Taxpayers May Not Be Helped By Past Mistakes of CRA
I often discuss with corporate taxpayers that they have been doing things a certain way for a number of years. Often these taxpayers were audited by the Canada Revenue Agency ("CRA") on a previous occasion and the taxpayer's way of doing things were blessed or the mistake was not highlighted. I have discussed that the CRA is not bound to make the same mistake twice and can change its mind without giving notice to the taxpayer.
In a recent decision of Manotas v. the Queen, the Tax Court of Canada discussed this very issue in the context of a taxpayer claiming residency for the purposes of determining entitlement to the Goods and Service Tax Credit. The words may be changed slightly to apply in goods and services tax ("GST") and harmonized sales tax ("HST") cases. Judge Bowie wrote in the decision:
I have not overlooked that the appellant has chosen to file returns declaring her income in Canada each year, nor the fact that upon her departure the Minister expressed the view that she was a “factual resident of Canada”. It is not open to individuals to establish Canadian residence when that is economically beneficial to them by the simple expedient of filing a return of income under the Act. Nor is the Minister bound by his conclusion as to her residence formed a decade ago. Factual circumstances change, and conclusions change with them. But even where the circumstances remain unchanged, the Minister is free to form a different opinion as to the legal effect of the circumstances in a later time period. It is well settled that if the Minister arrives at an erroneous conclusion in assessing a taxpayer (or in determining the right to refundable credits), she is not bound to repeat that error in perpetuity: see Nedelcu v. The Queen [which was confirmed by the Federal Court of Appeal]
Sorry to be the messenger of this news.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
