18 January 2002 Ministerial Correspondence 2001-0113334 - Interest and Penalties

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: Interest, penalties and status of Harris case

Position: Overview of interest/penalties

Reasons: The law

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Dear XXXXXXXXXX:

The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your letter of November 16, 2001, addressed to her predecessor, the Honourable Martin Cauchon, concerning an article from the Financial Post and the status of a particular court case.

The article of May 1, 2001 in the Financial Post indicates that the federal government collected 20 times more in interest and penalties on late income tax filings than it paid out as refund interest. The article was based on data obtained by the Canadian Taxpayers Federation under the Access to Information Act.

Canadian income tax is based on the self-assessment system. This means that the obligation to file income tax returns and pay income tax, as required by the Income Tax Act, rests on the taxpayer. At the heart of this system is the notion of voluntary compliance and fairness, as well as the principle that the system must be equitable towards those who fulfil their obligations within the time limits imposed by the Act. In light of this, those who fail to comply with their filing and payment obligations will be subject to interest and penalties. The Canada Customs and Revenue Agency (CCRA) does, however, make extensive efforts to ensure that individual taxpayers are aware of their filing obligation and are given the assistance they require to comply.

In addition, in the interest of fairness, the Act also permits the CCRA to waive or cancel interest and penalties in situations where taxpayers, because of personal misfortune or circumstances beyond their control, are unable to comply with certain obligations imposed under the Act. For the 2000-2001 fiscal year, approximately $210 million in interest and penalties was waived or cancelled, affecting more than 1.9 million taxpayers.

With respect to your second question, we have assumed that you are referring to the case of Harris v. The Queen. This court case involves one individual's court challenge regarding the tax affairs of another, and was heard by the Federal Court-Trial Division earlier this year. By a judgment dated December 19, 2001, the Court dismissed Mr. Harris' action. A copy of the judgment, docket T-2407-96, may be viewed or printed from the Web site on the Internet maintained by the Federal Court of Canada at www.fct-cf.gc.ca.

I trust the information provided is helpful.

							Yours sincerely, 

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

Gwen Watson
957-2094
December 21, 2001
2001-011333

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