Audit reversals

According to Neil Armstrong’s summary of Alexandra MacLean’s paper at the 2018 CTF Annual Conference (“CRA Audits of Large Corporations – The view from ILBD”), CRA Tax Services Offices and programs are assessed by “tax earned by audit” for the purposes of allocating resources. The result, predictably, has been that auditors made adjustments that, too often, needed to be reversed by Appeals.

Although Ms MacLean’s paper is about large audits, her observation seems apt for owner-managed businesses as well. Accountants who represent such clients have mentioned to me repeatedly a growing intransigence on the part of CRA auditors. I have encountered a number of audits where Appeals ended up making large changes because the audits weren’t well founded in the facts or the law (or both).

Apparently the CRA is working to fix this problem. Ms MacLean also notes, however, that the CRA is dealing with statutes where there is “substantial interpretive uncertainty”. She expressed confidence that the government would move forward quickly with a comprehensive review of those statutes for the purpose of reforming and simplifying them so that business owners and other taxpayers will have more confidence they are complying with the law when filing tax returns.

Ha ha ha ha. I made up that last part, of course. In reality, we’ll be stuck with the patchwork mess that is the Income Tax Act for at least the remainder of my professional life.

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