Access to Justice in Income Tax Appeals

Article excerpt


This article considers barriers which may hinder access to the judicial process by taxpayers who seek to challenge assessments of income tax. It is limited to appeals relating to the personal and corporate income imposed by the federal Parliament and administered by the Canada Revenue Agency (CRA), or the corresponding taxes imposed by the provincial and territorial legislatures and administered by the CRA under tax collection agreements. (1)

Access to justice may be impeded either by juridical or economic factors; the relevant law and judicial processes may prevent or only provide substantively or procedurally limited avenues of appeal. Alternatively, the legal process may be adequate but the cost of using the appeal procedures may effectively prevent or discourage access. A brief review of the appeal mechanism available to a taxpayer in respect of an income tax assessment reveals that there are no material juridical barriers. The discussion therefore focuses on economic barriers and seeks to identify ways in which the barriers might be reduced.

The Income Tax Appeal Process

Income tax is imposed by the relevant statutory charging provision but generally only becomes payable when an assessment is raised by the CRA, using the statutory powers conferred on the Minister of National Revenue. (2) Under the Income Tax Act, (3) a taxpayer has an absolute right to challenge an assessment by filing an objection with the CRA. Except for large corporations, there are no demanding technical requirements and there are no filing fees. The taxpayer need not retain legal or other professional advice, though may choose to do so. Objections are considered by the appeals branch of the CRA in what is a non-judicial (4) internal administrative review. If the result of that review is not satisfactory to the taxpayer, (5) there is an absolute right of appeal to the Tax Court of Canada. (6)

The Tax Court offers two different procedures, or "tracks" for an appellant taxpayer: the Informal Procedure (IP), which closely resembles a typical small claims court format; and the General Procedure (GP), which is substantially identical to the procedure for trials in the Federal Court or the provincial superior courts. (7)

Thus, there are no pre-trial discoveries, either oral or of documents, under the IP and the court is not bound by "legal or technical" rules of evidence. The taxpayer, if not self-represented, can be represented at an IP appeal by a non-lawyer agent such as an accountant. Like small claims courts, the jurisdiction of the Tax Court in IP appeals is defined by monetary limits. If the amount of federal tax or penalty in issue in a year exceeds $12,000 or the amount of a loss in issue exceeds $24,000 (8) the appeal must either be dealt with under the GP or the taxpayer must abandon the excess. The Crown can effectively move an appeal otherwise falling under the IP to the GP when: the amount of interest exceeds $12,000, if the outcome of the appeal will affect other appeals, if the reassessment of the taxpayer and the total federal tax in issue exceeds $12,000, or if the appeal is common to a group or class of persons. The taxpayer who is unsuccessful in an IP appeal is only exposed to costs if the taxpayer unduly delays resolution of the appeal. However, if more than 50% successful, the taxpayer may receive costs (in respect of counsel only) on a party and party tariff basis. For a typical IP appeal such costs would be approximately $800.

The unsuccessful taxpayer in a GP appeal is exposed to costs in the same way as an unsuccessful litigant in a provincial superior court or the Federal Court. The only concession made to appeals involving smaller amounts in the GP is to dispense with oral examinations for discovery where the amount of federal tax in issue in a year is less than $25,000 or the loss in issue is $50,000 or less. Costs in the GP are normally awarded to the successful appellant on a party and party tariff basis. …