Michael Lubetsky

2Good morning, Pulat. How are you?

4And you know, it's not like Jason is just random, but Jason has been known to exaggerate.

6I'm sure he was excluding himself certainly as well. I mean, Jason and I have been friends for many years. When we were an undergrad, we were both doing— we both did competitive debating. That's how we know each other. And then after university, we both just separately ended up in Japan. So that's how we got to know each other even better, and we've just been friends for a long time.

8Well, I went— he was in New Jersey. I went— I did my undergrad at Princeton, and Jason did his at Rutgers, which was just up the street. And we both were doing competitive debating, so every weekend there would be a tournament of some kind, and that's how we got to know each other.

10Yep.

12Canada. No, I mean, I was born and raised in Canada, but I chose to— I chose to do my undergrad in the States. And it's kind of a funny reason why. I started my undergrad in engineering. And in Canada, if you do your bachelor's in engineering, you're basically doing 5 years of engineering and nothing but engineering. And I kind of wanted a more, you know, just I wanted to have a more I wanted a chance to take more courses outside of engineering in the humanities and the arts and things like that. And that was more possible in the United States. And it was, that's sort of why I chose to go to the States for my undergrad.

13But that was kind of, it was probably a wise choice because in the end I ended up switching out of engineering. I just decided, I realized after a couple of years that becoming a professional engineer wasn't for me.

15Well, not— I, I wouldn't say it doesn't exist in Canada. I do think that Canadian higher education is much more pre-professional, pre-professional than— Canadians have a more pre-professional attitude towards higher education than Americans do. To. So, you know, there is sort of— Canadians tend to more expect that you go to university to learn a skill or to learn a trade than Americans do.

17Yep, the that was that. Well, that's the Whig-Clio is what we sort of called it colloquially. Oh, so Whig-Clio was the— it was an umbrella organization that included the Princeton debate team. And it was, I mean, included the debate team, Model UN, the Speakers Forum, it organized public speakers. And so it was sort of an umbrella organization for public speaking and related activities. They had a model Supreme Court as well, which was a lot of fun.

19Yeah, well, there are different types of competitive debate in the United States, and my information is not entirely current, but I can say sort of what it was like back then is that you had two different sort of debate leagues that focused on prepared topics. So there would be one topic that they announced, the teams would research it, and they would argue both sides of the topic. We did parliamentary debate. Which was extemporaneous. The topic would be announced, and then you'd have 20 minutes to walk in and have a debate. So Princeton did parliamentary debate, and that's what the Rutgers team— Rutgers, I think, maybe had several different teams, but Jason was on their parliamentary debate team.

20So that's the style that we did. And there would be tournaments basically every Friday and Saturday. Parliamentary debate in America was, at the time, focused mostly on the East Coast. So, and there were lots of different tournaments. I mean, Harvard, Yale, Princeton, Penn, I mean, Rutgers, Cornell, I mean, Brandeis, every week UVA, every weekend there'd be a different tournament. And so we would travel to them and, and debate.

22Correct, yes. The—

24The gap, well, simple explanation is, you know, I graduated from Princeton in '93 I had really, really big student debts and That's the price of doing your education in the United States. And I wasn't really sure what I wanted to do. That's the thing. I wanted to— I didn't know really what I wanted to do. I wasn't in a position to incur the added cost of going to law school. I didn't know I wanted to be a lawyer at the time. So I looked for alternatives. And what happened soon afterwards— wasn't immediately afterwards, but about Less than a year afterwards, I got a job teaching English in Japan. So, you know, flew to Japan.

25I worked for one of the schools there, and I did that for, I did that for several years. And, and that was actually very— and that's like I said, that's where I met Jason. Jason was in Japan. He wasn't there teaching English. He was there working for a company. And what happened then? I mean, after a couple of years in Japan, I kind of realized that I didn't want to be teaching English for the rest of my life. Like, I like teaching kind of at the time I was actually thinking of maybe becoming a high school teacher, but like, I'm coming back, going to Teachers College, getting certified, and becoming a professional teacher here.

26But I kind of realized that that's— so that's what I was thinking at the time, and You know what happens to a lot of foreigners in Japan? It's something that we call the gaijin trap, that people come to Japan in their early 20s, their mid-20s, they get paid quite a lot of money for doing really nothing except for chatting in your native language. You know, that's what a lot of the foreign English teachers tend to do, is that you're being hired there really— like, every Japanese person studies English for 6 years, like, they have a base, they just need native speakers to interact with and to practice with. And that's largely what the foreign teachers do.

