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Using CRA Guidance Documents when Filing your Returns

The Canada Revenue Agency (and the Department of Finance) publish a large number of documents that deal with various income tax and excise (GST/HST) tax topics. These documents include Interpretation Bulletins and Folios that interpret some parts of the Income Tax Act and Information Circulars that set out the administrative procedures the CRA will follow.

Examples of topics covered by the Folios include information on “Health and Medical” tax credits, “transfers of Income, Property, or Rights to Third Parties”, and “employee benefits”. These guides are an important source of guidance for many of the over 26 million taxpayers that interact with the CRA annually. They are important because the Income Tax Act is complex and convoluted, often filled with provisions that are ambiguous or confusing to the average taxpayer. 

The question arises, how much can a taxpayer rely on these government publications? What happens if the information is wrong or the CRA decides it has changed its mind? What legal recourse do you have? The answer depends on the document you relied on, what you relied on the document for, and what the outcome of your reliance was.

Canadian courts have always said that a government department of agency cannot create law – for good reasons, as law is supposed to be made by legislature. This, however, means that the CRA’s publications are nothing but the CRA’s opinion on what the law is, at that time, and they cannot be bound by those interpretations. This can work in favor of a taxpayer who disagrees with the CRA position as a court will determine what the law requires irrespective of what the CRA wishes it said. However, this can work against many taxpayers because most taxpayers cannot make heads or tails of the convoluted provisions in the legislation. If you reply on what the CRA tells you in a publication, most times, they can change their mind at any point and can take a different position in any case. This is where case law and tax professionals’ experience becomes invaluable.

There is one exception. The exception applies to discretion and procedure. If the CRA has discretion and tells you how they will exercise that discretion, or where they set out the proper procedure to follow, the Courts will hold the CRA to these representations.

If you want to know what your tax obligations are, don’t just rely on the CRA. Contact the experts at Faris CPA for clarity.