CRA & Revenu Québec

Tax Court of Canada Act

The length and complexity of tax code in Canada requires occasional ruling and interpretation, and that task falls to the tax court.

While there always has been an appeals process with court oversight, the current Tax Court of Canada formed in 1983 and became the top level court for tax matters in 2003.

The History of Tax Courts

“Federal income tax arrived in Canada as a way to fund the armed forces during World War I.

With tax law came the need for a system of interpretation, first administered by the Exchequer Court of Canada,” says Jeff Stokley, chartered investment manager and financial management advisor with Investors Group in London, Ontario.

The Income Tax Appeal Board began in 1946 as a tribunal below the Exchequer Court, evolving into the Tax Review Board in 1970. Though the Tax Review Board intended to provide informal resolution to tax issues, much traffic bypassed the board into the trial division of the federal court.

Formal status changed to a court of record in 1983 and in 2003, the Tax Court of Canada became the superior court for the Income Tax Act. No higher court has control and rulings from the Tax Court set precedents.

All rules, procedures and forms used are developed and under the purview of the Tax Court, administering the Tax Court of Canada Act of 1985.

Jurisdiction of the Court

The Tax Court of Canada Act sets the areas of jurisdiction for the court itself, and while the Income Tax Act certainly falls to the court, it is also the originating court for a number of other acts and specific sections of acts.

Acts related to tax matters, such as the Canada Pension Plan and Old Age Security Act, are logical assignments to the court, while the Employment Insurance Act may not seem so obvious.

Additional tax court coverage is provided under the Air Travellers Security Charge Act, the Cultural Property Export and Import Act, Part V.1 of the Customs Act, the Excise Tax Act 2001, Part IX of the Excise Tax Act and the Softwood Lumber Products Exports Charge Act.

Discretionary power to waive penalties and interest, however, remains with the Canada Revenue Agency and appeals of these decisions apply to the Federal Court. The Tax Court also has limited jurisdiction in provincial tax matters.

Powers of the Court

The Tax Court’s powers to act are defined by the terms of the various legislations giving its jurisdiction. For example, the Income Tax Act limits the Tax Court’s discretion with rulings on assessment to uphold or set aside an assessment, or to request that the CRA reassess a taxpayer.

Legislation also holds the Tax Court to interpretations based solely on the letter of the laws in question. The court has no basis to consider fairness if it is outside the terms of written legislation.

The court often makes rulings acknowledging that the result meets requirements of law but with an unfair resolution.

Using the Tax Court

If you have a matter to appeal to the Tax Court, you may not file with the court until at least 90 days after you file a Notice of Objection with the CRA, or within 90 days after receipt of a Notice of Confirmation from the CRA.

The CRA itself resolves most tax disputes at this stage, preventing the time and costs of proceeding to court.

For appeals that proceed to the Tax Court, the taxpayer decides to adopt the informal or general procedure stream. The informal stream covers tax disputes with an amount of $12,500 or less. A taxpayer may represent himself or use an an agent such as an accountant.

Rules for evidence and procedure are relaxed, making the process accessible to those with legitimate issues, but without resources for full legal proceedings. Such trials generally occur within a year of filing. General procedures resemble formal legal procedure.

Taxpayers are usually represented by lawyers, amounts of tax in dispute are larger or involve complex law interpretation. Pre-trial activity may cause significant time to pass before resolution.

References & Resources