[See also (a) Planning and compliance services]
(b) Dispute and Problem Resolution Services
I offer problem resolution and dispute resolution services specifically tailored to U.S. businesses:
(a) Problem resolution services: I provide services to resolve any type of Canadian sales tax or customs issue which arises unexpectedly. Two of the most common issues are:
(i) disagreement with another person in the supply chain; and
(ii) discovery of an error.
(b) Dispute resolution services: I provide dispute resolution services in connection with any Canadian sales tax or customs issue. Representation is provided at audit, on appeal and before the courts.
Problem Resolution
I offer assistance in resolving one off types of problems where experience, diplomacy and efficacy are required. These issues can take any form but the most common issues for US corporations are:
Disagreement with another party in the supply chain: it is not uncommon to be told by another party in your chain (purchaser, supplier, customs broker etc) that you are "doing things wrong". Should you alter your systems to comply with their expectations? What are the exposure risks for you?
I will evaluate the substance of their position including where that position has come from a third party advisor. I will then make recommendations as to how to proceed. If their position is other than optimal or you do not wish to implement the changes I will negotiate with the other side on your behalf in order to achieve a diplomatic solution.
Discovery of an error: there is nothing more unsettling than the discovery of a substantial or recurring error which has been made in the past. Your natural reaction is to move quickly but how? Should you proceed by way of:
- Fairness application?
- Voluntary disclosure?
- Advance ruling request?
- Political solution?
- Lobby for legislative changes?
- Seek a remission order?
- Pull your operations out of Canada?
- Do nothing at all?
Before you select a course of action you need to know all of the options that are available to you. Then you need to know the risks and opportunities which are associated with each of these potential courses of action.
I will evaluate the issue and determine if it is in fact an error. Sometimes the legislation or administrative policies provide relief in a form which is not commonly known. I will then provide you with all of the options potentially available to you and I will outline the pros and cons associated with each.
I will make my personal recommendation as to how to proceed. Once you have selected a method of proceeding I will assist you in implementing the corrective action.
Dispute Resolution
Your company's audit has been progressing smoothly for two weeks. Then, the auditor drops the bomb. He explains that the manner in which you have been claiming input tax credits on exports to Canada is not supported by the legislation.
He advises you that you are responsible for repaying four years of input tax credits which you claimed in error. Interest and penalties will then be levied based upon the aggregate amount of ITCs wrongly claimed.
You know that you need to act quickly because the best time to challenge the government's position is prior to the time when the assessment has been issued. However, you also know that any argument you advance now may be used against you at subsequent stages of appeal. What do you do?
Services Offered
I provide dispute resolution services in connection with any of the following issues when they affect U.S. businesses:
1. Commodity tax (GST/HST, tobacco tax, excise tax, fuel tax etc); or
2. Customs (seizures, fail to report, tariff classification, NAFTA origin)
Why are cross border issues particularly sensitive?
Cross border issues are particularly sensitive for a number of reasons.
1. Government agencies take a very principled approach to jurisdictional issues because of the potential for tax leakage;
2. Audits of non-residents are not conducted as frequently as are audits of Canadian residents. Errors are often repeated over the course of several years and can result in particularly large assessments. This failure to detect is often construed by U.S. businesses as condonation;
3. Errors tend to relate to fundamental or threshold issues; and
4. Relief from cross border issues often requires the involvement and cooperation of one or more supply chain partners.
The resolution of cross border issues is rarely straightforward. Cross border legislative provisions and policy imperatives are complex. Effective resolution of cross border disputes requires a thorough understanding of cross border tax and customs legislation, as well as a complete and up to date understanding of the administrative practices and policies (both written and unwritten) which drive these legislative regimes. This understanding can be used to create solutions which meet the exigencies both of the government agency and the U.S. business which has been assessed.
My approach in cross border disputes
With flexibility, persistence and diplomacy many disputes may be resolved directly with the appropriate government agency either at audit or at the appeals/recourse directorate branch.
I am firmly committed to resolving disputes in the first instance by exploring all possible avenues of relief, both substantive and procedural and by identifying and building upon common ground with government officials. However, I am equally committed where necessary to resolve your appeal by way of the court system.
I regularly pursue appeals before the Tax Court of Canada, Ontario Superior Court and to the Canadian International Trade Tribunal.
The three stages of a tax appeal
There are three stages of appeal in any sales tax or customs matter:
(a) informal appeal directly to the auditor (or audit team lead). This appeal is exercised during the audit in an effort to preclude the issuance of the assessment;
(b) formal appeal to the appeals branch (or recourse directorate in customs matters). This appeal is exercised after an assessment has been issued;
(c) formal appeal to the courts or CITT. This appeal is exercised after the appeals branch has confirmed an assessment.
I offer representation at each of these three stages of appeal. For further information about the services provided please click on the link below:
Appeal Stage #1: Appeal during the audit
Appeal Stage #2: Appeal after the audit has been issued
Appeal Stage #3: Appeal to the courts after the assessment has been confirmed
Appeal Stage #1: Appeal during the audit
There are a number of strategic benefits associated with involving your lawyer in a tax disagreement (or potential disagreement) before the assessment has been issued. Many tax disputes can be resolved without the assessment ever being issued. For this reason, ideally, involvement should occur at the first sign of problems during an audit.