27And so what happens to a lot of foreigners in Japan is that they do this for several years. They get paid lots and lots of money for chattering in their native language. And, you know, they turn 30, they're whatever, and they decide they want to come home. And they sort of start filling out a resume, and they kind of realize that they're qualified to do absolutely nothing except for chattering in their native language. And no one on this side of the Pacific is going to be paying you whatever you would make, $70,000, $100,000 a year to do that, unless perhaps if you're a member of parliament. So I mean, what are you going— what do you do?

28So what happens to a lot of foreigners in that situation is they just decide to remain in Japan, and they just become the English teacher for the rest of their lives, which isn't— which, don't get me wrong, is not a bad life. I mean, Japan is a great country. It's a great place to live, great people there. You know, that's not what I wanted for myself. So what I did— this was a very, very roundabout path to ending up in law school— is I came back to Canada for the summer during summer vacation, and I met with two headhunters in Toronto. And I asked them, I said, you know, I want to come back to Canada at some point sooner than later, but I want to come back, you know, employable.

29So if I learned— if I apply myself to master the Japanese language, or at least master enough of it, to Japanese plus X equals high-paying job. So choose X to maximize this equation. And both of the headhunters said without batting an eyelash, do your CFA. And that kind of interested me because investment interests me. So I got back to Japan and I started doing the CFA program, the Chartered Financial Analyst program, sort of the program that's done by people who run mutual funds and manage investment plans and things like that. And so that was a lot of fun. That was kind of interesting. I was not the usual profile of a CFA. Most people who do CFAs work in investment.

30They work for brokers or traders or fund managers and things like that. Like, I had no prior background. So it was all very new to me. But I began doing the program and found it very interesting. And then— I'm sorry, this is turning out to be a longer story than it probably should be.

32I got a— I found a company in Japan that was basically marketing investments to expatriates, and they were considering setting up an office in Vietnam. And they asked me to go to Vietnam to do a business study for them. So I was sent to Vietnam, and I met a lot of people to learn about opening up a business, an expatriate business in Vietnam. Studied some of the Vietnamese language as well. That language is very interesting. Don't test me on it because I have almost forgotten pretty much everything.

34No, the— well, let me— with one important nuance. This is a bit of an aside, but it's an aside I don't mind talking about because it's fascinating, because I learned something I learned when I was there. So linguistically, Vietnamese and Japanese are in completely different families than Chinese. Like, Chinese is in the Sino-Tibetan family. It has its own sort of linguistic you know, history and origins. You know, Vietnam— Vietnamese is a different family, Japanese is a different family, but because of China's cultural prestige and influence over the centuries, both languages, and Korean as well, borrowed huge numbers of words, huge quantities of vocabulary from Chinese. So approximately 60% of Japanese vocabulary comes from Chinese, and Vietnamese, it's about 70%.

35I mean, a linguist can give you a more accurate number, I'm sure, but about 70% of Vietnamese vocabulary comes from Chinese. And when I say from Chinese, it's Southern Chinese. I don't think it's Cantonese. I think it's probably Hokkien, but, you know Fukienese. But so when I went to Vietnam, and, you know, Vietnamese is written in the Latin alphabet and I kept seeing all these words that looked unfamiliar to me. But what I was— but Vietnamese used to be written in Chinese characters like Japanese is now, an adapted form of them. I got a dictionary that was not Vietnamese-Japanese or Vietnamese-English, but was Vietnamese to Old Vietnamese. So it showed the Vietnamese words using the characters.

36And once I got— once I realized

38they were in many ways the same characters I used And the phonetic links became obvious. So for example, Vietnamese words with V, the sound V is a common sound in Vietnamese. It doesn't exist in Japanese. So the Vietnamese word Viên, in Japanese it would come out as N. You see what I mean? Just drop the V. Then the, the NIE sound, as in like the Vietnamese surname Nguyen. Which is a very common Vietnamese surname, the /nju/ sound doesn't exist in Japanese, but it would come out as /gen/. So the word Nguyen in Vietnamese comes out in Japanese as /gen/. It's completely regular. The /nju/'s become /g/'s, the /v/'s are dropped, and so on and so forth.

