The Budget Proposal on Alternative Arguments: Too Broad?

Subsection 152(9) allows the minister to advance an alternative argument in support of an assessment at any time, even after the relevant reassessment period has expired, provided that the total amount of income from all sources does not increase (Anchor Pointe Energy, 2003 FCA 294). The question is whether the minister’s alternative argument can adjust amounts relating to different sources of income up or down within that overall limit. The 2015 federal budget proposes to allow such an adjustment. In view of the significant concern about the scope of the budget proposal, the Joint Committee on Taxation of the Canadian Bar Association and Chartered Professional Accountants Canada submitted a brief to the Department of Finance on June 19, 2015, departing from its usual practice of waiting for the release of the draft legislation.

The budget portrays the proposed amendment as restoring a doctrine from longstanding jurisprudence that was upset by an unnamed court decision (the Joint Committee assumes this decision to be Canada v. Last, 2014 FCA 129; a similar issue arose in Petro-Canada, 2004 FCA 158). Because the budget proposal lacks detail, the Joint Committee is concerned about the possible unintended reach of the proposal beyond the circumstances of these two cases.

In particular, large corporations are required to specify certain matters in any notice of objection, and they are prohibited from later appealing any assessment on the grounds of an issue that is not included in that objection. It would be inappropriate for any amendments to subsection 152(9) to permit the minister to alter the basis for an assessment and then argue that the taxpayer cannot appeal because it has not specified that issue in its objection.

Currently, a taxpayer and the CRA or the Crown may enter into a settlement agreement with respect to a particular issue that is in dispute. Any amendments to subsection 152(9) should not permit the minister to violate the form or spirit of such agreements.

The Joint Committee has submitted that these existing restrictions should not be affected by the budget proposal:
  1. subparagraphs 152(4)(a)(i) and 152(4.01)(a)(i) permit the minister to reassess after the end of the normal reassessment period if the taxpayer has made certain misrepresentations, but only to the extent that the reassessment relates to the misrepresentations;

  2. subparagraphs 152(4)(a)(ii) and 152(4.01)(a)(ii) permit the minister to reassess after the end of the normal reassessment period if the taxpayer has filed a waiver, but only to the extent of the matters specified in the waiver; and

  3. subsection 152(5) prohibits the minister from reassessing a taxpayer after the expiration of the normal reassessment period by adding an amount in the computation of income that was not included for the purposes of an assessment prior to that expiration.

One issue not addressed by the Joint Committee is the burden of proof. In Anchor Pointe Energy, the FCA stated that when the Crown raises a new argument in its reply, the onus is on the Crown to prove the facts supporting that argument. Perhaps the amendments to subsection 152(9) should be expanded to include a codification of the shifting burden of proof in such instances.

Amanda S.A. Doucette
Stevenson Hood Thornton Beaubier LLP, Saskatoon
[email protected]

Canadian Tax Focus
Volume 5, Number 3, August 2015
©2015, Canadian Tax Foundation