Canadian Lawyer

www.canadianlawyermag.com 25 There's frustration over slow CRA audits and a tax court shutdown, but a light at the end of the tunnel is increased use of settlements, writes Elizabeth Raymer COVID-19's impact on tax law LEGAL REPORT TAX "The COVID problem has exacerbated what was already a slow, arduous and expensive process." Vern Krishna, TaxChambers LLP IF CANADA'S tax law system was already inefficient, the COVID-19 pandemic has only made it worse. At the same time, the delays resulting from Canada's tax court being shut down for several months last year have encouraged more settlement outside of court, say tax lawyers. "The COVID problem has exacerbated what was already a slow, arduous and expen- sive process," says Vern Krishna, professor of law at the University of Ottawa and Of Counsel at TaxChambers LLP. Many federal government subsidy programs, notably the Canada Emergency Response Benefit, were launched last year to mitigate the pandemic's effects. Still, confu- sion about whether benefits were taxable led to many Canadians owing money at tax time. "Erroneous information" was given to people in many cases, says Krishna, including by the Canada Revenue Agency, as to whether the benefits were taxable or not, and not everyone declared their awards because they didn't understand they were taxable. These cases "are working their way through the system," he says. Krishna says the CRA administration process and the litigation and adjudica- tion of tax disputes have always been slow and inefficient. COVID has exacerbated the situation considerably, with individuals working from home or not working. Courts have been closed, and electronic communi- cation is difficult. "It added an extra layer on top of an inef- ficient process to start with," Krishna says. "The long and short of it is that everything is grinding along, and not very efficiently." The Tax Court of Canada was closed for several months last year, with hearings resuming in late July. Recognizing the delays caused by the pandemic, the court introduced Fast-track Settlement Conferences in June. "There's really an increased focus on all reso- lutions, like settlements" during the pandemic, says Pierre-Louis Le Saunier, a partner and liti- gator in the tax group of Stikeman Elliott LLP in Montreal. He says this focus on settlements has accelerated with fewer in-person hearings and longer wait times to resolve files, with some taking up to 10 years. In today's environment, "you have to think twice when doing litigation," Le Saunier says. "You need to re-evaluate the bene- fits of preliminary proceedings, disputes in respect of the witnesses for the exam- inations for discovery, the confidentiality issue, the motions to compel answers during the discoveries, and all those proceedings [which] will just add delays." Settlements can be at the audit or the objection level and may include discussions with Department of Justice lawyers, out-of- court settlements, supervision by a judge and settlement conferences. But Le Saunier also predicts more litiga- tion in the future, in part due to taxpayers appealing government decisions related to COVID-19. The increased funding to the CRA over the past few years "inevitably brings new

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