2015-0566531E5 Collection of amounts in dispute

Principal Issues: (1) Whether section 286.2 of the Criminal Code applies to the collection of tax by the CRA. (2) Whether the amounts described are "in dispute" and therefore do not have to be paid.

Position: (1) No position taken. (2) General comments provided.

Reasons: The primary question is beyond the scope of the Income Rulings Tax Directorate's mandate since it requires interpretation of the Criminal Code. General comments were provided as to the formal mechanism for disputing assessments under the Income Tax Act.

Author: Deak, Andrew
Section: -

XXXXXXXXXX                                                                                                                      2015-056653
                                                                                                                                              Andrew Deak

February 27, 2015

Dear XXXXXXXXXX:

Subject: Collection of Amounts in Dispute

We are writing in reply to your letter dated December 20, 2014, concerning the application of subsection 286.2(1) of the Criminal Code to the collection of tax by the Canada Revenue Agency (the “CRA”). We also acknowledge our telephone conversation (Young / XXXXXXXXXX) of February 2 and 26, 2015. You suggested that the CRA would be in violation of subsection 286.2(1) of the Criminal Code if the CRA were to collect taxes on income that was from consideration given for services contemplated by that provision. You have also suggested that such amounts would be “in dispute” since, in your view, the legality of the CRA’s collection of those amounts is in question. According to your letter, those who would otherwise be liable to pay the tax would have the right not to pay until a full and impartial review has been conducted. You have asked us to provide you with a technical interpretation on the issues you raised.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Since the Income Tax Rulings Directorate provides interpretations with respect to provisions of the Act, we cannot comment on your interpretation of the Criminal Code.

With respect to your suggestion that the amounts in question are “in dispute” and, therefore, do not have to be paid, we offer the following comments in order to clarify the dispute resolution process under the Act. Generally speaking, “income from a source”, such as business or employment, is taxable. Section 150 requires individuals to file a return of income that is in prescribed form, which must include all amounts that are taxable. The CRA subsequently assesses tax under subsection 152(1). If a taxpayer fails to file a return of income, subsection 152(7) allows the CRA to assess tax. Further, the CRA may assess penalties for failure to file or for any misrepresentations or omissions in a taxpayer’s income filing.

Should the taxpayer disagree with the assessment of tax or penalties, they may dispute the assessment according to the process laid out in the Act. Notably, a taxpayer can file a Notice of Objection under subsection 165(1). If the taxpayer files an objection, the CRA usually postpones collection action on amounts in dispute until 90 days after we send our decision to the taxpayer. If the taxpayer files an appeal to the Tax Court of Canada, we usually postpone collection action on amounts in dispute until the Court mails its decision or the taxpayer ends their appeal. For some situations we will not postpone collection action on disputed amounts, such as for taxes which the taxpayer had to withhold and remit. It is important to note that, in all cases, interest will continue to accrue on any amount payable from the date that it should have been paid.  For more information please see Pamphlet P148, Resolving your dispute: Objection and appeal rights under the Income Tax Act, which is available at http://www.cra-arc.gc.ca/E/pub/tg/p148/p148-14e.pdf.

We trust our comments will be of assistance.

Yours truly,

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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