Facing a GST/HST Audit?

Overview of the Taxpayer Bill of Rights

The Taxpayer Bill of Rights (BoR) is a codified set of principles that outlines the rights for all persons dealing with the CRA. While those rights exist at all times, they are particularly important when a taxpayer is subjected to an audit. The BoR is intended to ensure that taxpayers are treated fairly, professionally, and in accordance with the law, and that their entitlements and obligations are clearly communicated and respected throughout the audit process.

The BoR applies to all interactions with the CRA, not just audits. Your rights, as set out in the BoR, can be summarized as follows:

• The right to receive entitlements and to pay no more and no less than what is required by law
• The right to service in both official languages
• The right to privacy and confidentiality
• The right to a formal review and a subsequent appeal
• The right to be treated professionally, courteously, and fairly
• The right to complete, accurate, clear, and timely information
• The right, unless otherwise provided by law, not to pay amounts in dispute before an impartial review
• The right to have the law applied consistently
• The right to lodge a service complaint and to be provided with an explanation of findings
• The right to have the costs of compliance taken into account when administering the tax legislation
• The right to expect the CRA to be accountable
• The right to relief from penalties and interest due to extraordinary circumstances
• The right to expect the CRA to publish service standards and report annually
• The right to expect the CRA to warn you about questionable tax schemes in a timely manner
• The right to be represented by a person of your choice
• The right to lodge a service complaint and request a formal review without fear of reprisal

Application of the Bill of Rights in GST/HST Audits

Right to Receive Entitlements and Pay Only What is Required

Taxpayers are entitled to all input tax credits, rebates, and refunds to which they are legally entitled, and are only required to pay the correct amount of GST/HST as determined by law. Auditors must ensure assessments are accurate and based on the facts and law, neither over- nor under-assessing.

Right to Service in Both Official Languages

All communications, including audit letters, interviews, and final reports, must be provided in the taxpayer’s official language of choice, as required by the Official Languages Act.

Right to Privacy and Confidentiality

All information obtained during a GST/HST audit is protected under the confidentiality provisions of the Excise Tax Act (ETA). Only those CRA employees who require access to the information for audit purposes may access it. Disclosure to third parties is strictly limited and must comply with section 295 of the ETA.

Right to a Formal Review and Appeal

Taxpayers have the right to object to GST/HST assessments and to appeal decisions to the Tax Court of Canada. The audit process must inform taxpayers of their objection and appeal rights and must also provide clear instructions on how to exercise those rights.

Right to Professional, Courteous, and Fair Treatment

Auditors must conduct themselves with professionalism and courtesy at all times, including when requesting information, conducting interviews, and issuing proposals or reassessments. The audit process must be impartial and take into account the taxpayer’s circumstances.

Right to Complete, Accurate, Clear, and Timely Information

Taxpayers must be provided with clear explanations of audit findings, proposed adjustments, and the reasons for any reassessment. All requests for information must be specific and reasonable, and responses to taxpayer inquiries must be timely.

Right Not to Pay Disputed Amounts Before Review (Unless Otherwise Provided by Law)

Unlike income tax, there is generally no statutory restriction on collections resulting from a GST/HST audit during an objection or appeal.

Right to Consistent Application of the Law

The CRA must apply GST/HST legislation and policy consistently across all audits. Auditors should refer to CRA technical publications, memoranda, and precedents to ensure uniform treatment.

Right to Lodge a Service Complaint

Taxpayers may file a service complaint if they believe the audit was not conducted in accordance with the BoR, or if they experienced undue delay, unprofessional conduct, or other service issues. The CRA must provide an explanation of its findings in response to such complaints.

Right to Have Compliance Costs Considered

The CRA is required to minimize the compliance burden on taxpayers. Auditors should avoid unnecessary requests for information, limit the scope of audits to what is necessary, and use electronic means where possible to reduce costs and inconvenience. Auditors should be open to suggestions from taxpayers if they have ideas for providing data in an alternative manner, if it can be shown that it accomplishes the goals set out by the auditor.

Right to Accountability

The CRA must be able to explain and justify all audit actions and decisions. Taxpayers are entitled to a full explanation of audit findings, adjustments, and the legal basis for any reassessment. Typically, this should include a sound understanding of the relevant facts and clear reference to the applicable sections of the ETA.

Right to Relief from Penalties and Interest

Taxpayers may request relief from penalties and interest if extraordinary circumstances prevented compliance. While these provisions may not automatically be applied at the audit level, a request for review can be made under the CRA’s taxpayer relief provisions.

Right to Be Warned About Questionable Tax Schemes

The CRA is committed to providing timely warnings about abusive GST/HST schemes and the risks of participation. Auditors should inform taxpayers if their arrangements are under scrutiny.

Right to Representation

Taxpayers may appoint a representative (i.e. accountant, lawyer) to act on their behalf during a GST/HST audit. Although the representative must be appointed through a duly authorized process, once they have been appointed, the CRA must communicate with the authorized representative if instructed to do so.

Right to Lodge a Complaint Without Fear of Reprisal

Taxpayers are protected from reprisal for exercising their rights, including filing complaints or requesting reviews. The CRA must ensure that all actions are free from retaliation.

Administrative and Procedural Safeguards

• Audit Notification and Communication: Taxpayers must be informed at the outset of the audit of their rights under the BoR, the scope of the audit, and the expected timeline. All requests for information must be reasonable and relevant to the audit.
• Documentation: All audit steps, communications, and decisions must be documented in the audit file, including any consideration of taxpayer rights or relief provisions.
• Access to Information: Taxpayers have the right to access their own information and to request copies of audit working papers, subject to confidentiality and third-party information restrictions.

Commitment to Small Business

In addition to the rights outlined above, the BoR also includes five commitments to small businesses, including:

• Minimizing the cost of tax compliance
• Working with all governments to streamline service, minimize cost, and reduce the compliance burden
• Providing services that meet the needs of small business
• Conducting outreach to help small businesses comply with the tax legislation
• Clearly explaining how the CRA conducts business

Key Takeaway

The Taxpayer Bill of Rights imposes obligations on the CRA’s auditors to ensure that audits are conducted fairly, transparently, and with due regard to the rights afforded to taxpayers. Adherence to the BoR not only protects taxpayers, but also enhances the integrity and effectiveness of the CRA’s audit function.

The CRA expects all audit staff to be familiar with the BoR and ensures that its principles are embedded in every stage of the GST/HST audit process. Understanding your rights is vital to obtaining an appropriate audit result.