39There are very predictable and regular phonetic transpositions. And once I realized what those transpositions were, I was able to decipher a good number of Vietnamese words because of the common origin with Chinese. See what I mean? So

41linguistically, no, Vietnamese is not related to Chinese or to Cantonese or to Japanese, but because of the extensive vocabulary borrowing, there's a— what can I say— there's an element of commonality that makes the language is accessible— what makes each of the languages accessible to speakers of the other.

43Yep.

45Well there's the joint— that's kind of how it's— this is sort of finishing the story, is that when I was in Vietnam, I met a lot of diplomats. That was part of my task. I met a lot of trade commissioners from Japan, from Canada, America, to talk about what support was available to foreign businesses. And I kind of thought to myself that what these diplomats do is more interesting than what I was doing. So I returned to Japan and I sat the exam for the Canadian Foreign Service. And this was actually very funny because most people in Canada join the diplomatic service because they want to travel and see the world. I applied to join the diplomatic service because I wanted to return to Canada.

46It's again, it's a very circular route. So I was accepted into the diplomatic service and I asked to be a trade commissioner because actually that's the work I thought— those are the guys I met in Vietnam and I thought their work was really interesting. In Canada, when you join the diplomatic service, I don't know if this is still the case. Like I said, this was about 20 years ago, but at the time you would be assigned to one of four divisions. and it was very difficult to move from one division to the other. And the division I was assigned to was immigration. So I became an— I was a visa officer.

48Yeah. So yes, my earliest case on CanLII was one before I went to law school. I, you know, I refused visas to some people and they, you know, there was a judicial review. That was my kind of first exposure to the federal court system. The and I might add that the court agreed with me.

50but yeah, the so that means— don't get me wrong, immigration was very interesting work. Like, I had my language training, I did a year at headquarters, then I was sent to Haiti for 2 years where I was doing visa officer work in both Haiti and the Dominican Republic.

52It's rusty, but yes, Creole is a very interesting language and a lot of fun to learn. I was doing— I could do— I could speak fairly well by the time I was done. I was doing my immigrant interviews mostly in Creole. I mean, if you speak French, Creole is not that hard to learn. I mean, it's a very— it's a different language, don't get me wrong, very completely different grammar, but most Creole vocabulary comes from French. So the joke we often used to say about Creole is that if you understand French, you can understand Creole if it's spoken slowly. The problem is that Haitians never speak slowly. So, but one more thing I could say about Creole, which I found to be very interesting, is that Creole is a very, it's a very direct language.

53Like, you know, there's no passive voice in Creole. It's a You know, you— the— it's just the type of language that you want to express something, it typically comes out in a very direct way. And I often found that when I was doing my immigrant interviews, that, you know, if I could understand everything without any difficulty what was being said, it was a strong indicator to me that the person was being truthful with me. That when someone tries to get— when you try to get evasive in Creole, it's hard to be evasive in Creole because the language just isn't set up for And so when you're trying to be evasive in Creole, it comes across as sort of babble.

54Now, when I was doing an interview, if I couldn't understand what the person was saying, I couldn't continue that day. I have to understand what the person is telling me. If I stopped understanding them, I would ask for an interpreter to come in. And that was always a sign. If I ever had to call for the interpreter, it was a sign that the interview was not going well. Because not always, but very often, if I wasn't following what was going on, it was because the person I was interviewing was becoming evasive and circumlocuting and trying to dodge the points in ways that sort of became confusing to me.

56Well, that's what immigration— like, that's a lot of what immigration work is. I mean, is, is assessing credibility. And this was always And this is sort of my reflection of work as a visa officer, is that a challenge you have sort of psychologically being an immigration officer is that most of your time— and let me be very careful with what I'm saying here— most of your time is spent on dealing with what one might call the problem cases, as in cases where there are serious credibility problems. I am not saying— let me be very clear on this— I'm not saying that most of the applicants have credibility problems. It says that you can deal with them relatively quickly.

57I mean, I have a file where the documents are all in order, the story makes sense. Maybe someone immigrated to Canada previously, he wants to bring, you know, their spouse and their children. The spouse and child, they, they were declared in the initial visa application, in the sponsor's application, declared their existence. Their identities were checked at the time. The identity documents and all are all in order, like, I, I can visa that family without interview. Like, I look at the file, this is, I don't know, depending on the case of course, but this may be a 10-minute review process. Okay, okay, okay, send for the medical exam. I mean, so that's easy. Where, but where a file is dubious, like, it's really not open to me, especially in immigrant visas.

