Canada’s Taxpayer Ombudsman announced Wednesday that it is investigating whether the Canada Revenue Agency’s implementation of new “bare trust” reporting requirements respected taxpayer rights.
A bare trust is one in which one person has legal title to real estate or assets but no beneficial ownership. A bare trust can be as simple as a parent putting their name on the title to a house so that their child can get a mortgage on it.
New reporting rules for the 2024 tax season initially required anyone holding a bare trust to file a T3 tax return, but the CRA suddenly announced it was suspending the reporting measure.
Taxpayer Ombudsman François Boileau said in a news release that he would investigate the matter, adding that many naked trustees reported paying representatives hundreds of dollars to fulfill filing obligations that were later waived by the CRA.
“Based on the information received to date, OTO will launch a systematic investigation into the clarity and timing of CRA’s communications and the cost of compliance issues to taxpayers and their representatives,” Boyle-Oh’s office said.
In early June, Revenue Minister Marie-Claude Bibeau said in the House of Commons that 44,034 Canadians still had Baer Trust tax returns filed. Her remarks were in response to a written question from Conservative MP Gary Vidal.
The Office of the Taxpayer Ombudsman (OTO) said its investigation will look at whether the CRA “respected the service rights” outlined in the Taxpayer Bill of Rights.
The OTO said it would take into account the right to “full, accurate, clear and timely information” and the “right to have compliance costs taken into account when implementing tax laws.”
The trust reporting rules were introduced as part of the government’s 2022 Autumn Economic Statement and were intended to target issues such as money laundering, terrorist financing and tax evasion.
Tax experts question scope of investigation
John Oakey, vice-president of tax at the Canadian Institute of Certified Public Accountants, said the announcement is “good” news, but he has questions about the scope of the investigation.
“If that range is, [the CRA] “If they were in charge of enforcing the bare trust rules, their scope was too narrow,” he said.
Okey added that the investigation must also take into account how policies were developed and debated in the House of Commons.
Mr Oakey said the Ombudsman should also take into account what consultations had taken place with various stakeholders.
“Here is, [the OTO] “It can expand its reach beyond the Canada Revenue Agency,” he said.
He noted that a joint taxation committee with the Canadian Institute of Certified Public Accountants and the Canadian Bar Association submitted opinions to the Ministry of Finance in 2018 and 2022.
Oakey added that CPA Canada contacted the Revenue Minister’s office in February 2024 to advise him that the bare trust was having issues complying with its reporting requirements.
The OTO said that based on the findings of its investigation, the Ombudsman “may make recommendations on how the CRA can prevent similar issues in the future.”
