A taxpayer's Judicial Review Application of Canada Revenue Agency's Decision was struck down by the Federal Court.
Pierre Barbe worked for a consulting firm from April 2017 to February 2018 and requested a ruling from the Canada Revenue Agency (CRA) to determine whether he was working in insurable employment. The CRA confirmed that Mr. Barbe indeed worked as an employee and issued T4 slips for the 2017 and 2018 taxation years that showed the amount of employment income and that did not show any amount of tax withheld at source. The CRA then issued tax reassessments on the basis that Mr. Barbe had not reported his employment income. Mr. Barbe subsequently filed a notice of objection which was denied by an CRA appeals officer on the basis that Mr. Barbe only disputed the amounts of tax withheld and the employee's contributions to the Quebec Pension Plan, but not the amounts of employment income. In April 2020, Mr. Barbe filed a notice of application to the Federal Court for judicial review requesting that:
- The CRA require the employer he worked for from 2017 - 2018 to issuethe T4 statements;
- The CRA compel the employer to repay him the amounts of withheld taxes and contributions to the Quebec Pension Plan; and
- To cancel the action issued by the National Verification and Collection Centre of Shawinigan (CRA collections) against the applicant to recover the amounts of taxes and contributions to Quebec Pension Plan.
In July 2020, the CRA's Canadian tax lawyer filed a motion to strike his application alleging that the notice of application didn't disclose any action admissible under administrative law. The Federal Court granted the CRA's motion to strike down the judicial review application.
The Federal Court decided the notice of application was so clearly improper as to be bereft of any possibility of success
The Federal Court cited the decision in David Bull Laboratories (Canada) Inc. v Pharmacia Inc. and decided the issue was whether the notice of application was "so clearly improper as to be bereft of any possibility of success". The court then adopted the approach in Canada National Revenue v JP Morgan Asset Management (Canada) Inc. that it "must gain 'a realistic appreciation' of the application's 'essential character' by reading it holistically and practically without fastening on to matters of form". The court then pointed out the following elements that warrant the striking of a notice of application:
- The notice of application fails to state a cognizable administrative law claim which can be brought in the Federal Court;
- The Federal Court is not able to deal with the administrative law claim by virtue of section 18.5 of the Federal Courts Act or some other legal principle; or
- The Federal Court cannot grant the relief sought.
The court then went on to examine the 3 requests one by one. With respect to the first request in the notice of application to compel the employer to produce the T4 slips, the court decided it was not possible in the context of an application for judicial review of a decision of a CRA appeals officer.
Regarding the 2nd request to recover the taxes and Quebec Pension Plan from the employer, the court decided that the Attorney General of Canada had no jurisdiction over the issue because contributions to the Quebec Pension Plan were a provincial matter and must be remitted to the Quebec Revenue Agency.
As to the third request to discontinue the recovery action issued by the CRA, the court ruled this was not supported by evidence on the record because the decision of the CRA appeals officer was not aimed at the recovery of the amounts per se.
Based on the analysis, the court ruled CRA's motion to strike the application was justified because the notice of application for judicial review is "so clearly improper as to be bereft of any possibility of success."
Pro tax tips -understand when CRA's decision can warrant a judicial review application
Generally speaking, theTax Court of Canada has exclusive jurisdiction to deal with appeals of assessments butdoes not have the power to tell the CRA what to do when the issue in question is within the CRA's discretion. A judicial review applicationis filed with the Federal Court when no other specific avenue for relief is available. The Federal Court judge will review the actions of CRA and can tell the CRA how to exercise its discretion for other powersif they believe an unreasonable or incorrect decision has been made. An experienced Canadian tax lawyer will provide tax guidance as to the appropriate court.
Although the taxpayer was unsuccessful in this case, there are certain situations where the CRA's decision is unreasonable and warrants the filing of a judicial review application. Pursuant to s.18 and 18.1 of the Federal Courts Act, the typical situations are:
- Failure to waiver or reduce interest and penalties;
- Denial of a voluntary disclosure application;
- Not exercising the CRA's discretion to process tax returns or adjustments that are more than 3 years late; and
- Enforcing legal actions against a director when there shouldn't be any personal liability.
If you find CRA's decision of your tax matter unreasonable, contact our office to speak with an experienced Canadian tax lawyer for tax guidance to help you decide whether you should appeal to the Tax Court or file a judicial review application to the Federal Court in your situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.