58For me just to look at a file and say, no, forget it. I mean, there's procedural fairness. I can't refuse an immigrant visa without giving the applicant a chance to come and explain themselves. And to, you know, if I have doubts, they have enough to give them an opportunity to explain to me why I might be wrong. So it's the problem cases that I would convene to interview. I would ask them lots of questions. I would have to challenge them. But you see what I mean? But it's self-selected, and those are the files that take up— and I have to document everything. So if I'm going to refuse them, I need to document in detail what the issues are and document the fact that I have explained to them what the issues are and have given them a chance to explain themselves, to try to convince me to change my mind, which sometimes, of course, I did depending on the explanations which— and sometimes I did not.

59So all that to say is that this is where the problem is. You spend most of your time dealing with applicants with credibility problems, and, you know, it can leave you— it can leave you very jaded. It can make you feel very, very cynical about immigration work in general. And I don't know, that's kind of why I kind of— I didn't want to spend the rest of my life doing visa work either.

61Oh no, I wouldn't say that. Keep in mind, litigation— we often think of what is litigation, that litigation is what happens in court. That's, that is only a small part of what litigation actually is. The vast majority of cases settle, and they settle for a reason, is that, you know, when parties start a case, they're, you know, The plaintiff wants this and the defendant is willing to give that. And then you have the process, you gather documents, you have examinations, and you, you learn more about the strengths and weaknesses of your case, and you learn more about the strengths and weaknesses of the other case. And that process tends to bring the parties closer together.

62And then you end up, you know, you have your pre-trial, you have your settlement conferences, and that— I mean, most— I get in many ways it's only the most pathological disputes that end up in front of a judge in the first place. And yes, and that's necessary sometimes, but, you know, the job of a litigation counsel is not just to show up in court, bash the other side's witnesses, make a brilliant argument, and come out entirely successful. I mean, that does happen, and we're always, you know, it happens sometimes, and when we— good litigators have to be able to do that, but that's not really what takes up most of the time of a litigator.

63Certainly not what takes up most of my time, and especially not in the tax space, not doing tax litigation.

65Yeah, well, keep in mind, define— in my experience, actually, let me— I'll say, I'll answer the question, but I must give a bit of nuance that the types of cases that I do, being at Davies, are not necessarily representative of the vast majority of tax litigation files. I mean, Keep in mind, let me make two nuances here. When we say tax litigation, what stage are we referring to? Because the word tax litigation can— is also used more broadly to include all forms of tax dispute resolution. So it includes dealing with auditors at CRA, auditors at the audit stage, CRA or their provincial counterparts. Then after the audit, you have the whole objection phase, which is, you know, with the appeals division of the CRA.

66And only after that, if you don't get a resolution at the objection phase, do you then go to tax court. So you already, even before you even get to the door of the tax court, you've had two important opportunities to come to a settlement or to come to some resolution, first with the auditors, then with the appeals division, right? So then we end up in— when we end up in tax court The majority of cases in tax court, like a third of all litigants in the tax court last time I checked, I don't know the exact number today, but are people who are self-represented. Like they're individuals showing up without even counsel, dealing with, you know, for them certainly material amounts, but for the standards of, you know, for a big— for my sense of a big corporation, amounts which are not very large.

67I mean, So all that to say, do most cases settle? In my experience, I've had very few of the disputes that I have handled with the Canada Revenue Agency actually proceed to a verdict in the tax court. You can even see on CanLII how many reported decisions from the tax court there are with my name on it. There aren't that many. Because a lot of the cases I— most of the cases I've been involved with have, have settled either with the auditors or with the appeals division or before the court in the context of a settlement conference, for example, or through negotiation.

69Oh, I forgive me, but I think you're missing a very— your history is omitting something very important, that the firm's full name is Davies Ward Phillips and Vineberg. Davies Ward, the Davies Ward piece was from Davies Ward and Beck, which was a Toronto firm that was founded in 1961. Phillips and Vineberg was a Montreal firm that was founded in 1895. Phillips and Vineberg has been around for a very long time. And was for, you know, for many years, you know, very much an institution in the Montreal legal community. And Phillips& Vineberg has always had, you know, a well-known litigation practice. I mean, you can— the— so I kind of beg to differ with the characterization you just made.

