CRA’s backtracking on bare trusts is too little and too late

A Canada Revenue Agency sign outside the National Headquarters at the Connaught Building in Ottawa is seen on Monday, March 1, 2021.Geoffrey Turner is a Toronto tax lawyer and adjunct professor at the University of Toronto Faculty of Law and Osgoode Hall Law School. He was the Conservative Party candidate in Etobicoke Centre in the 2021 federal election.This is a sensible decision, but it came far too late, on the last business day before the Easter long weekend preceding the due date.

More problematically, these rules were extended to so-called “bare trusts,” where a person owns property merely as agent for another person. Many Canadians unknowingly established bare trusts in common family circumstances, such as being added to their elderly parent’s joint bank or investment account, or holding title to their child’s home to help them obtain a mortgage. It was challenging for taxpayers and their advisers to assess these situations and how the new bare trust rules applied.

While CRA will be blamed for this debacle, it’s not entirely CRA’s fault – their job is to administer the tax laws as enacted. Responsibility for designing the trust reporting rules, and accountability for making them overbroad and underestimating the consequences, lies with the Department of Finance, under political direction from the Minister and her staff.

We have a voluntary self-assessment system for tax reporting, and we rely on Canadians’ sense of civic duty to honestly report their income, pay their taxes and comply with the law in a timely manner. Having done so by filing their bare trust T3s before the deadline, and now being told their efforts and fees were in vain, many Canadians may now feel punished for doing the right thing.

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