When filing an objection to Canada Revenue Agency (CRA) reassessment, one of the most frequently-posed questions is “How long will it take?”. The answer, according to the Auditor General, is “too long”.
On November 29, 2016, the Auditor General released a report to Parliament focusing on the effectiveness and timeliness of the objection process.
Length of Process
For the five-year period ending March 31, 2016, CRA took the following numbers of days, on average, to resolve objections from the time they were filed by the taxpayers:
- 143 days for low-complexity objections (about 61% of total objections for the period);
- 431 days for medium-complexity objections (about 37% of total objections for the period); and
- 896 days for high-complexity objections (about 2% of total objections for the period).
On average, CRA did not assign an objection to an appeals officer until 150 days after the taxpayer had mailed the notice of objection.
CRA’s performance was also compared to six other administrations using 2009 data. Canada took 276 days compared to an average of 70 days for the other six countries.
It was also noted that the tracking system for timing the process was not sufficiently accurate or complete.
Objection Decision Results
Of the objections accepted and processed by CRA, 65% were decided in favour (in whole or part) of the taxpayer. 0.6% of objections resulted in an increase in income tax owed.
In the Fall of 2016, CRA commenced a review of its objections process. As an immediate response, CRA indicated that it will implement the standard to respond to taxpayers on low-complexity objections within 180 days, 80% of the time. Also, beginning in the 2017-2018 year, as part of the initial step when objections are received and screened, taxpayers will be contacted (if necessary) to provide missing information to ensure the file is complete when assigned for resolution.
Action Item: As it will likely take a long time to complete an objection, a significant amount of interest on the tax liability may accumulate. Consider making an earlier payment to reduce the interest cost in the event that the objection is not successful. If it is successful, the CRA will pay interest to the taxpayer, albeit at a lower rate.
The above information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by your qualified DJB professional.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this newsletter, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents.
For further questions… please give your DJB advisor a call.
Article originally published in: Tax Tips & Traps 2017 First Quarter – Issue 117.