TCC POWERLESS OVER CRA COLLECTIONS
CRA FREE TO GARNISH UNREMITTED GST/HST - EVEN WITH TCC APPEAL PENDING
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In the recent Tax Court of Canada (“TCC”) decision Harris v. The King, 2026 TCC 89 (“Harris”), a taxpayer assessed for unremitted GST/HST learned the hard way about the Canada Revenue Agency’s (“CRA”) extremely broad Collection Rights.
In this Tax Audits Series we review the Harris decision and the key differences it highlights between the CRA’s ability to collect GST/HST debts and Income Tax debts – and why it demonstrates that retaining Experienced Tax Counsel at the front-end of the audit process can help avoid harsh collections action later on.
Background to the Harris Decision
In Harris, the TCC dismissed the taxpayer’s motion to (1) block the CRA from garnishing his funds in order to recover unpaid GST/HST; and (2) return the funds already garnished.
The taxpayer brought this motion on the grounds that the appeal concerning this unpaid GST/HST – which stemmed from the sale of ten condominium units between 2007 and 2013 – was ongoing and had not yet been decided. The CRA had begun garnishing the funds while the taxpayer’s appeal was still pending, and the taxpayer argued that these collection efforts were premature.
The TCC’s Powers in GST/HST Appeals
The TCC dismissed the motion entirely and awarded costs to the Crown, finding that it lacked jurisdiction to block or reverse any CRA collections actions. The TCC reasoned that its powers are strictly governed by statute – in the case of GST/HST appeals, the Excise Tax Act (“ETA”) – and the Act simply did not give it these powers.
Rather, the Act provides that an assessment is valid and binding, unless vacated on objection or appeal. A pending appeal does not vacate or suspend an assessment.
And, once an assessment is issued, the Act provides that the amount assessed is payable “forthwith” to the CRA. Once a debt is payable, the CRA may take collections actions. In certain circumstances, those actions may include garnishing payments the CRA identifies as incoming to the taxpayer – from almost any source. Unfortunately for the taxpayer in Harris, those circumstances were present.
Critically, the ETA does not provide any mechanism to seek a stay of GST/HST collections activities while an appeal is pending. (The ETA differs from the Income Tax Act in this respect, which automatically stays collections while an appeal is pending.)
The Only Way to Stop GST/HST Collections
The TCC found that in theory, GST/HST collections actions can be stopped if the taxpayer can obtain an injunction from the Federal Court, which has wider powers to grant equitable remedies. (However, obtaining such an injunction is notoriously difficult.)
Taxpayers should engage Experienced Tax Counsel well
before any GST/HST tax dispute reaches that stage!
Takeaways
Harris demonstrates that the TCC has NO ability to limit, stop, or reverse CRA collections actions. In the case of GST/HST disputes, these actions may proceed even if an appeal is pending.
Harris is also a stark reminder that in any dispute with the CRA, Experienced Tax Counsel should get involved early — ideally, during the Audit stage. Experienced Tax Counsel can negotiate with the CRA to secure administrative collection holds, and will avoid the sort of costly, pointless litigation undergone by this unfortunate taxpayer.
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