Canada Revenue Agency Annual Report to Parliament 2013-2014

Appeals

The CRA provides a fair and impartial redress process to resolve disputes and requests for relief arising from decisions made by the CRA. If taxpayers are not satisfied with the outcome of this process, they can appeal to the courts.

Income and commodity tax – Objections, determinations, and appeals to the courts

The CRA interacts with millions of taxpayers, GST/HST registrants, and benefit recipients each year. Our goal is to make sure each taxpayer is treated fairly and according to the appropriate tax laws, beginning with the Income Tax Act.

Whenever a taxpayer or benefit recipient disagrees with a CRA decision, they can request a review. To launch a formal redress process, the taxpayer files an objection and receives a letter of acknowledgement from the CRA. To ensure impartiality, we assign an appeals officer who was not involved in the original assessment, determination, or ruling to work with the taxpayer to try to resolve the dispute. In cases where we are unable to resolve a tax dispute to the taxpayer's satisfaction, the taxpayer has the right to appeal to the Tax Court of Canada or the Federal Court.

The CRA is committed to providing objective, fair, transparent, and timely administrative reviews. The ultimate goal is to provide a sound decision that will respond to the taxpayer or benefit recipient who put forward the objection and will build trust in the tax system. Our decisions are not arbitrary or subjective—every decision is firmly grounded in legislative authority to ensure all taxpayers are treated fairly and consistently.

Faster Processing, Decreasing Costs

The CRA's growing focus on aggressive tax planning in recent years contributed to a growing backlog of income tax objections and subsequent appeals to the courts.

Bill C-48 received Royal Assent on June 26, 2013, amending the Income Tax Act retroactively to 2002. The amendment affects selected groups of objections involving more than 107,000 taxpayers. Between August 2013 and March 2014, the CRA communicated with 25,600 taxpayers to offer resolution to the dispute. Of these, 19,300 accepted the resolution. Along with objections from other similar groups, we anticipate completing about 44,500 objections in 2014-2015.

In addition to resolving these group objections, the CRA has continued to find more efficient ways of processing objections. By distributing low-complexity objections to tax centres across Canada, the CRA can reduce turnaround times. In 2013-2014, we also began a review of information technology systems related to appeals to identify potential efficiencies and improvements.

The ability to process and clear some of the existing backlog, combined with a decrease in new files coming in during the reporting period, enabled us to reduce the closing inventory. The closing inventory for 2013-2014 was 197,278 which is lower than the 2012-2013 closing inventory of 208,559 leaving us with 11,000 fewer objections to resolve.

Key results:

• We received 80,723 income and commodity tax disputes.
• We resolved 91,214 income and commodity tax disputes.
• 4,543 appeals were filed before the Tax Court of Canada.

Canada Pension Plan/employment insurance appeals to the minister and appeals to the courts

The CRA provides a timely, objective, fair, and transparent dispute resolution process for taxpayers who want to appeal a CRA decision relating to an assessment or ruling made under the Canada Pension Plan or the Employment Insurance Act. Once we issue a decision on an appeal, the decision can be further appealed to the Tax Court.

Increased emphasis on the timeliness of these decisions has reduced the average time it took to resolve a CPP/EI appeal. The average time fell to 140 days from the previous year's average of 150. The program also saw an improvement of 13% in 2013-2014 in meeting its internal objectives for the timely resolution of CPP and EI appeals.

If the administrative review of a CPP/EI appeal does not resolve the taxpayer's dispute, the taxpayer can appeal to the Tax Court of Canada. In these instances, the CRA works with the Department of Justice. There has been a decrease in the number of CPP/EI appeal files received at the Tax Court of Canada in the last few years: a 31% reduction in the number of CPP/EI appeals to the Tax Court of Canada compared with 2011-2012. This decrease is explained in part by our commitment to transparency in explaining our decisions. Taxpayers receive a complete analysis and explanation, which we believe increases their understanding of the decision and reduces the number of appeals to the courts.

Key results:

• We received 2,985 CPP/EIdisputes and resolved 3,272.
• 284 appeals were filed before the Tax Court of Canada. 

Service complaints

The CRA offers a three-step process to resolve service-related issues resulting from mistakes, undue delays, misleading information, or concerns about behaviour of CRA employees. Since some service complaints result from a lack of information or simple miscommunication, we first encourage taxpayers to talk with us. Taxpayers who are still not satisfied may file a formal complaint with the CRA's service complaints program. If the resolution we provide is unsatisfactory, taxpayers have the right to submit a complaint to the Office of the Taxpayers' Ombudsman.

In 2013-2014, our analysis of trends in service-related issues helped us to identify and confirm service gaps and to prioritize needs for service improvements. During the reporting period, the CRA:

• updated call centre information so our agents advise taxpayers who are updating their direct deposit information to keep their old accounts open until the first deposit is made to their new account;
• equipped call centre agents with more information about processing times of tax returns for taxpayers who have a proposal in bankruptcy, so they can give them more accurate information; and
• updated our website to explain that business clients can request a "comfort letter" confirming a taxpayer's business accounts are in good standing with the CRA.

Key results:

• We resolved 2,705 service complaints.
• 95.3% of the service complaints were resolved within 30 business days.

Taxpayer relief

The CRA's Taxpayer Relief Program helps taxpayers who may not be able to meet their tax obligations because of personal misfortune or circumstances beyond their control. When taxpayers disagree with how the CRA applied the taxpayer relief provisions, they can ask the Federal Court to intervene.

The taxpayer relief provisions give the minister the authority to cancel or waive penalties and interest otherwise payable. They also provide the discretion to allow certain late, amended, or revoked elections, and issue income tax refunds or reduce amounts payable beyond the normal three-year period. This allows the CRA to take a common-sense approach to helping taxpayers who are unable to comply with certain tax obligations, such as filing a return by its due date, or paying or remitting an amount when required.

The CRA issues media releases and posts information on its website to tell taxpayers who have been affected by disasters that they will have access to the taxpayer relief provisions if they are unable to meet their tax obligations. For example, in 2013, Canadians from several regions, including Alberta, Ontario, Quebec, and Atlantic Canada, had to rebuild because of flooding, severe weather conditions, and other tragic events. On July 25, 2013, the Minister announced taxpayer relief measures for Canadians affected by the disaster in Lac-Mégantic, Quebec.

The Taxpayer Relief Program has received significantly more requests over the past several years as Canadians become more familiar with options available to them when they encounter challenges complying with their tax obligations. The increased volumes have put pressure on the CRA's ability to provide timely responses. To relieve these pressures, the CRA has invested significant resources to improve timeliness. We invested in system enhancements allowing for better file management, training, and better tools to help staff address requests.

The CRA website tells taxpayers how to submit a taxpayer relief request, what information to include, and what the time limit is for requesting relief.

Key results:

• Under taxpayer relief provisions, we cancelled and waived $414.2 million in penalties and interest for 382,758 requests (taxpayer-requested and automated).
• We introduced system enhancements and streamlined procedures which have improved processing times for cancelling and waiving penalties and interest.

Performance results

Footnote 1: The figure represents the actual spending for the CRA on a modified cash basis, based on Parliamentary appropriations used. See pages 106-107 for an explanation of how actual spending relates to results in the CRA Financial Statements – Agency Activities.

Footnote 2: Established timeframe targets were mostly met in 2013-2014. Processing improvements will continue to be implemented.

Footnote 3: An increase in intake in 2012-2013 as a result of changes in the Pensionable and Insurable Earnings Review program and in an increase in major investigation files resulted in unexpected increases in inventory. Consequently, 2013-2014 internal objective results on disposals were negatively affected.