This document is intended to provide you with a summary of the federal tax dispute resolution process in Canada, as well as an introduction to the services provided by our Tax Litigation Team.
Our Tax Litigation Team includes tax and commercial litigators in our Toronto, Montreal and Vancouver offices. The goal of our Tax Litigators is to be persuasive and, at the same time, be mindful of the costs incurred by the client.
Early Involvement
It is recommended that our Tax Litigation Team be involved in the pre-assessment stage. This will provide an opportunity to "nip the assessment in the bud". Once an assessment is made it can often take on its own momentum.
At this stage a client will need advice on how to respond to a request for documents and to identify documents which are privileged. Also, judgment will have to be exercised as to whether or not a claim for privilege should be made. It is important to clarify the facts for the tax assessor and correct any misconceptions the assessor may have. Also, it is often useful to enter into a dialogue with the assessor to determine whether this is a matter that should be sent to the Head Office of the Canada Revenue Agency ("CRA") where legal advice can be obtained by the CRA. At this stage the facts should be marshalled and the theory of the case, together with legal arguments, should be developed.
Following Reassessment
Following a reassessment, a Notice of Objection must be prepared. Large corporations are required to prepare very detailed Notices of Objection, which describe each issue to be decided and the relief sought, together with facts and reasons relied on by the corporation in respect of each issue. Failure to comply with these rules may prevent the corporation from objecting to a particular issue.
At this stage an opportunity will be available after having received a copy of the auditor's report to meet with the appeals officer for an independent review of the matter. This will also present an opportunity to discuss with the appeals officer whether the matter should be sent to the Department of Justice for a legal opinion.
After the Reassessment is Confirmed
At this stage the Notice of Appeal is to be prepared. Again, at this time the theory of the case should be clarified and the facts confirmed. Following the receipt of the Minister's Reply, counsel will have to advise whether an Answer is required.
Following the close of pleadings a list of documents must be exchanged. Once again documents should be reviewed to determine whether certain documents are privileged and whether or not a claim for privilege should be asserted. Counsel will prepare the client for the examination for discovery. (See "Preparation for Discovery".) Also, during this period consideration will be given to which witnesses and expert witnesses, if any, will be required at the trial and the evidence to be adduced. (See "Giving Evidence".) Following the conclusion of the discovery, there is generally an opportunity to discuss with the Department of Justice whether the case can be settled.
Litigation
The overriding principle is that success depends on persuading the court of the correctness of your case. This requires simplifying complex factual situations and esoteric tax legislation. This is accomplished both in written and oral presentations, including a well-thought out opening statement. Tax litigators must understand the intricacies of tax law and how other sections of the tax legislation may have an impact on the subject matter of the appeal.
Our tax litigators combine litigation skills together with a detailed knowledge of tax law. We have extensive experience representing clients from the pre-assessment steps through the court proceedings, including at the Tax Court of Canada, the Federal Court of Appeal and the Supreme Court of Canada. We also represent clients in the provincial courts dealing with provincial tax legislation. Our practice covers a variety of areas of tax practice such as income tax, capital tax, commodity tax, customs duties and anti-dumping legislation.
List of Precedent Setting Cases
H.T. Hoy Holdings Limited v. The Queen ("capital gains stripping" case that dealt with a non-arm's length relationship as a matter of fact)
Joseph Ribkoff Inc. v. The Queen 2003 TCC 397 (a GST case that dealt with the claim of input tax credits where the supplier did not remit the GST)
DuPont Canada v. Canada 2001 FCA 114 (CanLII) (an important case articulating the criteria for a separate business)
The Queen v. Savage 83 DTC 5409 (Supreme Court of Canada) (defining taxable employment benefit)
Thibodeau Family Trust v The Queen 78 DTC 6376 (FCTD) (leading case on the determination of the residency of a trust)
Equilease Corporation v. The Queen 97 DTC 419 (TCC) (the second case dealing with the general anti-avoidance rule)
