What is the status of the "tax fairness" plan in Canada?

Question

Canadian Royalty Trusts

Answer 1

Thought the Income Trust Industry - especially the Oil and
Gas industry -has attempted to lobby the government to change its mind, the Tax Fairness Plan is still set to go ahead in 2011, as announced last October.

http://www.billcara.com/RBC%20Dec%205%202006%20Cdn%20Income%20Trusts.pdf

Answer 2

This is not an easy question to answer as you have not provided much information to what can be a very complicated situation.

Fairness covers two situations. The first is the cancellation of late filing penalties when the late filing was caused by situations not under the filer's control. Recent examples include the BC forest fires and flooding in the maritimes.

Fairness is also a system that tries to give a debtor a break in cases of financial hardship. I will address the situation where an individual has a tax debt that they are having trouble paying.

There are two important preconditions to be eligible for fairness.

1. You have to be current and up to date on all filings. This includes returns that were not filed because of no income etc. If you have any outstanding returns including GST, if you have a business, you will automatically be denied fairness consideration.

The second condition is that you must have the ability to pay the outstanding tax portion of the debt. Fairness does not cancel tax it gives relief or cancellation on the penalty and interest portion only. If you are unable to pay the tax portion you are not eligible for fairness. In this situation it becomes a "writeoff" ,meaning that CRA writes off the debt as an active account but it still remians on file should your financial situation changes later on. Interest continues to be accrued.

A fairness request to cancel penalty and interest will be based on financial hardship and detailed financial statements must be provided showing that you are unable to pay the "p&i" and lack the ability to borrow the money from a financial institution, a family member or your business. CRA policy expets that you will go to a bank and borrow money to pay your debt even if the interest rates are higher.

Once a submission is made it is reviewed by CRA staff. If you disagree with the result you have the right to a second review by a higher level at CRA, usually the Director of your Tax Office. If you still disagree you have a right to a judicial review which will review that CRA gave your request an adequate review in terms of the policy but will not address your own circumstances. Other than that there are no Appeal rights for fairness.

Using an example of the Income Trust situation. a tax debt or investment loss caused by the change in Government policy/tax law to tax income from these properties is not a fairness issue Unless you have a debt and are unable to pay the penalty and interest. If you lost money on your portfolio too bad - your only
"fairness relief" would be at the ballot box and a hope that a new governmemt might change the policy.

Answer 3

Fairness is a VERY hard program to receive relief through. Since the Auditor General reviewed CRA operations and was less then impressed with what she saw, CRA has really tightened things up. That being said, there's no harm in trying an application.

Best of luck.

Answer 4

It's "be quiet and enjoy your national health"