70And Phillips& Vineberg, I can speak more because I started in Montreal. I transferred to our Toronto office 7 years ago, but I was— I did my articling in our Montreal office, and that's kind of where I was raised within Davies. The, you know, Phillips& Vineberg was, you know, it was a full-service law firm that did, you know, litigation, corporate services, and so forth. I mean, one of the claims to fame of Phillips& Vineberg was that it was the firm of Jews and Francophones at a time when the big blue-chip firms would not hire Jews or Francophones. And Phillips& Vineberg's claim to fame was also was the firm of Annie Langstaff. Who you may or may not have heard of.

71Annie Langstaff was the first woman to graduate from law school in Quebec, and she attempted to get called to the bar, alas unsuccessfully, because women at the time were not allowed to be called to the bar. It was our firm's— one of our— Quebec?

73Well, I don't know the exact year. I can check that. It was our firm's founder, one of our firm's founders, Sam Jacobs, who represented Annie Langstaff. In her lawsuit against the Quebec Bar for her to be called to the Bar. Alas, unsuccessfully, he lost that lawsuit. The decision is now quite infamous. But in the end, Annie Langstaff spent her whole career with Phillips& Vineberg doing the work that today we would call the work of a paralegal. So, you know, that's sort of the— you want to talk about the history of Davies and the institutional lore of Davies, I think you have to be looking at the Phillips and Vineberg piece for, you know, the complete story, which I think reveals that the firm has a history that's much more than that of simply a transactional law firm.

75Phillips and Vineberg, yes. And I can't speak— like, I can't speak too much about the, the, the, the more ancient history before my arrival, but I can sort of say this. I know The Montreal office of Phillips& Vineberg, and now the Montreal office of Davies, has always had a tax litigation practice, an established tax litigation practice, and that's how I started. When I started at Davies in the Montreal office, I began working very closely with Guy Dupont, who is sort of well known. He's one of Canada's most well-known tax litigators. He's the one who argued Candarel and Letko at the Supreme Court, which are two cases that I actually studied in law school.

76It was kind of thrilling to be able to to work with Guy when I started at Davies, like about 10, 10 or so years ago. And so that's— our Montreal office has always had a thriving tax litigation practice. Now, the Toronto office— and again, I'm more speaking, this is more hearsay because I wasn't really part of all this— I know that about maybe 20 years ago or so, the Toronto office also used to do tax litigation. Around, again, maybe 20 years or so ago, there was a business decision made in the Toronto office to focus more on what, on sort of what was core. And, and, you know, the practice, the legal market in Toronto is big enough to, for that.

77You know, keep in mind also the legal market in Quebec is smaller, so it's harder for a firm to focus too narrowly in the Quebec context. So a decision was made in the Toronto office not to focus at the time on tax litigation and to focus more on what you referred to before, transactional work. But that's changed, and it's changed heavily in the last 10 years because of a massive, massive growth of tax litigation over the past 10 years. That, you know, starting with the— under the Harper government, it's continued under the current Trudeau government— there has been an enormous added investment of resources into the CRA for administration and enforcement. I mean, the number of auditors has, I think, in the last 10 years almost doubled.

78All while, I might add, the number of appeals officers has gone up something like 10% and the number of judges has remained basically constant. I mean, it was just now increased. So, you know, you have this massive growth of tax dispute work. And so, and that's why over the last 10 years We've seen all— we've seen the major accounting firms mostly setting up like in-house law firms to do tax litigation work. We've seen a lot of firms, a lot of Bay Street firms who have never had full-time tax litigators hire them to set up tax litigation practice groups because clients require it. And so, you know, we've done that. A couple of years ago, we brought on Bobby Sood, my partner Bobby Sood, who's to do full-time tax litigation here in Toronto.

79Most of them— I'm in the litigation group, I— but I— most of my practice is tax litigation as well. I mean, and our Montreal office has brought on a lot of new people over the past several years to build up a full tax litigation group. So that's just us. I'm sure many other firms can tell you similar stories.

82No, listen, there's— on the end of the day, there's, there's— I mean, there are several different layers to that question. I mean, as long as you have government officials You know, saying to people, entering into people's places of business and saying, I don't think you've paid the right amount of tax, you need to pay more. You're going to need to have a process if the taxpayer says, well, excuse me, but no, you're wrong, I don't think I have to pay more. And there needs to be a process to resolve those disputes, and that process needs to be— and the importance of having the courts is to have a process which is not just an arm of the minister.

