{"id":5922,"date":"2020-03-18T06:52:36","date_gmt":"2020-03-18T10:52:36","guid":{"rendered":"http:\/\/www.spiegelsohmer.com\/?p=5922"},"modified":"2020-03-24T10:38:21","modified_gmt":"2020-03-24T14:38:21","slug":"objection-settlement-practices-of-the-quebec-revenue-agency-reviewed-by-the-quebec-ombudsman","status":"publish","type":"post","link":"https:\/\/spiegelryan.com\/en\/2020\/03\/18\/objection-settlement-practices-of-the-quebec-revenue-agency-reviewed-by-the-quebec-ombudsman\/","title":{"rendered":"Objection settlement practices of the Qu\u00e9bec Revenue Agency reviewed by the Qu\u00e9bec Ombudsman"},"content":{"rendered":"

In December 2015, the Qu\u00e9bec Ombudsman (link here<\/a>, French version available here<\/a>) published its annual report, a section of which dealt with various practices of the Qu\u00e9bec Revenue Agency (\u201cQRA<\/strong>\u201d). The relevant section of the Qu\u00e9bec Ombudsman 2015 annual report is available here<\/a> (French version available here<\/a>).<\/p>\n

As per this section of the Qu\u00e9bec Ombudsman 2015 annual report, certain QRA practices were harshly called into question, such that the publication of said report gave rise to an \u201caction plan\u201d published by the QRA in response to same. This \u201caction plan\u201d, only available in French, can be consulted here<\/a>.<\/p>\n

The most notable aspect of this \u201caction plan\u201d was the creation of the Charter of Taxpayers\u2019 and Mandataries\u2019 Rights<\/em>, available here<\/a> (French version available here<\/a>).<\/p>\n

Following the publication of the Qu\u00e9bec Ombudsman 2015 annual report, the publication of the QRA\u2019s \u201caction plan\u201d and the coming into effect of the Charter<\/em>, it has been the undersigned\u2019s experience that certain QRA practices that existed prior were indeed modified, and that an increased willingness to listen and cooperate so as to resolve cases in a more fair and objective manner resulted. The undersigned\u2019s experience is shared by many other professionals dealing with the QRA, professionals whose prior perception was, rightly or wrongly, much less favorable.<\/p>\n

On February 27, 2020, the Qu\u00e9bec Ombudsman published a special report dealing with settlement agreements reached between Qu\u00e9bec taxpayers and the QRA at the objection level. An English \u201cexecutive summary\u201d of the report is available here<\/a>, while the full version of the report, in French, is available here<\/a>.<\/p>\n

This report deals with the Ombudsman\u2019s review of the various policies, guidelines and considerations used by the QRA in order to determine if a settlement agreement (in French a \u201ctransaction\u201d) should be reached at the objection level, the whole in application of sections 2631 and following of the Qu\u00e9bec Civil Code<\/em>. This report does not deal with settlement agreements reached between Qu\u00e9bec taxpayers and the QRA either at the audit or at the judicial level.<\/p>\n

An analysis of this report and the conclusions thereof are, unfortunately, troubling.<\/p>\n

In year 2000, the QRA published a specific directive called CMO-2976 Transactions conclues avec les contribuables et les mandataires en vertu des articles 2631 \u00e0<\/em> 2637 du Code civil du Qu\u00e9bec<\/em>, which was updated in 2009, and which is available, in French, here<\/a>. This directive, which is now under review following the publication of the Quebec Ombudsman\u2019s report, specifically provided, at section 4.2.2 that:<\/p>\n

\u201cLorsque les faits pr\u00e9sents au dossier ne pourraient vraisemblablement pas, selon l’\u00e9valuation qu’en fait le fonctionnaire, soutenir la position du Minist\u00e8re dans l’\u00e9ventualit\u00e9 d’une contestation devant les tribunaux et que le Minist\u00e8re ne peut, par ailleurs, constituer une preuve ad\u00e9quate, le Minist\u00e8re peut alors proposer ou accepter une offre de transaction du dossier. Cette offre doit \u00eatre raisonnable eu \u00e9gard aux circonstances du cas en l’esp\u00e8ce.<\/em><\/p>\n

Il est possible que le Minist\u00e8re puisse \u00eatre en mesure de constituer la preuve n\u00e9cessaire pour le traitement du dossier, mais que le travail exig\u00e9 pour ce faire soit hors de proportion par rapport aux b\u00e9n\u00e9fices qu’il peut en retirer. Dans de telles circonstances, le Minist\u00e8re peut \u00e9galement proc\u00e9der par voie de transaction.<\/em>\u201d<\/p>\n

Accordingly, as per this directive, it was the QRA\u2019s position that where there was a lack of sufficient facts to support the position adopted by the QRA, a settlement could be envisioned. Furthermore, a settlement could also be proposed to a taxpayer when the QRA did not have the necessary proof to support its position and when obtaining same would be overly costly in relation to the benefits that would result to the QRA.<\/p>\n

The Qu\u00e9bec Ombudsman, rightfully, denounced such an approach as contrary to the very purpose of the QRA\u2019s role and mission, which is to tax that which is fair and appropriate, nothing less but nothing more. As indicated by the Qu\u00e9bec Ombudsman, if a position adopted by the QRA is unsupported or untenable, then the reassessments resulting therefrom should be fully cancelled, rather than the subject of haggling. The undersigned would go even further and suggest that one can question the validity of a \u201ctransaction\u201d reached under such an approach: a \u201ctransaction\u201d necessarily involves reciprocal concessions by both parties. It is questionable whether one is really making a concession when one is giving up part of a claim to something that one is self-evidently not entitled to.<\/p>\n

The Quebec Ombudsman\u2019s report also outlines other issues in relation to settlement agreements reached with the QRA at the objection level, notably that:<\/p>\n