BULLETIN D’INFORMATION
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Subject:
Streamlining of certain measures concerning the
administration of the tax laws and collection
This information bulletin describes the changes concerning various measures relating to the administration of the tax laws and collection.
For information concerning these subjects, contact the Secteur du droit fiscal et de la fiscalité at (418) 691-2236.
The French and English versions of this bulletin are available at the ministère des Finances Web site at: www.finances.gouv.qc.ca
Paper copies are also available, on request, from the Direction des communications, at (418) 528-9321.
1. MEASURES CONCERNING THE ADMINISTRATION OF THE TAX LAWS 1.1 Changes to the calculation of interest in the case of instalments
❏ Simplification of the calculation of interest in the case of instalments by individual
When the withholdings at source taken from an individual’s income are insufficient, such individual must pay tax instalments. These instalments are partial payments made periodically by an individual against his tax for the year, his contributions to the Québec Pension Plan, to the Health Services Fund and to the Québec Prescription Drug Insurance Plan. An individual must make instalment payments if he estimates that he must pay a balance of over $1 200 in tax for the current year and if the balance of the amount of tax payable for any of the two years preceding the current year is greater than $1 200.
Under the current rules, the tax legislation stipulates three methods for determining the instalment amount: the method without calculation, the calculation method based on the preceding year and the calculation method based on the current year.
According to the second method of calculating instalments, i.e. the one based on the preceding year, instalments are based on the tax for the preceding year less estimated withholdings at source for the current year, leading to a degree of uncertainty when year-end events can influence an individual’s income.
To set the instalment amount with greater certainty when using the calculation method based on the preceding year, the tax legislation will be amended so that the preceding year’s tax is reduced by the withholdings at source for such preceding year.
❏ Easing of liability to pay additional interest in the case of insufficient instalments by individuals
Under the existing tax legislation, additional interest at a rate of 10% per year is calculated on an instalment or portion of an instalment not made by a taxpayer. However, such additional interest is not payable if the instalment paid by the taxpayer is equal to at least 90% of the instalment he was required to pay.
It can at times be more difficult for individuals whose income fluctuates significantly from year to year, self-employed workers for instance, to accurately estimate the amount of tax payable for a year. Consequently, such individuals are more likely to have to pay additional interest.
The tax legislation will be amended to provide individuals with greater flexibility by reducing the minimum percentage of instalments that an individual must pay in order not to be liable to pay additional interest from 90% to 75%.
❏ Application date
These changes will apply regarding instalments that must be made as of taxation year 2002.
1.2 Withdrawal of rules relating to the calculation of interest owing and the penalty for failure to file a tax return when a loss carry-forward is claimed after the deadline for filing a tax return
Currently, interest and a penalty are payable by a taxpayer when he has a balance of tax payable, for a taxation year, that is changed further to a loss carry-forward claimed after the stipulated deadline for filing his tax return for such year.
Such interest and such penalty are calculated on an amount of tax deemed unpaid, i.e. an amount equal to the tax the taxpayer would have had to pay had he not deducted his loss. However, in such a situation, the ministère du Revenu may waive the imposition of interest and a penalty in certain circumstances.
The tax legislation will be amended to withdraw this particular feature regarding the calculation of interest owing and the penalty for failure to file a return, when a loss carry-forward is claimed after the deadline for filing a tax return.
For greater clarity, such withdrawal will not prevent the application of the penalties stipulated in the tax legislation in the case of gross negligence or fraud.
These changes will apply regarding a loss carry-forward claim made after the day of publication of this information bulletin.
1.3 Withdrawal of certain penalties
In recent years, some penalties stipulated in the tax legislation have not been applied, in view in particular of the good tax behaviour of the taxpayers concerned and duplication with other existing penalties. The tax legislation will accordingly be amended to withdraw penalties that are no longer necessary for sound administration of the tax laws.
❏ Withdrawal of the additional penalty for late filing of a tax return by a large corporation
Currently, the tax legislation stipulates that a corporation whose gross income for a taxation year exceeds $20 million and that fails to file its tax return within the prescribed time is liable, for each month up to 40 months and in addition to the basic penalty of 5%, to a penalty equal to 0.25% of the total of the income tax and any tax on capital payable for the year.
Since large corporations generally display good tax behaviour and since the tax legislation already includes a penalty when such corporation does not file its tax return within the prescribed time, this additional penalty will be repealed.
❏ Withdrawal of the penalty for failure to file a tax return by a person who administers the property of other persons
The existing tax legislation stipulates that a person who fails to file a tax return as administrator of the property of other persons is liable to a penalty of $10 per day by which the filing of such return is late, up to $50.
❏ Withdrawal of the penalty on members of a partnership
The Act respecting the ministère du Revenu stipulates that a penalty may be imposed when a return has not been filed for a fiscal year of a partnership. This penalty, whose application is very narrow, is $100 per member of the partnership for each month or portion of a month, but not exceeding 24 months, during which such failure persists. This penalty is in addition to the penalty of $25 per day of failure to file that may be imposed on the members of a partnership that fail to file a return.
Since the latter penalty is sufficient to sanction the failure to file such a return, the Act respecting the ministère du Revenu will be amended to withdraw the additional penalty of $100.
❏ Withdrawal of the penalty for failure to supply certain information to the operator of a flea market
Under the existing rules, the occupant of a space at a flea market must provide the market’s operator with certain prescribed information. If the occupant fails to provide the operator with all the information required or provides false information, he is liable to a penalty of $100 for each day he occupies a space.
The legislation will be amended to withdraw this penalty since such behaviour is already sanctioned by a penalty stipulated in the Act respecting the ministère du Revenu.
