I owe the CCRA money--now what?

• Author: Kirby, Richard
• Position: Tax law - Part 3

This is the final article in a three part series describing dispute resolution between taxpayers and the Canada Customs and Revenue Agency (the CCRA). Parts 1 and 2 described the objection and appeals processes. When a taxpayer (the Debtor) is unsuccessful, or partly successful, in challenging a particular reassessment, they will have a debt owing to the CCRA. This article describes the powers that the CCRA has available to collect this debt from the Debtor.

The Collections Division of the CCRA is in charge of collecting amounts owing by taxpayers. It is sometimes possible to make payment arrangements with collections officers when the Debtor has tried all reasonable ways of obtaining funds to pay the debt (including borrowing and rearranging their financial affairs). For such arrangements to be accepted, it is usually necessary to provide full financial disclosure and to give evidence of the Debtor's income, expenses, assets, and liabilities. In the absence of adequate arrangements being made, however, the CCRA may employ the very broad collection powers at its disposal. As Edwin G. Kroft notes, the people from whom the CCRA can collect a tax debt fall into three categories:

* the Debtor;

* persons paying amounts to the Debtor; and

* persons jointly and severally liable with the Debtor.

For income tax purposes, the CCRA is not entitled to use the powers below as long as the particular reassessment is under objection or appeal. This limitation does not apply in respect of reassessments for goods and services tax (GST) or unremitted source deductions (such as income tax, employment insurance premiums, or Canada Pension Plan premiums withheld on behalf of employees). It is important to note, though, that interest continues to accrue on all amounts out standing even when an objection or appeal is underway.

Collection from the Tax Debtor

Certificates and Memorials

When the Debtor has not paid an amount owing to the CCRA, the CCRA may have the debt certified as an amount payable by filing a certificate with the Federal Court stating there is an outstanding amount owing. Once registered with the Court, the certificate is referred to as a memorial and is treated as a judgment against the Debtor for the tax owing, as well as all interest accruing.

While a memorial only puts the CCRA in the shoes of an unsecured creditor, the CCRA may use it to create a charge, lien, priority, or other interest on property in any province creating a secured interest...