Principal Issues: Ministerial authority to make a determination on a contractual relationship
Position: A determination on a contractual relationship may be made in the course of an assessment or a reassessment
Reasons: Under the voluntary system of tax administration a taxpayer is required to compute and report tax by filing tax returns. The Minister is required to assess the returns and where necessary to verify the accuracy of the returns. The taxpayer may object to or appeal from the Minister's determination.
April 30, 2009
XXXXXXXXXX
Dear XXXXXXXXXX :
Thank you for your letter received on February 23, 2009, in which you are seeking clarification on the legislative authority of the Minister of National Revenue to make a ruling under the Income Tax Act concerning a contractual relationship between two parties.
In answer to your question, please note that the Act specifically provides that the Minister shall administer and enforce the Act, and the Commissioner of Revenue may exercise all the powers and perform the duties of the Minister. The Act further provides that the Minister may authorize officials to exercise those powers and perform those duties. It is in this context that officials of the Canada Revenue Agency may be called upon to examine a contractual relationship between two parties.
Your reference to the term "ruling" has a limited technical meaning in terms of tax administration. Indeed, a ruling is not the only way, or even the most common way, in which the Minister or the authorized official expresses a conclusion. Such conclusions arise under the voluntary system of tax administration in Canada, where each taxpayer is responsible for calculating and reporting tax payable by filing tax returns.
The Minister has the authority under the Act and other tax legislation to review the records of taxpayers to verify the accuracy of those returns, and to assess or reassess tax, interest, and penalties to correct errors. Whenever an assessment or reassessment is made, a notice of assessment or a notice of reassessment containing an explanation of any changes is issued to the taxpayer. One reason for a reassessment could be that the Minister's conclusion about the tax effect of a particular contractual relationship differed from that of the taxpayer. The taxpayer has the right to object or appeal to the courts to vacate or vary the reassessment.
If you have more questions about a particular transaction affecting your tax situation, I invite you to contact Mr. Tony Brosseuk, Assistant Director of Taxpayer Services and Debt Management at the Southern Interior Tax Services Office, by writing to
277 Winnipeg Street, Penticton BC V2A 1N6, or by calling 250-492-9209. The CRA accepts collect calls. Mr. Brosseuk is aware of our correspondence and will be pleased to assist you.
I trust that the information I have provided is helpful.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.