❏ Application date
2. MEASURES CONCERNING COLLECTION
2.1 Measures concerning administrative garnishment
❏ Introduction of a notice sent to the person liable for an amount exigible under a tax law
Currently, when the Minister of Revenue sends a notice to a garnishee further to the Act respecting the ministère du Revenu to demand the payment he is required to make to a person liable for an amount exigible under a tax law, the Minister of Revenue is not required to advise the taxpayer of such administrative garnishment when it is executed on the taxpayer’s property.
To allow such taxpayer to be adequately informed of the administrative garnishment executed on his property, an amendment will be made to stipulate that the Minister of Revenue is required to send the taxpayer, by mail, a notice of the administrative garnishment that has been executed on his property.
This change will apply to notices of the Minister of Revenue to a garnishee sent as of the day following the day of publication of this information bulletin.
❏ Withdrawal of the power to garnishee a payment due to be made to the transferee of a transferred claim
The Act respecting the ministère du Revenu notably allows the Minister of Revenue to require that a third party, by means of administrative garnishment, pay to him any payment such third party is required to make to a transferee of a transferred claim when such payment is to be made to a person liable for an amount exigible under a tax law, were it not for the transfer of claims.
This power aims at claims given as security, which are covered by the Act respecting the ministère du Revenu, and not claims in full ownership. Accordingly, an amendment will be made to eliminate the Minister’s power to demand payment due to be made to the transferee of a transferred claim.
❏ Withdrawal of the power to garnishee the unpaid consideration of a debt of a tax debtor
Currently, the Minister of Revenue may send an administrative garnishment further to the Act respecting the ministère du Revenu to seize the consideration of a debt, a line of credit for instance, of a tax debtor to a financial or banking institution, if such tax debtor has provided security regarding his debt and the institution has not yet paid its consideration for such debt.
This power of the Minister of Revenue to garnishee the unpaid consideration of a debt of a tax debtor will be eliminated, and accordingly the section of the Act respecting the ministère du Revenu granting such power to the Minister of Revenue will be repealed.
This change will apply as of the date of publication of this information bulletin.
2.2 Withdrawal of the power to seize and sell the property of a tax debtor
The Act respecting the ministère du Revenu authorizes the Minister of Revenue to seize and sell the moveable or immoveable property of a taxpayer, after serving notice on him and after the Minister has issued a certificate of default of payment.
Since the Minister of Revenue has never availed himself of this exorbitant provision of common law, the power of the Minister to seize and sell the property of a taxpayer will be eliminated and accordingly the section of the Act respecting the ministère du Revenu granting such power to the Minister of Revenue will be repealed.
In addition, concordance amendments will be made to the provisions of the Act respecting the ministère du Revenu concerning taxpayers who leave Québec, to remove any legislative reference to the power of the Minister of Revenue to seize and sell the property of a debtor.
2.3 Measures concerning the assessment period regarding certain third parties who have incurred a tax liability
❏ Introduction of an assessment period of four years regarding a person who distributes property without the certificate of the Minister of Revenue
Currently, the Act respecting the ministère du Revenu authorizes the Minister of Revenue to assess, at any time, a person who distributes property of another person, without having first obtained the certificate of the Minister of Revenue authorizing him to distribute the property of such other person. This applies regarding a director who participated, acquiesced or agreed to such distribution of property.
To reflect the current administrative practice of the ministère du Revenu of assessing such third party within four years of the date of the distribution of property and to thus avoid the lapse of an excessively long time between the issuing of the assessment and the time of the distribution of the property, changes will be made to stipulate an assessment period of four years as of the date of the distribution of the property.
However, the Minister of Revenue will retain his power to assess such person at any time if he has falsely represented the facts by negligence or by voluntary omission or if fraud has been committed, or if he has forwarded a waiver of prescription to the Minister.
These changes apply regarding a distribution of property made as of the date of publication of this information bulletin.
❏ Introduction of an assessment period of four years regarding the recipient of a transfer of property between persons not at arm’s length
Currently, the Act respecting the ministère du Revenu stipulates that the Minister of Revenue may at any time assess a transferee who is not at arm’s length with the taxpayer and who receives a transfer of property at a price below its fair market value.
To reflect the current administrative practice of the ministère du Revenu of assessing such a recipient third party within four years of the date of the notice of the transfer of property and to thus avoid the lapse of an excessively long time between the issuing of the assessment and the time of the notice of transfer of property, changes will be made to stipulate an assessment period of four years as of the date of the notice of transfer of property.
However, the Minister of Revenue will retain his power to assess such person at any time if he has falsely represented the facts by negligence or by voluntary omission or if fraud has been committed, or if he has forwarded a waiver of prescription to the Minister.
These changes apply regarding a distribution of property made as of the date of publication of this information bulletin.
3. CLARIFICATION CONCERNING RECOVERY OF SUPPORT PAYMENTS
Under the current provisions of the tax legislation, the ministère du Revenu can take or maintain a recovery measure regarding a tax debt. In addition, the ministère du Revenu also acts as collector of support payment debts in accordance with the provisions of the Act to facilitate the payment of support. Because persons owed support are often in a precarious situation, when a debtor owes both a tax debt and a support debt, the ministère du Revenu generally gives priority to the recovery of support debts.
To clarify the position taken by the ministère du Revenu, an amendment will be made to the Act respecting the ministère du Revenu to specify that the Minister may exercise his discretion to give priority treatment to the recovery of support debts.
For greater clarity, an amendment will also be made to the Act to facilitate the payment of support to provide that a refund due under a tax law may first be applied to the payment of a support debt.
These amendments will become effective on the date the bill giving effect to them is assented to.
