16 October 2001 External T.I. 2001-0092215 - COLLECTION OF TAX-LIMITATIONS

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 CCRA.

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

Principal Issues: CTF Round Table 2001 - Markevich

Position: General comments.

Reasons: Case under appeal.

Topic 6: Markevich (2001 DTC 5305)

On May 7, 2001, the Federal Court of Appeal ruled that provincial limitation laws were applicable to the Federal Crown in respect of the collection of debts under the Act. This decision overturns a previous decision from the Federal Court - Trial Division.

In this case, the taxpayer failed to pay taxes that were assessed on income he had earned between 1980 and 1985. In 1986 the taxpayer owed more than $230,000 and nothing was paid on this outstanding amount after 1986. The debt was written-off by the CCRA in 1987, but was not forgiven. From 1987 to 1997, no collection measures were taken to recover this amount. During 1998, the taxpayer was advised that the CCRA intended to take statutory collection action for the full amount of his indebtedness. The statement of account sent to the taxpayer in January of 1998 indicated a balance of approximately $770,500, reflecting the amount owing in 1986, assessments and reassessments for subsequent years, and accrued interest, less payments made by the taxpayer. The taxpayer was of the view that CCRA's collection procedures had become statute-barred as a result of provincial limitation laws.

The taxpayer appealed to the FCA, which ruled the Act's collection procedures were subject to provincial limitation laws. In the Court's view, the Act deals with limitation periods in three ways. One is to explicitly provide for limitations. A second is to exclude the application of limitation periods by words such as "at any time". A third is by silence as to limitation periods, as is the case with the collection provisions of the Act. The Court found that since limitation periods are expressly addressed in some situations and not others, it was wrong to infer from silence that no limitation period was intended. The Court rather interpreted such silence as Parliament's intention to have the question of limitations governed by laws of general application, such as the Crown Liability and Proceedings Act (CLPA) and provincial limitation laws. In addition, the Court found that statutory collection procedures were "proceedings" within the meaning of this term in section 32 of the CLPA and, consequently, that the relevant provincial limitation law was applicable to such procedures.

Questions and Responses

Question 1

Will the CCRA appeal this decision?

Response 1

We have sought leave to appeal this decision to the Supreme Court of Canada. It is our view that limitation laws were not intended to apply to collection procedures under the Act.

Question 2

Are there any changes that will be made to CCRA's collection procedures as a consequence of this decision?

Response 2

As result of the Markevich case, and until further guidance from the Supreme Court of Canada, the CCRA will review all accounts and accelerate collections procedures in respect of accounts at risk of not being collected as a result of relevant limitation periods.

Question 3

Has the CCRA discussed this case with the Department of Finance?

Response 3

Yes we have. In fact, we have strongly suggested to our colleagues at Finance that the Act be amended to clarify that limitation laws do not apply to collection procedures under the Act.

Prepared by Marc Vanasse