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CRA DIRECTS TAXPAYER TO WRONG COURT!

PROPER JURISDICTION REQUIRED AT OUTSET OF ALL TAX DISPUTES

The question of jurisdiction (that is, which Court has the authority to hear a particular dispute) remains often confused in the administration of Canadian tax law.  While the Canada Revenue Agency (“CRA”) routinely provides directions in its decision letters about where taxpayers can appeal, a recent Tax Court of Canada (“TCC”) decision demonstrates that the CRA sometimes gets this wrong – with serious consequences for taxpayers!

More problematically, a similar scenario may now be unfolding with the Canada Border Services Agency’s (“CBSA”) appeal process for remission applications made in respect of Canada’s recent retaliatory tariffs imposed on US goods.

Martinez Cedeno v. The King

In Martinez Cedeno v. The King, 2025 TCC 142, the Tax Court criticized the CRA for misdirecting a taxpayer to the wrong Court for an appeal.

The taxpayer had reported her residence as Nunavut, while CRA took the position that she was resident in Ontario.  When the CRA denied her Notice of Objection, its standard Notice of Decision indicated that she could appeal the CRA’s reassessment to the TCC.

The problem for the taxpayer was that this was ENTIRELY incorrect. 

In its decision, the TCC held that it did not have jurisdiction to hear appeals of disputes over whether a taxpayer was a resident of one province or territory or another.  It explained that the correct forum for appeals in such cases generally depends on the province or territory that the CRA believes the taxpayer resided in.  Accordingly, the TCC appeal was dismissed.

Writing for the TCC, Justice Graham observed that this was the third such case he had seen in two years.  While he acknowledged that jurisdictional questions can be complex, particularly for assessments involving residence and federal tax issues, he noted that CRA must ensure its notices of confirmation contain accurate information. 

Similar Potential Issue for Customs Remission?

This issue is not unlike a current issue unfolding at the CBSA.  CBSA is in charge of administering the recent remission program, rolled out by the Department of Finance to give relief to importers of certain US goods, that have been subjected to Canada’s 25% retaliatory taxes.

CBSA is currently advising that if remission is not granted or rejected, importers have a full right of appeal under section 60 of the Customs Act.  We are not so sure that is correct and it remains to be seen what happens when somebody inevitably tries to further appeal to the Canadian International Trade Tribunal ("CITT").  This could well be the same sort of situation seen in Martinez.

Continued Jurisdictional Problems

Following the Supreme Court of Canada’s 2024 decisions in Dow Chemical and Iris Technologies, uncertainty remains as to what Court has jurisdiction over particular tax matters.

One easy fix would be to give the TCC jurisdiction for ALL tax-related matters, and the Department of Finance ought to consider amending the applicable tax legislation in the Excise Tax Act, Excise Act, and Income Tax Act to allow for that.

Takeaways

Tax authorities have on several occasions deprived taxpayers of their appeal rights by directing them to the wrong Court!

This highlights that there is no substitute for proper legal advice.

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