRA’s review of income tax objections and included the following summary of its conclusions:
We concluded that the Canada Revenue Agency did not process income tax objections in a timely manner.
Although the Agency had developed and reported performance indicators for the objection process, the indicators were incomplete and inaccurate. Specifically, there was no indicator or target for the time that taxpayers should wait for decisions on their objections.
In addition, the Agency did not adequately analyze or review decisions on income tax objections and appeals, and there was insufficient sharing of the results of these objection and court decisions within the Agency.
This issue is very well-known to many Canadians (and their professional tax advisors) who have filed and pursued objections, and it is not surprising when you consider the CRA currently has an inventory of more than 171,000 objections in respect of personal and corporate income taxes totaling more than $18 billion.
Interestingly, the report notes that the amount of federal income tax dollars in dispute more than tripled from $6.2 billion in 2005-06 to $18.8 billion in 2013-14, and the amount in dispute has remained around $18 billion in 2014-15 and 2015-16.
The report recommends the following:
- The CRA should provide timelines for resolving objections
- The CRA should develop and implement an action plan with defined timelines and targets for reducing the inventory of objections
- The CRA should review the objection process to identify and implement modifications to improve the timely resolutions of objections
- The CRA should modify its performance indicators so that it may accurately measure and report on its performance
- The CRA should review and share the results where objections are decided in favour of taxpayers in such a way that may improve the quality of audit results
Minister of National Revenue Hon. Diane Lebouthillier released a statement in response to the Auditor General’s report, and stated (in part): “An action plan is already underway to reduce processing times and it will be ready at the beginning of 2017.”