Safe Workforce was under GST audit. It asked for disclosure of CRA audit documents; CRA gave part of these but told SW to apply under the Access to Information Act for the rest. SW asked the auditor to delay the audit until the AIA records came and it could make fuller submissions. The auditor and his superiors refused; SW sought judicial review to delay the audit and prevent reassessment.
CRA sought to have the application dismissed on the basis that (a) the CRA (Minister) has a statutory duty to audit and (b) SW had an alternative: to appeal to Tax Court after assessment. [19-20, 25.]
The Federal Court refused to dismiss the application without a full hearing but it also refused to order the CRA to hold off reassessment. So it seems that the taxpayer, SW, did not get what it really wanted. As the Crown put it, SW “commenced the application in order to delay the audit process, achieve a favourable tax outcome, and postpone issuance of the notice of reassessment”. [21]
Two features of the GST law (Excise Tax Act) make this case a little more interesting. First, GST is different from income tax in relation to collection action. GST, once assessed, is payable immediately. In income tax, generally CRA cannot collect as long as the taxpayer has an objection or Tax Court appeal underway. (There are exceptions for large corporations (taxable capital over $10 million) and assessments related to charity donations. But even there only 50% is collectible right away. ITA s. 225.1(7))
Automatic collection makes GST audits more threatening than income tax ones. Collection of a large GST assessment could ruin a business. Aside from that automatic collection threat, it’s hard to understand the merit of judicial review to delay a GST audit so that the taxpayer can get audit records under the AIA.
The second peculiar feature of GST law is that, unlike income tax, where the Minister must assess a return once filed (ITA s. 152(1)), there is no obligation to assess GST returns. Assessment is discretionary: ETA s. 296(1). Here is the actual wording from section 296:
“296. (1) Assessments — The Minister may assess
(a) the net tax of a person under Division V for a reporting period of the person,…
and may reassess or make an additional assessment of tax, net tax, penalty, interest or an amount referred to in paragraph (d) or (e).”
In that light, this Crown argument is more interesting:
“[44] First, the Applicant is essentially seeking to enjoin the Minister from carrying out her statutory responsibility to assess tax in accordance with the ETA and this Court has previously held that such relief is not available.”
In GST, both audit and assessment are discretionary. Generally, discretionary decisions are subject to judicial review. Even so, it’s a bit hard to see the role for the Federal Court in ordering a delay in assessment, since, aside from the collection issue for GST, once assessed, the taxpayer has the right to object and later appeal to the Tax Court. (By contrast, the Federal Court has interfered to order CRA to assess where it has unreasonably refused to do so, as required, under the Income Tax Act. See e.g., McNally v. Canada (National Revenue), 2015 FC 767.)
One point that the case does not examine is the CRA discretionary decision under subsection 315(3). That rule allows the CRA to postpone collection of amounts under dispute:
“315. (3) Minister may postpone collection — The Minister may, subject to such terms and conditions as the Minister may stipulate, postpone collection action against a person in respect of all or any part of any amount assessed that is the subject of a dispute between the Minister and the person.”
That seems to have been a better route for the applicant to have taken. The decision is discretionary and so is reviewable by the Federal Court.
In its National Collections Manual (2015), CRA comments on this power that it may postpone collection action of amounts under objection where:
“• the debtor provides additional information after assessment, and Appeals concludes the assessment will likely be vacated”
It also says:
“ETA Memorandum assessments [these would include director liability and non-arm’s length transfer assessments]
“For memorandum assessments issued on ETA amounts, it is our policy to parallel the ITA legislation regarding the 90 day restriction period and also for amounts under objection or appealed to the Tax Court of Canada (TCC).”
So, the apparent goal of this application, with all its legal cost, was to prevent imminent assessment. But, in that, it failed.