Thirty Years of Tax Cases 

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Thirty Years of Tax Cases

From capital gains to disability claims, Tax Forum has covered many topics over the years.

FROM: JAN-FEB 2008 ISSUE | BY DON GOODISON

Unlike CGA-Canada, I’m not 100 years old. But given that I’ve been writing this column since the 1970s, I have been around for a few years. Back in Tax Forum’s early days, I was very biased against the tax authorities. But my perspective has changed over time. I have come to see that there are two sides to every case. Taxpayers aren’t always right, and I now try to present a fair and balanced commentary on the cases I choose to write about.

Some Things Change...

I’ve watched the Income Tax Act become increasingly complex, to the point that accounting firms no longer have a “tax partner” but rather, a “tax section.” In the past, one person was able to handle the majority of tax issues. But it is now a common practice for firms to employ a multitude of specialists – individual experts in specific areas such as reorganizations, appeals, foreign taxes, GST, provincial taxes, and so on. It is virtually impossible for one person to be familiar with the entire Act, so as practitioners, we should know when we are in over our heads and need to discuss an issue with a subject matter expert.

I’ve also witnessed tax case subjects change significantly over the years. The first few years I wrote this column, I could have devoted every article to cases involving capital gains versus income gains, as they constituted the majority of disputes between taxpayers and the government. While there are still disputes of this nature, they don’t seem to make it to court nearly as often.

Then there was a period of time when cases involving the disability tax credit dominated the courts. During those days it seemed that all disability claims were being challenged. Fortunately, we have seen a change in the government’s attitude, as disability claims are now more readily accepted. Recently, disputes involving the Canada Child Tax Benefit seem to be the greatest single issue before the courts. 

And Some Things Stay the Same

To my mind, taxpayers haven’t changed at all in 30-plus years. Most people still want to pay as little tax as possible; some will go to whatever length they can to avoid paying taxes altogether. I continue to hear stories about people who earn gobs of money and pay no taxes at all – but those people are criminals.

In recent years, I haven’t seen many examples of the good old “tax shelters” that used to be so common. There were the speed-reading kits in which you could invest nothing, yet earn a huge write-off; the art works that you paid little for, but received donation receipts well in excess of the actual payments; the movies that were never made, and so on. A simple example is a $10,000 investment, but a $100,000 tax write-off, netting a person in the 50 per cent tax bracket a $50,000 return on a $10,000 investment. Unfortunately for the investor, these schemes are usually shot down, meaning there’s no deduction and the original investment is lost as well. It still always amazes me that some otherwise astute people are easily sucked in by the words “tax deduction.”

Memories of CGA

In addition to writing for the magazine, I spent six years as the chair of CGA-Canada’s Tax Policy Committee. During that time, I attended budget lockups, made presentations to the House of Commons Finance Committee, made television and radio appearances, and participated in meetings with senior bureaucrats and politicians. I am particularly proud of the budget lockup in 1999, when the CGA-Canada team was one of the few to spot the so-called “Kiddie Tax” buried deep in the budget proposals. The Kiddie Tax was responsible for significantly reducing the tax effectiveness of family trusts, as it was established to tax certain income received by children under the age of 18 at the highest personal tax rate with no offset for personal exemptions. Even though the other teams were stacked with experts, they failed to notice the tax.

Several years ago, I authored a Capital Gains course for CGA-Canada, and more recently, a Practice Alert on Future Taxes.  I doubt I would have had these opportunities without being involved with CGA for all these years, but it is my CGA designation that has truly made it all possible.

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