Law Times

Law Times • OcTOber 19, 2015 Page 13 www.lawtimesnews.com Litigation a growing part of tax boutiques' business BY MICHAEL McKIERNAN For Law Times ax litigation is boom- ing at the country's tax law boutiques thanks to an empowered and aggressive Canada Revenue Agency, according to some of the field's top practitioners. Clifford Rand, national man- aging partner at Deloitte Tax Law LLP, which is an affiliate of the accounting giant, says the last decade has seen a trans- formation of the approach the CRA takes to enforcement. "In the early days of the CRA and its predecessors, they would tend to focus their audits on fairly simple issues that they had the expertise to identify and analyze," says Rand, whose practice focuses on tax litigation and controversy. "Over the last five to 10 years, they have developed expertise in various fields, particularly in the international domain, that allows them to look into trans- actions and challenge them." As a result, tax litigation has become "an increasingly large practice," according to Rand. "It's not uncommon to see reassessments now dealing with tens and hundreds of millions of dollars, whereas 20 years ago it was quite rare," he adds. According to Robert Kreklewetz of Millar Kreklewetz LLP, the CRA's aggressive en- forcement is evident in its ap- proach to indirect taxation. "The CRA's approach to tax- payers has changed from a place 20 years ago where you could deal very reasonably with virtu- ally all of its divisions to a place now where its collection guys are hammering away at GST as- sessments before you even get a chance to raise an objection or get your day in tax court," says Kreklewetz, whose firm focuses on indirect taxation issues aris- ing out of the GST/HST system. "I had one client assessed for more than $20 million, and the collections team were in there the next day, seizing bank ac- counts and doing everything they could from a collections perspective. There's not many businesses with $20 million ly- ing around, so it's become much more high stakes for taxpayers and professionals alike. I can see GST litigation continuing to grow and grow." Ian Morris, the founder of 12-lawyer Toronto tax boutique Morris Kepes Winters LLP, says several developments in recent years have given the CRA ac- cess to an unprecedented level of information on individual Canadians' foreign investments. More importantly for his prac- tice, the agency's willingness to act on what it finds has matched its information-gathering pow- ers. "When I look around my of- fice today, almost all the files are tax litigation," he says. It's a far cry from the early 1990s when Morris founded his firm on the base of a strong tax-planning practice with tax litigation little more than a small sideline. Pretty soon, the firm's work took on a more international f lavour as Cana- dians embraced offshore trusts as a method of reducing tax ex- posure. Since then, the rules on disclosure of foreign assets have tightened with harsh penalties for non-compliance. "When I started, there was none of that. You could move money without any reporting, and there was no such thing as FINTRAC [the Financial Trans- actions and Reports Analysis Centre of Canada]," says Morris. One of the latest weapons in the CRA arsenal arrived last year with the launch of the off- shore tax informant program that offers a cut of recovered tax as bounty payments for suc- cessful tipsters. In a move seen by some tax lawyers as a shot across the bow of potentially non-compliant Canadians, a wave of letters from the CRA's offshore compliance division in December 2014 warned targeted taxpayers about the risk of failing to voluntarily disclose foreign assets costing $100,000 or more. And in January 2015, the CRA began receiving all of the same information that financial institutions must currently turn over about certain types of international electronic fund transfers to FINTRAC, the agency set up in the early 2000s to detect and prevent money launder- ing and terrorist financing. For those already facing an audit, the process is "very time-consuming and intru- sive," according to Morris. "It's not good enough to simply send in your statement. They want every single deposit explained and documented, never mind that you can bare- ly remember what you did yesterday, let alone five years ago," he says. According to Morris, the in- creased complexity of tax work makes boutique firms, with their depth of expertise, an even more popular choice for clients. "It's so complicated, and there's such a high risk in terms of professional liability that you just can't dabble in tax anymore," he says. "When I started, a two-person office could handle tax law, but now you need much more breadth to offer a full tax service." Kreklewetz says he turned to tax law right out of law school because of its niche properties. "All that work and time you have to put in under- standing the practice area sets a very high barrier to en- try," says Kreklewetz. "At a larger firm, a tax law- yer may be a more service-end person dealing with someone else's clients," he adds. "Clients seek us out for the specializa- tion we offer, which gives you a bit more satisfaction and control over what's happening." LT Two decades ago, a leading Canadian lawyers magazine called Millar Kreklewetz LLP a Super Boutique, describing us a Not much has changed. We are proud to be recognized as a Canadian Lawyer Top 5 Tax Boutique, on the strength of our GST/HST and indirect tax practice! 24 Duncan Street, 3 rd Fl, Toronto, Ontario, M5V 2B8 W. Jack Millar wjm@taxandtradelaw.com Tel: (416) 864 - 6200 Fax: (416) 864 - 6201 www.taxandtradelaw.com Robert G. Kreklewetz rgk@taxandtradelaw.com Helping You. Help Your Clients. ® "brand name for commodity tax and related international trade work". MillarKreklewetz_LT_Oct19_15.indd 1 2015-10-15 6:47 AM T 'I can see GST litigation continuing to grow and grow,' says Robert Kreklewetz. BRIEF: TAX BOUTIQUES

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