Canadian Lawyer

CRA's appeal division, can take upwards of two years to be heard. "I have to say that the CRA's appeals division is more open-minded in regards to interruptions than the audit side," notes Gartner. Regardless of the outcome of an appeals process, Gartner says lawyers are sometimes forced to convince a client to make a proposal for bankruptcy in order to forestall collection actions and enable their business to continue operating. "It's still the only defence," says Gartner. "But it has a huge impact on people. I've seen some go into depression or cry, all kinds of terrible stuff." For Phil Nolan, a tax lawyer with Montreal's Lavery de Billy LLP, the aggressive nature of GST collection in Quebec, which this year harmonized its taxes with Ottawa (though it remains the only province to collect federal taxes) has changed the landscape. "Tax law is no longer a gentlemanly field in Canada, it's become the Wild West like in the United States," says Nolan. "People now can and do get assessed for millions that are payable immediately." Sole tax practitioner Dale Barrett, author of Tax Survival for Canadians (Stand up to the CRA) who represents mostly small business owners and the self-employed, lays some of the blame on the quality of audits being carried out by CRA inspectors. "Audits are almost always poorly done," says Barrett, who handles 1,000 cases a year. "It is plain to me that a lot of auditors just don't get it and challenge every expense. But when they are presented in court, lawyers [for CRA] often just drop them right away because they are so frivolous." For Kreklewetz, the human fallout from the CRA's collection actions are frightful. He has seen a corporate client assessed $30 million for GST owing on sales he had been told beforehand would be exempt because the land was on a reserve and the purchaser was aboriginal, and another client assessed $1.1 million in 2013 after the CRA changed its administrative interpretation of a previously exempt service and made the change retroactive four years. "It can be absolutely crazy when the CRA changes its administration policy and forces people to come up with money that was never there in the first place," says Kreklewetz. "Basically your only recourse is to try to survive the process [and] get to Tax Court as quickly as possible. Of course, by the time you get a ruling, lives may be destroyed and people have lost their businesses or their homes, or both. Imagine the impact that has on their sense of being and the health of them and their families." In a recent paper written for the Canadian Tax Foundation, he and fellow lawyer John Bassindale considered the possible extension of the statutory stay provided for income tax purposes in s. 225.1 of the Income Tax Act to other acts like the Excise Tax Act and the Customs Act on the basis "some practitioners feel reasonable arguments can be made [that] lack of protection may impose a significant hardship on a taxpayer, particularly if the taxpayer ultimately succeeds in challenging the assessment." In "No Statutory Stay of GST Collection Actions," the two lawyers considered the case of Irving Leroux, a park and campground owner whose claim that the absence of a stay of collection under the ETA violated both the Charter and the Bill of Rights was rejected by the British Columbia Court of Appeal in February. The decision in Leroux v. Canada (Revenue Agency) ended a 13-year dispute that began when the CRA allegedly and mistakenly shredded Leroux's books and records. The CRA later agreed to a consent judgment by the Tax Court, reducing the taxpayer's liability for income tax to nil, and for GST to $20,000. While the appeal was pending, however, the CRA took action to collect on its assessment of nearly $100,000 owing for GST. Leroux claimed the move forced him to sell both his home and business. In assessing the subsequent court case, in which Leroux sued the CRA for tort damages and on constitutional grounds, Kreklowetz and Bassindale argue the judgment "seems to confirm that there is no tenable argument for a statutory stay under the ETA based on either the Charter or the Bill of Rights. "More positively, however, the BCCA's decision adds weight to the proposition that the [Federal Court] has an inherent ability to grant a stay or injunction in an appropriate case. Now that the BCCA has opened the door further to this type of relief, it is up to practitioners to attempt to cross the threshold." According to the CRA, GST net revenues for both fiscal years 2012-13 and 2011-12 are approximately $10.3 billion. GST net revenues include the federal portion of HST only. It is net of input tax credits (ITCs), rebates, and the GST quarterly tax credit for low-income individuals and families that the CRA administers. Total number of GST/HST audits and examinations conducted by the CRA's Compliance Programs Branch for fiscal years 201213 and 2011-12 are 89,409 and 90,380 respectively. Almost two decades ago, a leading Canadian lawyers magazine featured Millar Kreklewetz LLP in an article on Canadian Super Boutiques, calling us a "brand name for commodity tax and related international trade work". Nothing much has changed. Today we continue to assist a wide range of national and international companies with their indirect tax and trade issues and provide specialized advice to Canadian and U.S. lawyers seeking assistance in these matters for their own clients. Please think of us as a national resource for Commodity Tax, Customs & Trade! 24 Duncan Street, Third Floor, Toronto, Ontario, M5V 2B8 Telephone: (416) 864 -6200 Facsimile: (416) 864 - 6201 www.taxandtradelaw.com MillarKreklewetz_CL_Jan_13.indd A 1 I A N www.CAN D L a w ye r m a g . c o m Jan uary 3:03 2 013-12-05 49 PM 14

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