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:
2001 TEI Question 2 Fines and Penalties - CCRA's comments on its process for disseminating information about current jurisprudence to field staff in order to ensure that significant decisions are taken into account in audits that are underway when a case such as the Supreme Court decision in 65302 British Columbia Limited. v. The Queen, 99 D.T.C. 5799, which addressed the deductibility of fines and penalties, is decided.
Position:
See below.
Reasons:
See below.
Question 2 Fines and Penalties
In many cases, auditors fail to take account of recent jurisprudence. For example, the Supreme Court decision in 65302 British Columbia Limited. v. The Queen, 99 D.T.C. 5799, addressed the deductibility of fines and penalties, but few auditors seem aware of the decision or follow it unless TEI members bring the case to their attention. We invite CCRA's comments on its process for disseminating information about current jurisprudence to field staff in order to ensure that significant decisions are taken into account in audits that are underway when a case is decided.
Agency's Position
? The CCRA mainly communicates changes in its assessing positions resulting from court decisions through Interpretation Bulletins, Information Circulars and the Income Tax Technical News. As well, internally, the Appeals and Compliance Programs Branches communicate the impact of court decisions to field staff though various forms of electronic and printed medium: some on a formal basis, others on an ad hoc basis.
? When there is a decision that significantly impacts a long-standing CCRA position such as 65302 British Columbia Limited, it receives considerable attention and goes through an extensive review before we officially announce our position. This particular decision had a significant impact on the CCRA's position on fines and penalties.
? By way of background on the 65302 British Columbia Limited decision, there were several meetings of senior members of the various Branches of the CCRA (Appeals, Policy and Legislation, and Compliance Programs), with our legal advisors and the Department of Finance to formulate a response and position with respect to the decision.
? While CCRA auditors had access to this decision, and were for the most part aware that our previous position on the non-deductibility of fines and penalties was no longer legally supportable, they were not given formal written direction on how to interpret the decision. Having said that, however, CCRA industry specialist auditors in Headquarters were in close contact with their counterparts in the field. For example, resource industry specialist auditors had immediate contact through e-mails, telephone calls and conferences, and were quite aware of the impact that the decision would have in narrowing the scope of their audits of fines and penalties.
? CCRA auditors also have access to various tax research tools, which contain not only the text of the case but also an analysis of the decision. These include CCH, Carswell and CCRA electronic libraries, such as the Income Tax Rulings Directorate's database.
? The CCRA's first public response to the 65302 British Columbia Limited decision in September 2000 at the Canadian Tax Foundation Annual Conference was given after careful and considerable analysis to formulate an appropriate position on the case.
? At that conference, it was announced that we accepted the court's decision and would cancel or amend IT-104R2 to account for the court's decision.
? Currently, IT-104R2 is being revised.
? Comments are now added to our Internet version of IT-104R2, noting that the bulletin is under review in light of the court's decision in this case.
? The bulletin should have been revised by now. We have recently recruited more staff for updating IT's and this bulletin will be given priority.
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