Prescribed Interest Rates for GST/HST
I was recently asked what is the difference between the rates of interest (1) payable by a tax debtor to Canada for GST/HST and (2) payable by the Government of Canada to a taxpayer when an incorrectly assessed amount of GST/HST is refunded. There is a difference.
| Period | Refund Interest Payable By Canada | Arrears and Instalment Interest |
| 2010 | ||
| July 1 - September 30 |
1% Corporate taxpayers 3% non-corporate taxpayers |
5% |
| April 1 - June 30 | 3% | 5% |
| January 1 - March 31 | 3% | 5% |
| 2009 | 5% | |
| October 1 - December 31 | 3% | 5% |
The prescribed rate of interest on refunds and amounts owed to corporate taxpayers recently changed. The Auditor General raised concerns in her Spring 2009 report about interest paid by Canada to corporations regarding overpayments. Simply put, the interest rate payable by Canada to corporations on overpayments of tax was higher than bank interest rates and was costing the Government of Canada.
From the perspective of the taxpayer, the CRA should not be incentivized to make incorrect assessments, force payment and hold on to the taxpayer's money. The change creates a disincentive to the CRA to settle tax disputes.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
