From: AlanBaggett@volcanomail.com   
      
   Some Changes Ahead for the Tax Objection and Appeal Process of the Canada   
   Revenue Agency :CRA SOTW   
      
   Blake Cassels & Graydon LLP - Ed Kroft QC and Matthew Weaver   
      
      
   On November 29, 2016, the Auditor General of Canada released the 2016 Fall   
   Reports, including “Income Tax Objections”, regarding the Canada Revenue   
   Agency’s (CRA) management of income tax objections. This bulletin provides   
   an overview of the Report    
   and highlights its recommendations and the CRA’s responses and plans for   
   improvement.   
      
   The Office of the Auditor General sought to answer a simple question: Is the   
   CRA effectively managing income tax objections? In answering “no”, the   
   Report found that the CRA did not generally:   
      
   1.	Process income tax objections in a timely manner   
   2.	Adequately measure its performance results, and its performance indicators   
   were incomplete and inaccurate   
   3.	Adequately review decisions on income tax objections and appeals and did   
   not share the results of these objections and court decisions within the CRA   
      
   REPORT OVERVIEW    
   The Office of the Auditor General conducted an independent examination (Audit)   
   of the CRA’s Appeals Branch to provide objective information, advice, and   
   assurance to assist Parliament in its scrutiny of the government’s   
   management of resources and    
   programs.   
      
   The Audit covered the period between April 1, 2011 and March 31, 2016 and   
   focused on objections and appeals related to personal and corporate tax   
   returns. The Audit sought to determine whether the CRA was efficiently   
   managing income tax objections. To    
   assess efficiency, the Audit examined the time the CRA took to provide   
   taxpayers with decisions on their objections. To identify where delays   
   occurred, the various stages in the objection process were reviewed. The Audit   
   also considered how the CRA used    
   and communicated information internally on the results of objections and court   
   decisions.   
      
   FINDINGS, RECOMMENDATIONS AND RESPONSES    
      
   What follows are the highlights of the Report’s findings and their   
   implications, as well as the Report’s recommendations and the CRA’s   
   responses to such recommendations as well as their plans for improvement.   
   Various charts depicting the number,    
   outcome and tax amounts involved in group and non-group objections can be   
   found in Schedule A. “Group” files contain objections with respect to the   
   same claims, or similar claims, that the CRA may consider to represent tax   
   avoidance. For efficiency    
   and consistency, the CRA does not typically process “group” files until a   
   final decision is made on a lead case. The Report focused on non-group files   
   and this bulletin does the same.   
      
   The report highlighted and made recommendations on the following six problem   
   areas:   
      
   1. Timing: The CRA did not resolve income tax objections in a timely manner   
   and did not effectively communicate expected delays to the taxpayer.   
   The Report compared the CRA’s performance to that of similar tax   
   administrations in six other countries and found that Canada took the longest   
   to resolve objections. Canada took an average of 276 days compared with an   
   average of 70 days for the other    
   six countries, according to data from 2009, contained in an international   
   benchmarking study reported in 2011 by the United Kingdom’s tax authority,   
   HM Revenue and Customs.   
   The CRA’s acknowledgement letter to the taxpayer’s notice of objection did   
   not provide an estimate of the waiting period to resolve the objection, and   
   this information was not publicly available. The taxpayer remained unaware at   
   the time of filing    
   how long it could take the CRA to resolve the objection.   
   Recommendation: The CRA should provide taxpayers with the time frames within   
   which it expects to resolve their objections and the time frames should be   
   based on the objections’ level of complexity.   
   Response: The CRA agreed and explained that this information will be provided   
   to taxpayers within the 2016–17 fiscal year. It also explained that expected   
   and actual time frames related to complexity will begin to be shared with the   
   general public on    
   the CRA’s website by March 31, 2017. Also, by the end of the 2016–17   
   fiscal year, the CRA will clarify, on its external website, the steps to   
   resolving taxpayer disputes, including the requirement to provide any relevant   
   information.   
      
   2. Management of growing number of objections: The growth rate in the number   
   of new objections far outpaced the increase in resources the CRA dedicated to   
   managing them. Specifically, in the past 10 fiscal years, the number of   
   outstanding income tax    
   objections increased by 171 per cent, from 63,384 to 171,744, while the number   
   of employees dedicated to resolving these objections increased by only 14 per   
   cent, from 998 to 1,138.   
   Recommendation: The CRA should develop and implement an action plan with   
   defined timelines and targets to reduce the number of outstanding objections   
   to a reasonable level.   
      
   Response: The CRA agreed and explained that, by early 2017, it will develop a   
   strategy for reducing the backlog of unresolved objections in order to respond   
   to taxpayers in a more timely fashion.   
      
   3. Processing times and reasons for delay: Processing of objections was often   
   delayed because notices of objection sent by taxpayers were missing   
   information. The appeals officer was usually the first to identify such   
   missing information and most    
   objections were not assigned to appeals officers until, on average, 150 days   
   after the taxpayer had mailed the notice of objection. This caused delays in   
   requesting the information from taxpayers and such delays hindered the CRA’s   
   ability to resolve    
   objections in a timely manner.   
   When seeking technical assistance from other areas within the CRA, appeals   
   officers sometimes waited months, or even years, before receiving responses to   
   their referrals. Six per cent of the resolved objections needed to be referred   
   elsewhere within the    
   CRA and the appeals officers waited, on average, 401 days to receive a   
   response.   
      
      
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