When the right to challenge the enforcement of a tax debt expires for whatever reason (say because of a failure to pursue a timely objection or appeal to an assessment, or because of an unfavorable court decision), there is one final approach to consider: an application for a remission order under subsection 23(2) of the Financial Administration Act. Under that Act, the decision whether or not to grant relief is vested in the Governor in Council acting on the recommendation of the Minister of National Revenue, and is to be exercised favorably where it is considered that the collection of a tax or the enforcement of a penalty is unreasonable or unjust or that it is otherwise in the public interest to remit the tax or penalty. The decision of the Minister of National Revenue not to recommend relief is the proper subject for judicial review in the Federal Court. The recent decision in Germain v AGC (2012 FC 768) is a useful primer on the remission process and highlights the difficulty a taxpayer should expect when asking for a remission order.

The process starts with an application to the Remissions and Delegations Section of the Legislative Policy and Regulatory Affairs Branch of the CRA. An official of that Branch reviews the case and makes a recommendation for (or against) remission to the Assistant Commissioner of the Branch. The Assistant Commissioner then makes a decision for or against remission and advises the taxpayer what recommendation will be made to the Governor in Council. In practice, the Governor in Council follows the recommendation of the Assistant Commissioner, so it is that official’s decision that may be made the subject of a judicial review.

On a judicial review application, it is well established that where the legal and factual issues are intertwined and cannot be readily separated, the standard of review is reasonableness. This standard is concerned with the existence of justification, transparency and intelligibility within the decision-making process. For its internal purposes, the CRA has developed a Guide for the Remissions of Income Tax, GST/HST, Excise Tax, Excise Duties or FST under the Financial Administration Act. As in all matters involving administrative discretion, where the administrative body has established guidelines, an important question on a review is whether the decision maker considered the specific facts of the applicant’s case when applying those guidelines in the course of exercising his discretion. The guidelines here are general in nature, and comprise four elements: is the applicant the victim of unintended results of the applicable legislation; was an error made on the part of CRA officials; was the applicant suffering extreme financial hardship; or has the applicant suffered financial prejudice such that extenuating factors exist.

In the Germain case, the applicant failed to satisfy the court that the Assistant Commissioner exercised his discretion improperly. The court reviewed each of the guidelines and assessed the information the CRA considered in recommending against relief. The case is worth noting for the description of how the CRA interprets the four factors in a particular case. This may be useful in any future case in which a disaffected taxpayer is inclined to seek relief in this way. The court in this case emphasized that remission remains an exceptional measure and that the public interest demands that relief not be granted lightly.