Do You Really Want to Have an HST Map to Right?
Yesterday I had a discussion with a friend who was deciding on whether to write to the Canada Revenue Agency, GST/HST Rulings Directorate for a GST/HST ruling on an issue. The discussion started that the client had followed advice given years ago that its supply was exempt. The client had not collected GST for a number of years. With the implementation of harmonized sales tax, the cost of being wrong has increased from 5% to 13% (in Ontario). The client contacted my friend to revisit the issue. The client does not want to be assessed - this is understandable.
The problem with writing in for an advance GST/HST ruling is that the CRA may not give the desired answer. The CRA may disagree with the original analysis. The CRA may see things differently. The CRA may have given other rulings that are inconsistent with the ruling requested. What if the CRA determines that the supply is taxable now, was previously taxable, and that the exemption did not apply to past supplies? What if the CRA determines that they were not in the "Right" place? There is a risk.
When there is a risk that the CRA will not give the ruling requested, the affected party (i.e., the client) must answer the question "Do you want to get to "Right"? If the client wants the "Right' answer and to know where is "Right", the client should obtain an advance GST/HST ruling (which is binding) or an interpretation (which is not binding). If the clients wants to continue to treat its supplies as exempt, then the client does not want to be at "Right". If the client plans to ignore the ruling if it does not reaffirm what they want to do/are doing, the client does not want to be at "Right" and would increase its risk by applying for an advance GST/HST ruling.
It is important to determine whether the client (or you) want to have the "Right" answer or merely the answer the client (you) want. They are not necessarily the same thing.
If the client (you) want to get to "Right", it is possible to prepare a customized map. If the client(you) are not sure whether you really want to get to "Right", more thought is required on whether you do not care if you stay at 'Lost".
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
