Canada Proposes Change To Limitation Period For Income Tax Collection

by Mike Godfrey, Tax-News.com, Washington

08 March 2004

Canadian Minister of Finance, Ralph Goodale last Thursday announced his intention to propose amendments to the Income Tax Act and other acts that will establish a 10-year limitation period for the collection of federal tax debts.

The proposed new limitation period responds to a Supreme Court of Canada decision that the collection of federal income tax debts was subject to the 6-year limitation period set out in the Crown Liability and Proceedings Act. Previously, no limitation period was provided for in the Income Tax Act.

"The Government agrees that a limitation period for the collection of taxes is needed. We believe a 10-year limitation period is appropriate and recognizes the special reporting and assessment system in federal tax acts," Minister Goodale explained, continuing: "It provides a reasonable amount of time for the Canada Revenue Agency and taxpayers to deal with tax debts."

In the case of taxes that became payable before Thursday but remain unpaid, the limitation period will end 10 years from March 4. The proposed amendments also ensure that taxes that were collected beyond any limitation period will not be reimbursed to those taxpayers.

"Allowing reimbursement of past collections would give late payers a windfall benefit at the expense of the vast majority of Canadians who pay their taxes on time," noted Mr Goodale.

To prevent such a result, the proposed amendments will preclude all claims against the Government of Canada in respect of tax debts collected before last Thursday.

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