The late 1980’s and early 1990’s were riotous times for tax shelters and their promoters. Unfortunately, many of them tended to leave taxpayers with severe hangovers in the form of large tax bills complete with assessments for interest amounts that tripled or quadrupled the amount of tax payable. What to do about that interest?
In Moledina v. The Queen, 2007 TCC 354, the taxpayer tried to argue that the Tax Court could “grant relief from interest calculated in accordance with the provisions of the Income Tax Act, because of delays which the Appellant alleges are excessive and unacceptable” (at ¶4). Bowman C.J. responded as follows:
[5] […] It is sometimes said, inaccurately in my view, that [the Tax Court has] no jurisdiction when a taxpayer objects to the imposition of interest on income taxes. This statement is too broad. If the issue in an appeal is whether the interest was properly calculated, or whether it was imposed in accordance with the provisions of the Act, patently the Tax Court has jurisdiction to hear such an appeal. Interest is a component of an assessment and the Tax Court’s jurisdiction includes the power to hear and determine appeals from assessments under the various statutes mentioned in section 12 of the Tax Court of Canada Act. See Union Gas Limited v. The Queen, 90 DTC 6659.
[6] I do not however believe that the Tax Court of Canada has the power to review the exercise or non-exercise of the Minister’s discretionary power to waive interest under subsection 220(3.1) of the Act or, indeed, to exercise that power.
So far, so good. The Chief Justice, however, continued as follows:
[7] Generally speaking, delay in processing a notice of objection is not a ground for vacating an assessment or, a fortiori, for deleting interest. The reason for not granting such relief is not because of a lack of jurisdiction in the Tax Court of Canada[1] — if there is a legal basis for vacating an assessment it is within the Court’s power to do so — but because delay is in most instances not a legal basis for attacking an assessment because it lies within a taxpayer’s own power to bring the delay to an end.
[8] Under paragraph 169(1)(b) of the Act, if the Minister has not responded to a notice of objection by reassessing or vacating or confirming the assessment, the taxpayer has a right to appeal to the Tax Court of Canada. It is difficult to imagine why a taxpayer would seek or be granted an extraordinary remedy such as mandamus (cf. The Queen v. Ginsberg, 96 DTC 6372) or some other form of judicial review where the Minister delays in dealing with an objection when there is a clear right of appeal after 90 days (see Bolton v. The Queen, 96 DTC 6413).[2] This is sufficient to dispose of these appeals.
The Chief Justice’s comments are interesting inasmuch as they seem to indicate that interest relief should never be granted to a taxpayer in connection with a delay in processing an objection because the taxpayer can always file an appeal to the Tax Court. Assuming this interpretation is correct, is this view correct in all cases?
Legally, of course, a taxpayer can appeal to the Tax Court at any time after the expiry of the 90-day period after the filing of an objection. But the objection process exists because it is supposed to be cheaper and faster than the Tax Court. Can a taxpayer really be blamed for sticking with the objection process if he or she is trying to work with the CRA in a relatively informal manner to resolve a tax dispute and the CRA delays the consideration of an objection? Is it really the taxpayer’s fault if interest continues to accrue while the taxpayer, who is hoping to avoid expensive litigation, waits for the CRA to do its job?
