A Defence of the Principled Approach to Tax Settlements

The Canadian Minister of National Revenue is responsible for administering and enforcing the majority of tax legislation in Canada. Where disputes arise with particular taxpayers over the correct amount of tax owed, the taxpaying public ought to have confidence that the Minister has a principled basis in law for settling disputes for less than amounts previously assessed. Yet opponents of the principled basis for settlement consistently call for reform, arguing that compromise settlement should be permissible. This paper responds to arguments raised for compromise settlement by reconciling the jurisprudence on the authority of the Minister to settle tax disputes. It then challenges the Carter Commission's recommendation that U.S.-style offers in compromise should be available in Canada. Exercise of existing Ministerial discretion to grant advance rulings and taxpayer relief has been inconsistent, demonstrating that additional discretion would only deepen public suspicion that the tax system is administered unfairly.