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The Burden of Proof in Tax Disputes

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Many taxpayers respond to an audit by the CRA expecting that the CRA has to prove its case. However, this is not correct. Many taxpayers believe that it is a principle of our justice system that a person is innocent until proven guilty.

Unfortunately tax law does not operate on this same principle. In fact it is just the opposite.

In a tax dispute, the burden of proof is on the taxpayer to prove that the assumptions that the CRA’s reassessment is based upon are wrong. In other words you are guilty until you can prove you are innocent. The Charter of Rights and Freedoms does not apply to taxes!

The rationale for placing the initial burden of proof on the taxpayer is that the taxpayer, and not the CRA, has the information required to properly determine the tax liability of the taxpayer. This is not necessarily true, and this burden of proof can cause real injustice. It may feel like the CRA is acting like a steamroller without any regard to your rights. That is why you need to exercise your right to appeal. A hearing in front of a Tax Court Judge may be the first opportunity you have to be treated fairly.

It is important, throughout your tax dispute, to understand who bears the burden of proof. That should inform how you prepare for the dispute.

It is extremely important that proper documentation and credible evidence is produced in support of the taxpayer’s position so that the taxpayer has the tools required to meet that initial burden.