83I mean, that's the thing. Like, if you have a system where the minister sends in, you know, auditors to say you owe X amount of tax, and if you don't agree, well, you can appeal to another one of the minister's officials. I mean, is that really a fair way of resolving that situation? That's exactly why first it was the Tax Board and now it's the Tax Court of Canada was created to be a body separate from the minister, separate from the CRA, to resolve those disputes between the taxpayer and the minister over how much tax is owed. That's inevitable. Now, in terms of complexity, this is the bigger issue. And this is, to my mind, a source of endless problems.

84You know, the original Income Tax Act, when it was enacted in 1917, was a booklet of about 8 pages. You see this book here. This is the most recent edition of the Annotated Income Tax Act. This doc— this book has about 2,500 pages, and look, this is just volume 2. So I mean, you have this piece of legislation which is extremely long, extremely complex, that is very difficult for someone even with legal training to read and interpret. And you have now in the CRA— the CRA has about 40,000 employees who are invested with extremely vast powers to enforce this legislation, that the auditors can show up at your place of business, rifle through your books and records without warrant, They can send demands for information to your creditors, to your employees, to your banks, to anybody really.

85That may be expansive and repetitive and disruptive. They can issue an assessment saying you owe X amount of money of tax, which are— those assessments are presumed to be valid and binding unless you prove them wrong. The burden is on you. And in order to collect on those assessments, there are extremely vast powers. They can put liens upon your— they can garnish your bank accounts, put liens upon your home and other property. So, you know, the CRA is invested with these extremely vast powers to enforce a piece of legislation which is incomprehensible. So you can imagine that creates a lot of problems. There is an enormous, an enormous cost to complexity which is never taken into account.

86In any kind of discussion of the fiscal system in Canada. And let me give— I can give two examples that I think illustrate the point really well. The small business deduction, you know, the fact that small businesses get access to a preferential tax rate on the first half million dollars of income. You know, everybody, every politician loves the small business deduction. Everybody likes small business, and every politician says, let's give small business people a break, we have this deduction. It's been around for a very long time. Or some variant of it. And I don't question the concept, but how does that work in reality? If you're going to give a tax incentive to small business, and if you have a small business, well, when your business starts to grow, you eventually become a big business and you want to keep collecting these benefits.

87So what people— what business people would do is they would set up multiple corporations to try to multiply access to the credit. Well, this was found to be not wrongly problematic. So there were— and we're talking, this is a long time ago— there were mechanisms put in place to prevent that from happening. And so taxpayers would say, well, fine, I'm not going to set up multiple corporations, I'll have my brother-in-law do it, or I'll have my spouse do it. So then we have further measures in the Income Tax Act. So now we have a whole regime in the act, the associated company rules that are longer than the entire Income Tax Act was when it was first enacted.

88And I have had a case, I had an actual case, I represented a builder, a home builder here in Toronto. He claimed the small business deduction. By all evidence, he was entitled to it. And the auditor said no, because you have a brother-in-law out in Vancouver apparently who had some business of his own, and he claimed the deduction. So that's not allowed. My client didn't even know about it. He had nothing to do with his brother-in-law's business in Vancouver. I mean, this is what you have. And let me, and let me kind of— the punchline to this analysis is, is there any evidence? And I'm not offering a view on this, but I'm asking the question: what evidence is there that having the small business deduction actually supports small business?

89Like, does it? You— businesses only pay on their profits. So you can, you can make an argument, yes, the small business deduction allows more money to small business to grow and expand their businesses, but you know, those investments to grow and expand the businesses can be deductible anyway. So again, I'm asking the question. If you had someone on your podcast from the Canadian Federation of Independent Business, I'm sure they would have views on the subject and that might be more well-informed than mine, but my point is, is that analysis there? I mean, or would we— could we potentially— would it— the— would the removal of the small business deduction and removing that whole section from the Act simplify things?

90Would it prevent disputes with the minister over— that would reduce the number of disputes with the minister over the small business deduction. I mean, a similar example is SR&ED. Scientific research and development credit. Everybody loves scientific research. Everybody loves that. And of course, you know, well, the politicians all get very excited about it. But, you know, I have clients— but, you know, you're a business, you claim, you claim the credit for scientific research and research exploration and so forth. Then 3 years later, a CRA auditor comes in and says, I don't think this was valid research. You have to prove them wrong. You need this auditor who may or may not really understand your business or what it is you are researching.

