13 February 2001 Ministerial Correspondence 2001-0067484 - Trust Assessment Court Challenge

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Various questions concerning CCRA's non-assessment of a particular trust.

Whether taxpayers have a legal right to challenge CCRA's assessment of another taxpayer.

Position:

A statement of defence has been filed with the court and the case is proceeding under special management of the court to protect taxpayer confidentiality.

2001-006748
M2001-00497

February 13, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your correspondence addressed to the Honourable Paul Martin, Minister of Finance, concerning an article by Ms. Diane Francis in the National Post with respect to the taxation of property when the owner leaves the country. Your Member of Parliament, XXXXXXXXXX, sent Mr. Cauchon a copy of your correspondence on January 15, 2001.

The Canada Customs and Revenue Agency (CCRA) is responsible for administering and enforcing the Income Tax Act, while the Department of Finance is responsible for tax policy and any proposed changes to the Act. The CCRA is committed to applying the tax laws consistently and collecting the full amount of tax owing under the law. However, the amount of tax payable for a particular year is based on the law that is in force at that time, and the CCRA does not have the discretion to change the law.

The Act provides that any person residing in Canada who owns taxable Canadian property may leave Canada without having to pay tax on this type of property at the time of departure. However, when the former resident sells the taxable Canadian property, any capital gain realized on the sale is subject to tax in Canada, unless Canada's right to tax is denied by a tax treaty between Canada and the new country of residence.

The concern raised in Ms. Francis's article is one of several tax policy issues raised in the Auditor General's 1995 report. Those issues were considered by the House of Commons Standing Committee on Finance in its report released in September 1996. Even though the committee found that the specific cases referred to in the Auditor General's report were dealt with in accordance with existing provisions of the Act and that there was no evidence of wrongdoing, it recommended that the Act be amended to address the tax policy issues.

The Department of Finance responded to those recommendations on October 2, 1996, by announcing draft amendments to the Act which, when enacted, will be effective as of that date. As a result, any person who leaves or transfers property from Canada will pay tax on most capital gains that have accrued in Canada up to the time of departure. Exceptions to this rule include gains that accrue on Canadian real estate and Canadian business property, which can always be taxed in Canada when they are ultimately sold. A Notice of Ways and Means Motion was tabled in the House of Commons on June 5, 2000, to implement these proposals.

The confidentiality provisions of the Act preclude me from divulging information about taxpayers' files without their prior written authorization. The CCRA takes its responsibility of maintaining confidentiality very seriously.

The court case referred to in Ms. Francis's article involves one individual's court challenge regarding the tax affairs of another. The case was taken to the Supreme Court of Canada as the issue of taxpayer confidentiality is fundamental to the integrity of our self-assessment system. While the courts have permitted the challenge to proceed, they have agreed that the case should proceed under special management of the court in order to protect taxpayer confidentiality. This will permit the courts to review the facts of the case while protecting the confidentiality of the taxpayer. The Attorney General filed a statement of defence on October 20, 2000. As this matter is before the courts, I cannot comment further.

I appreciate the opportunity to address your concerns.

						Yours sincerely,

						Bill McCloskey
						Assistant Commissioner
						Policy and Legislation Branch