Sunday News Roundup 22.10.16: Tax Court, CRA frustrations, and more Canadian accounting news

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TORONTO, October 16, 2022 – Earlier this month, Judge Patrick Boyle of the Tax Court of Canada allowed the appeals of three plaintiffs without holding trials, in cases involving the Canada Revenue Agency and gross negligence penalties. The ruling has not been published to date by the Tax Court, so the information available comes from the plaintiffs’ lawyer and an article from the CBC. 

In a 52-page decision, Justice Boyle railed against the behaviour of the CRA, accusing them of abusing the discovery process in myriad ways, and essentially threw up his hands in frustration. In order to "protect the integrity of the judicial process," he allowed the appeals without trial. The ruling could have significant repercussions, as “the three appeals were supposed to be the lead plaintiffs for a much larger group of appeals.” 

The ruling has not been published so there is precious little interpretation available for the case. But Tim Cestnick at the Globe and Mail quickly used the case — and two personal anecdotes provided by CPA friends — to say the culture at Canada Revenue Agency needs a complete overhaul. Cestnick clearly hit a nerve with readers, with around 150 comments as of Sunday, the vast majority of which were complaints over treatment by the CRA. 

If you dig a little deeper into the story, however, there is more to tell. The plaintiffs were among the many dozens of Canadians who were clients of the infamous DeMara Consulting and its tax evasion system called “The Remedy.” (Its principal was sentenced to 33 months in prison for tax evasion offenses, including criminal fraud.) The CRA has relentlessly pursued DeMara’s clientele for years, levying gross negligence penalties against the taxpayers, sometimes to disastrous effect. 

While one can sympathize with the plaintiffs, one note of caution. Headline-grabbing rulings by the Tax Court have been successfully appealed in the past, and upheld by the Supreme Court of Canada. And now, on to the rest of the news from the past week in Canadian accounting. 

SMBs frustrated by lengthy CRA audits

According to documents tabled in Parliament, it now takes the CRA almost a year on average to conduct an audit of a small business, which is really bugging small business owners across Canada. The Canadian Federation of Independent Business says correctly that CRA audit times have been increasing for years. 

That said, the number of SMB audits were halved during the pandemic, due to the reassigning of workers for pandemic benefits, and it looks like audit times are now returning to pre-pandemic levels. The CBC quotes spokespersons for both Opposition parties, the Conservative saying the CRA has audited enough, and the NDP saying the reassignments just prove the CRA needs more funding. 

Canadian professional services firms prime ransomware targets

Palo Alto Networks published its 2022 Ransomware Threat Report this past week and revealed that the second largest number of victims from dark web leak site data were from Canada. Moreover, while manufacturing was the most targeted Canadian industry vertical by ransomware gangs, accounting for nearly 20 per cent of all attacks, guess who accounted for just under 20 per cent? 

Professional and legal services! If your company is based in Ontario or Quebec, consider yourself a prime target for ransomware attacks, followed by British Columbia and Alberta, Consider yourself warned! 

Former KPMG accountant becomes Mayor of Vancouver

Congratulations to Ken Sim of Vancouver, who has unseated incumbent mayor Kennedy Stewart, to become Mayor of Vancouver. Sim is a CPA, CA who worked at KPMG before joining CIBC World Markets, eventually becoming an entrepreneur. Sim ran on a centre-right platform of “addressing crime, public safety, and public disorder issues, especially in the context of Chinatown’s issues and anti-Asian racism.” 

Quick Hits: Articles of Interest

CRA can deny business expenses even after the normal assessment period (Financial Post)
KPMG in Canada implements Truth and Reconciliation Action Plan (Press Release)
Canada’s retirement system remains strong, but DC pension plans facing inflation risks: report (Benefits Canada)
Tax & Spend: Chrystia Freeland is right on EI – and she has Stephen Harper to thank (Globe and Mail)
Microsoft uses strategically located subsidiaries to lower taxes more than previously known, new analysis finds (Globe and Mail) 

By Canadian Accountant staff.