Tax & Trade Blog

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TAX AUDITS NOT ALWAYS CORRECT

CRA DATA SHOWS THE MAJORITY OF TAX AUDITS OVERTURNED!

When most taxpayers receive a Notice of Assessment from the Canada Revenue Agency (CRA), they likely have the following concern: what did I do wrong? That first instinct – although likely well-founded in the human psyche – ends up being a statistically incorrect assumption. In fact, the most recent data from the CRA suggests that the majority of CRA Assessments are INCORRECT and are ultimately overturned on Objection.

This Tax Audits Series Report reflects on this data and its implications and “best practices” for taxpayers.

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US NO LONGER RAISING TARIFFS ON WOOD PRODUCTS

DUTIES ON LUMBER & WOOD CABINETS/VANITIES WERE TO DOUBLE - BUT NOT ANYMORE!

A recent last-minute announcement by the United States (US) government that it will NOT proceed with increasing certain tariffs is just the latest demonstration of how fluid and uncertain the US tariff situation is.  Happily, it provides some relief to Canadian exporters of kitchen cabinets, bathroom vanities, and other wood products.  It may imply more good news is to follow, but it certainly shows how hectic the tariff situation is for Canadian exporters to the US.

Further detail below.

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CRA GST & INCOME TAX AUDITS

UNDERSTANDING A CRA AUDITOR'S POWERS & METHODS

As most people understand, “Audits” are the Canada Revenue Agency’s (CRA) primary tool for verifying voluntary compliance with Canada’s taxing legislation, including the Excise Tax Act (ETA) for GST purposes, and the Income Tax Act (ITA) for income tax obligations.

Less well known is the scope of the CRA’s powers when it comes to demanding answers to its questions and reviewing business records.  In this Tax Audits Series Report, we examine these broad powers, and what taxpayers can expect when audited.

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CHINESE STEEL IMPORTS COSTLY

IMPORTING CHINESE STEEL HAS COSTLY CUSTOMS DIMENSIONS

While the recent focus in Canada has been on the tariff war between Canada and the US (for example, President Trump's tariffs on certain imported Canadian steel, and Prime Minister Carney's retaliatory surtaxes on same), what many have overlooked are similar Canadian surtaxes on Chinese steel and aluminum, which pre-date both.

As a number of Canadian importers have figured out, importing Chinese steel comes at a very significant cost on two different fronts.

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CUSTOMS RULES & CRIMINAL OFFENCES

IMPORTER BEWARE: CUSTOMS NON-COMPLIANCE CAN BE A CRIMINAL OFFENCE

Earlier this year, Canada Border Services Agency (“CBSA”) intercepted a shipment declared to be electric fans from China.  When opened, CBSA found no fans, but almost 20,000 cartons of cigarettes, with a market value of about $2.2 million. (!)

Everyone knows that smuggling millions in cigarettes into Canada is a crime.  Like importing other sensitive goods (e.g., a prohibited weapon), many forms of importation can amount to criminal conduct, carrying with them potential offences under the Criminal Code.  Not all customs errors or violations amount to criminal conduct, however.  We explore the line between the two below.

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CANADA-AUSTRALIA CUSTOMS PACT SIGNED

AUSTRALIA-CANADA'S LATEST PARTNER IN CUSTOMS MUTUAL ASSISTANCE AGREEMENT

Since 1979, Canada has been putting together a web of Customs Mutual Assistance Agreements (“CMAAs”) with a number of trading partners, including the US, Mexico, UK, EU, Israel, China, Korea, Chile, and Argentina.  Australia recently became the 15^th nation to agree to a CMAA with Canada, and we discuss below how these protocols allow Canada to tighten its enforcement on goods coming into Canada from foreign lands.

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CANNABIS CHARGES & EXCISE FINES

CONTRAVENING CANNABIS LAWS CAN INVOLVE TWO SEPARATE FIGHTS

The legalization of most cannabis sales in Canada comes with a number of statutes and regulations, and a detailed set of enforcement rules for those trying to operate outside the system.

Everyone knows that breaking the laws governing cannabis can lead to criminal penalties. A less well known, but very serious, consequence of noncompliance is the potential for large fines under the Excise Act(“EA”). One Canadian found this out the hard way in a recent Saskatchewan Court of Appeal (“SKA”) case.

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RIGID RULES GOVERN CANNABIS AT THE BORDER

CBD PRODUCTS WHILE LEGAL, REMAIN TIGHTLY CONTROLLED FOR IMPORT/EXPORT

Since the Trudeau government largely decriminalized CBD and cannabis products in 2018, there has been a proliferation of both distribution and retail in this industry – but not all legal.

The legalization of CBD and cannabis products also comes with highly complex and difficult regulations which can lead to both civil and criminal enforcement where they are not strictly followed.

In a recent case, an unfortunate Ontario resident found this out, and also learned the extent to which CBSA and RCMP work together in these matters.