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Tax Litigation

CRA with Faye - Should I be Bullish or Bearish with CRA?



This question arises in the context of litigation and negotiation generally but dealing with CRA can be a different animal. CRA auditors have the authority to require taxpayers to provide them with an extremely broad range of facts and documents.  Their powers are fairly unique among government agencies which typically have much more tiptoeing to do around requesting personal information.

So as I’ve expressed before it can feel very invasive, and taxpayers and lawyers alike can have a very strong negative reaction to the process, which could translate to negative interactions with auditors. Of course, I must emphasize that no one strategy will work all the time and there is no one size fits all audit strategy. But something that people can forget when dealing with a massive government agency is that the people working for it are, well, people. And as good as those people may be and as committed as everyone is to administering the Income Tax Act in a non-biased, objective fashion, human nature is omnipresent. These people are scouring your tax returns and other personal documents and they are already incentivized to try to find activity for which they can reassess. Their job is to protect the Canadian tax base and recover any tax dollars that may have improperly gone unpaid.

As I put to you my next question, please remember that I am not suggesting ill of anyone at CRA where I can tell you firsthand that the vast majority of employees are truly seeking to fairly administer the Income Tax Act so as to preserve our tax base for social services – a valiant and often thankless job. I am only pointing out that they are still people. With this said I now ask an unrelated question with any implications being drawn solely being those of the reader. If you had someone’s personal information at your fingertips along with the power to request as much additional personal information as was required for you to determine whether that person owed a large sum of money, under what circumstances would you be more motivated to delve deeper into and demand more of that person’s information: if they were cooperating and treating you with respect or if they were difficult and treating you poorly?