91You need to get experts, and you need to— because the burden of proof is on you. You need to show them that they're wrong, and if they don't agree, you end up having to go to court, which is very expensive. I mean, and in the meantime, you can be reassessed to deny access to those credits with interest, potentially penalties as well. I actually have clients who are eligible to claim SR&ED, and they don't, precisely because of,

93headache, because of the headache and the compliance burdens.

95I can't really speak to other jurisdictions. I know there are— I know the United States has had numerous initiatives over the years to try to simplify their system. —but I'm certainly not in an effort, I'm not in a position to offer a view as to where we stand on the complexity scale. But I am able to say that there is an enormous cost to complexity, and that complexity drives the growth in tax litigation disputes.

97Well, remission orders are provided for not in the Income Tax Act, they're in the Financial Administration Act, and they allow the cabinet— so it's not the minister, it's— they actually— this has to be approved by cabinet to basically cancel taxes that are owing or to refund taxes that have been paid. It's intended to be It's intended to be used exceptionally because, you know, people are— and you can kind of vaguely understand why. Like, why should the government— we— everybody has to pay their taxes. The income— everyone has the burden. So why should, you know, some people be excused from that when other people have to pay? But, you know, there are certain circumstances where the imposition of all the tax that is owed can be unfair or unduly onerous.

98I mean, There is a published guide, which is not— sorry, I say published, it's not really available to the public, but it kind of is available if you know where to look— where the CRA sets out the criteria for circumstances when it will recommend the issuance of a remission order, including in particular cases of extreme hardship, which payment can entail. Cases of extreme hardship, cases of sort of changes to legislation, like circumstances where an act has been changed but not with retroactive effect, like things like that. Certain, but very unusual, where it would be unjust to sort of subject a taxpayer to the prior regime and so forth. But let me be clear. Remission orders are very hard to obtain.

99You have to do an application. It's the process is, you know, to quote David Sherman, it's the process that is very rarely successful and it takes years. What is interesting is that up until just like 2020, in theory, if you ask for a remission order and I say the CRA, the CRA make doesn't actually give the remission order order, but they'll issue the recommendation to cabinet. And if the CRA declines to give a recommendation, you can go to the federal court to challenge that decision on judicial review. In 2020, for the first time ever, a litigant was successful. I was actually— it was quite remarkable, actually, because up until that decision, no challenge to a CRA refusal to recommend a remission order had ever succeeded.

100But in the, the Moncraig decision, a litigant was successful for the first time, which was very interesting and potentially a game changer.

102I mean, historically, I mean, it's funny, it's very funny historically, actually. I have a publication that's coming out that addresses this. Like, it used to be prior to 1948, there was an enormous amount of discretion that was baked into the Income Tax Act. Like, a large number of, like, depreciation, the amount of depreciation you could claim for your business was at the minister's discretion. I mean, the types of allowances you could claim are all at the minister's discretion. The minister had the government had enormous amounts of discretion to determine how much tax you actually owed. And there was an enormous reaction against this. And that's why in 1948— plucking some ancient history here— like, the Income Tax Act was amended to remove virtually all discretion from the minister in tax enforcement.

103But it's funny, really, over the years there's been this kind of steady re-infiltration of discretion. In several different ways, and including, I mean, what, that sort of, and we have a lot more provisions of the Act now which are discretionary. And so it's been kind of making a comeback, and I think what you've identified is perhaps part of that trend. Although I would give the caveat, just to nuance what you say though, I don't think, you know, as much as I criticize the regimes that exist for income tax and remission orders, like, I do believe that the CRA is committed to enforcing the Act in a fair way. Like, they do try to be consistent.

104I think it's very hard to be consistent when you have such a complex legislation being enforced by 40,000 people, but my experience with the CRA is that, you know, if you tell them, you know, in this case, which is very similar, the CRA has done that, CRA auditors will often find that persuasive. Like, consistency and fairness is something that the CRA does take seriously. I'm not going to take that away from them. And for remission orders, I think that's part of the reason why the government tends to be reticent to give remission orders, because they want to be fair and consistent. And if they give a remission order to one person, do they have to give it to everybody?

105And is that fair to everybody else? So I think that is something that the government does take seriously, to their credit.

107it's been my pleasure. Thank you for having me.