Reaching a settlement agreement with the CRA is often the most efficient and affordable means of resolving a tax dispute. And indeed, our experience is that about 95% of tax disputes settle before going to trial.
But negotiating a settlement in a tax dispute is very different from negotiating a settlement in normal litigation or in a typical business transaction. By law, the CRA can only agree to settlement agreements that are “principled”.
This means they can only agree to concede a particular element of a reassessment if they have been provided with an argument and supporting evidence that is legally compelling.
As a result, the CRA cannot agree to settle a dispute merely because the legal costs outweigh the amount in dispute. Likewise, they cannot agree to “split the difference” and we cannot simply “make them an offer.” Therefore, succeeding in a tax dispute requires detailed legal analysis and diligent gathering of evidence.
Understandably, this is very frustrating for individuals and corporations that find themselves in tax disputes.