In Ficek v. the Attorney General for Canada, 2013 FC 502 the taxpayer successfully compelled the Canada Revenue Agency (CRA) to issue a notice of assessment (and a related income tax refund) by going to court 18 months after the filing of her tax return in which she claimed credits for charitable donations. Her Canadian income tax litigation lawyer argued that under Canadian income tax law the Canadian income tax return must be processed promptly after being filed with the Canadian income tax office. Instead of processing the tax return and either allowing the claim (and refund) or disallowing it, the CRA held the return without processing it. The delay affected all aspects of her income tax return and not only the disputed donation amount. The inaction was not due to laziness on the part of the CRA or the actual time needed to process the return but was part of a wide-scale anti-donation program put in place by CRA. By not processing the return, the CRA’s goal was to inconvenience the taxpayer (and the thousands of other donors involved in the same donation program) and to deter other taxpayers from participating in donation programs. The Federal Court of Canada looked at the real motive behind the CRA’s inaction and, given its impropriety, found in favour of Ms. Ficek.
Tax Shelters are generally investments that have as a main or secondary purpose the reduction of taxes, and are often challenged by CRA. The Canadian tax department has been warning about charity tax shelters for years, and has tried various approaches to shutting down the charity tax shelter industry. As a further attack on the industry, CRA announced that they have launched criminal investigations into a number of tax shelter promoters. Prior to investing in any tax shelter it is important to seek independent advice from a Canadian tax lawyer. We have experience in both structuring tax shelters for promoters and in providing tax assistance to Canadian taxpayers who have their tax shelter investments challenged by CRA.