If the Canada Revenue Agency (CRA) challenges your return and you can’t afford a tax lawyer, how likely are you to win your case? Does hiring a lawyer help your chances?
In 2009 32% of self-represented appellants before the Tax Court of Canada (TCC) were successful in their appeals. Appellants represented by counsel had a 41% chance of success before the TCC, and appellants represented by agents had a 39% chance of success. These numbers were compiled by going through rulings for 2009, randomly selecting 7-9 rulings per month—100 cases in total—and extracting the disposition and the representation. Cases were chosen randomly though an effort was made to screen out cases with an obvious corporate appellant and cases published in French due to translation difficulties.
The numbers show that, while representation makes a major impact, the real key to avoiding a loss before the TCC is to avoid being brought before the TCC. Overall the CRA won 51% of the cases before the TCC outright and rulings were split in 11% of cases with overall average wins for appellants at 36%. With odds like those the best way to win seems to be not to play and get solid tax advice before filing to avoid court.
If there is no choice but to take the issue to court is representation needed? The answer is that it depends, and economics play a large part in the question. What is the amount in dispute and what is the nature of the dispute? For a fact-based appeal where $10,000 is at risk a lawyer isn’t going to be able to do much and the cost of litigation could be worse than a negative finding (and most of the time appellants get stuck with both a big legal bill and a big tax bill). On the other hand, if fighting a point of law, victory is an up-hill battle without representation. In the cases examined self-represented litigants tended to be fighting over both small amounts and factual issues and represented litigants tended more to be fighting larger cases on points of law.
In the end it seems to come down to the context of the case to determine if a lawyer is economically efficient: if you’re in a plane that’s going to crash the expensive parachute is better, but if all you can get is a cheap parachute it’s better than nothing.
