29 August 2002 GST/HST Interpretation 41232 - GST/HST Net Tax Refunds and the Family Orders and Agreements Enforcement Assistance Act ("FOAEAA")

This memorandum is in response to conversations we had concerning the FOAEAA, and GST/HST net tax refunds. The purpose of this memorandum is to confirm the opinion I expressed during the course of our earlier conversations.

Background Information

The Individual Returns & Payment Processing (IRPP) Refund Set-Off (RSO) Program provides an automated service by which the tax refunds of individuals may be "set-off" to pay debts owed by clients under federal, provincial or territorial programs. A number of social benefit program credits administered by the CCRA, such as the Child Tax Benefit and its provincial equivalents, are exempt from set-off.

In the situation at hand, a sole proprietor registrant's GST/HST net tax refund was held by the CCRA, and there was a debt outstanding, pursuant to the Family Orders and Agreements Enforcement Act.

Questions Asked

Would the CCRA be required to pay out a GST/HST net tax refund, pursuant to the FOAEAA? Is there some authority under the Financial Administration Act (FAA), under which a GST/HST net tax refund could be used to pay off a debt outstanding pursuant to the FOAEAA? Or alternatively, would the CCRA set aside a statutory set-off or garnishment issued pursuant to the FOAEAA, and pay the net tax refund to the registrant?

Our Views

Section 312 of the Excise Tax Act (ETA) provides that, except as specifically provided under Part IX of the ETA, the Customs Act or the FAA, no person has a right to recover any money paid to Her Majesty as or on account of, or that has been taken into account by Her Majesty as, tax, net tax, penalty, interest or any other amount under Part IX of the ETA.

Upon examining the FAA, and the regulations made thereunder, we have not identified any express provision(s) that would require the CCRA to pay out a GST/HST net tax refund, to satisfy a debt pursuant to the FOAEAA. Furthermore, Part II of the FOAEAA deals with the garnishment of federal moneys to satisfy support orders. Section 24 of the FOAEAA provides that, notwithstanding any other Act of Parliament preventing the garnishment of Her Majesty, Her Majesty may, for the enforcement of support orders and support provisions, be garnisheed in accordance with Part II in respect of all "garnishable moneys".

Subsection 23(1) of the FOAEAA defines "garnishable moneys" (http://laws.justice.gc.ca/en/F-1.4/52149.html#rid-52200) to mean moneys authorized to be paid by Her Majesty by or under such Acts of Parliament or provisions thereof or programs thereunder as are designated by the regulations. Section 3 of the Family Support Orders and Agreements Garnishments Regulations (http://laws.justice.gc.ca/en/F-1.4/SOR-88-181/99119.html) provides that a number of Acts, provisions thereof and programs thereunder are designated for the purposes of the definition garnishable moneys in section 23 of the FOAEAA.

Net tax refunds paid pursuant to the ETA are not specifically designated as being garnishable moneys under the FOAEAA. We are not aware of any specific legislative authority that would require the CCRA to pay out GST/HST net tax refunds, pursuant to the FOAEAA. Please note that subject to a few restrictions, subsection 229(1) of the ETA provides that where a net tax refund payable to a person is claimed in a return filed by the person, the Minister shall pay the refund to the person with all due dispatch after the return is filed.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-9699.