I offer two different streams of service in connection with audits: a behind the scenes "ghost" function or a "front and centre" role. I can assist you in determining which of the two approaches might be better for your situation.
Behind the scenes approach
There may be times when it is advantageous to be able to call upon the support of a lawyer but without disclosing this involvement to the auditor.
I can quickly review the facts, research the issue and advise as to the best ways to counter the position being advanced by the auditor.
I can also ghost write correspondence from you back to the auditor explaining why your position is preferable.
I will also advise you as to procedural opportunities which arise through the process, many of which will preclude the issuance of the assessment.
Where necessary I can also engage in no-names discussions with government which do not connect back to you. |
Front and centre approach
At other times it is advantageous to have the lawyer deal directly with the auditor to negotiate in an open and transparent manner.
Frequently assessments are based upon simple misunderstandings of the application of the law or of the policies of the Ministry. Articulating these discrepancies in a timely and effective manner can often head off issues before they ever get off the ground.
This approach sends the signal that you are fully prepared to challenge any element of the assessment which is not rock solid. As a result issues can be headed off in an open and straightforward manner. |
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Appeal Stage #2: Appeal after the audit has been issued
For the majority of tax issues there are two levels of appeal once an assessment has been issued. The first level of appeal is to the appeals branch of the same government entity which issued the original assessment. The vast majority of appeals are resolved at this stage. Representations may be made in writing. There is also opportunity to arrange for discussions with the government decision maker.
Appeals which cannot be resolved at this stage may then be appealed to a court. Federal tax matters are appealed to the Tax Court of Canada. Provincial tax matters are appealed to the respective provincial courts (in most provinces referred to as the "Superior Court" or the "Court of Queen's Bench"). Customs matters are appealed to the Canadian International Trade Tribunal.
Notice of Objection
There are two major objectives to be achieved at the Notice of Objection stage:
1. win the appeal by persuading the appeals branch that the decision made on audit was incorrect; and
2. build the case for appeal to the courts. In the event that you are not successful before the appeal branch it is critical to build the case for proceeding before the courts. Ironically, presenting your appeal in a manner designed to build the case for court will often assist in resolving the case at the first level of appeal. The appeals branch will be forming opinions as to the veracity of your appeal, your credibility and as to the likelihood that you will continue the appeal. This is a good time to let the appeals branch know that you are both credible and serious in your approach.
Unfortunately, opportunities at the Notice of Objection stage are often squandered. Some of the more common mistakes which I have seen are:
1. allowing the other side to define the scope of the issue;
2. insufficient knowledge of your material (facts and law);
3. failing to develop a fall back/alternative position;
4. lack of awareness of opportunities to resolve the issue by alternative measures including procedural defences;
5. failure to listen to and respect the position advanced by the other side;
6. failure to carefully read the legislation;
7. failure to develop a strategic game plan;
8. failure to recognize the profound impact of loss of credibility; and
9. allowing personality issues to cloud good judgment.
Common mistakes made in Challenging tax assessments
I can assist you in devising and implementing a strategy which will enhance your chances of winning at the first level of appeal. The key to winning at the first level of appeal is the adoption of, and adherence to a solid strategic plan. Research and experience are critical to the development of the strategic plan.
I will also assist you in answering the more subtle questions which are commonly asked at this stage which include the following:
- Is it preferable to appeal by the "fairness" route instead of the ordinary appeal route?
- Should the matter be taken to the ombudsman?
- Should the matter be politicized?
- Can the assessment be reversed on a correction?
- When should you escalate the matter within the government?
- How do you define the scope of the issues?
- How do you deal with an unreceptive government official?
- When is it a good idea to meet with the government official?
- Who should attend that meeting?
- Can we "saw off" the amount owing?
- Do we present all of our arguments in the first instance? Do we show our hand?
- How do you deal with unfavourable facts - are they fatal?
- How do we advance alternative arguments?
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Appeal Stage #3: Appeal to the courts after the assessment has been confirmed
Appeals which are not successful at the Notice of Objection stage may be appealed to the appropriate court (or in the case of customs matters, to the CITT). The appeal will ultimately be heard by a single judge who will render a written decision after reviewing the arguments and facts presented both in writing and orally by both sides. Most sales tax and customs cases are resolved in a one day hearing.
A number of procedural steps are required to be fulfilled prior to the date of the hearing. The parties to the dispute will each file written pleadings (appellants case and respondants case). Witnesses and documents will in most cases be subject to the discovery process prior to the hearing. Parties to the litigation are expected to make all reasonable efforts to settle the case without the requirement of a court hearing.
Negotiations at this stage are strictly between lawyers. The provincial government bodies are represented by government lawyers and federal bodies (including the Canada Revenue Agency) are represented by lawyers from the Department of Justice.
Government lawyers will take a fresh look at the issues in dispute and will consider the arguments being advanced with an open mind. Where the government's case is not strong the lawyers will recommend that the appeal be settled out of court.
I am available to take your matter to any of the Tax Court of Canada, the Ontario Superior Court of Justice or to the Canadian International Trade Tribunal. |
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