Canada’s tax-dispute and litigation system operates without coordinated architecture or design leadership. No institution is responsible for aligning conduct, accountability, and proportionality, or for maintaining a shared design lens across stakeholders with different levels of representation and influence. In the absence of that unifying structure, system behaviour reflects institutional incentives rather than coherent design.
This report explains how fragmented governance produces incremental and uneven reform, identifies the pressures that drive misalignment, and assesses the risks created by uncoordinated procedural change. It also outlines why a whole-of-system design approach is needed and provides a foundation for more deliberate and transparent system governance.
Canada’s tax-dispute and litigation system operates without a coordinating body to align design decisions across all stakeholders. No group carries the mandate to ensure that conduct, accountability, and proportionality operate as a coherent whole, or to sustain a unifying tax-dispute design lens shared across different taxpayer segments, government, the private bar, and the courts.
In the absence of this cross-stakeholder design function, several essential responsibilities remain unaddressed:
Committees and mechanisms exist, and each plays a legitimate role. But they refine individual processes rather than steward the system's design as a whole. No group holds the overall tax-dispute map or provides the design leadership required to balance all stakeholder interests and maintain coherence.
As a result, the system operates as a set of strong, active parts, each with different levels of representation, sophistication, and influence. Each part operates from its own vantage point, without a shared architectural view to coordinate, balance, and align decisions.
Without coordinated leadership, reforms tend to move through narrow institutional pathways. Each initiative reflects the priorities of the institution advancing it, the constraints and incentives of its vantage point, and limited visibility into system interdependencies.
This produces ad hoc governance: changes are incremental, uncoordinated, and often disproportionate to their system-level relevance. Institutional priorities can outweigh system needs. Without countervailing perspectives, reforms can assume more weight than their place in the broader architecture warrants.
Fragmentation does not arise from bad intent. It is the predictable outcome of a system distributed across multiple institutions, where stakeholders operate with different levels of representation, sophistication, and influence, and without a shared, unifying tax-dispute design lens.
A recent Budget 2025 request to explore potential updates to the Informal Procedure thresholds illustrates this dynamic. What began as an exploratory signal from one part of the system quickly became a procedural idea carried forward through institutional channels.
The idea itself is not the issue; it shows how a single suggestion can gather momentum and advance without a unifying design lens or coordinated governance discipline. Through no fault of those advancing it, an adjustment viewed from one vantage point can create effects elsewhere in the system that are neither anticipated nor visible within the current governance model. This is not an oversight; it is the predictable behaviour of a system designed without a central coordinating function or shared architectural view. The pattern reflects the underlying structural gap.
The pathway Budget 2025 activated makes this visible. The request moved through a narrow executive-branch process: internal Department of Justice analysis, followed by a technical review by the Joint Committee. DoJ assesses feasibility and coherence from within its own institutional mandate, not from a system-wide or cross-stakeholder perspective. The Joint Committee reviews drafting mechanics. Neither institution carries a mandate to evaluate cross-stakeholder effects, system-level impact, or taxpayer experience.
The limits of these mandates matter. The Joint Committee’s role is technical, focused on coherence within the Income Tax Act. A change in numerical threshold raises minimal technical issues, so its contribution is naturally narrow. In a system built without a mechanism to integrate cross-stakeholder insights or to manage competing institutional polarities, the gaps between mandates become gaps in governance. Because every formal mandate in the dispute system sits within government institutions, the system’s visibility is one-sided. The structure consistently reflects institutional vantage points but not the taxpayer’s. No institution is positioned to assess how procedural changes affect proportionality, access, or the lived experience of different taxpayer segments.
This example shows how exploratory ideas can move through institutional channels without a shared architectural lens. It is not the problem itself; it is the latest expression of an uncoordinated design environment.
Systems behave according to the interaction of their components. Without a shared design lens across stakeholders with different levels of representation, sophistication, and institutional weight, even small procedural changes can:
A whole-of-system design approach would ensure that:
These are design questions requiring shared stewardship, not isolated procedural adjustments.
This report does not present a full architecture. Its purpose is to:
A whole-of-system design lens would help ensure that proposed reforms are assessed for cross-stakeholder impact, that institutional incentives remain balanced, and that accountability and proportionality stay aligned. It would also help keep procedural changes coherent with the broader architecture.
These are design questions that require shared stewardship. They cannot be resolved through isolated procedural adjustments.
A further gap lies in the absence of a coordinated way to reflect the full range of taxpayer experience. The system includes several segments: informal-procedure users, taxpayers whose disputes sit near the line between informal and general, those solidly in the general procedure, mid-market businesses with meaningful financial and governance stakes, and institutional stakeholders who observe patterns across many files. Each group interacts with the system differently. Yet no mechanism brings these perspectives together or provides a shared view of how procedural changes influence them. This lack of cross-segment insight underscores the need for a more deliberate design function.
Canada’s tax-dispute and litigation system needs coordinated architecture and design leadership. The forces that shape the system are strong, yet they operate without a unifying structure to guide balance, coherence, and accountability across stakeholders with different levels of representation and influence. As long as reform moves through the vantage points of individual institutions rather than through a shared design lens, structural imbalance will remain.
This report is a starting point. Its purpose is to support a broader and more deliberate conversation about how the system should be designed, governed, and improved.
The Counter Institute is the independent research and policy arm of Counter LLP. Its work focuses on system design, governance, and accountability in tax dispute resolution. The Institute produces independent research to surface system patterns, strengthen understanding, and inform principled improvements in Canada’s tax dispute system.
Media Contact:
Natalie Worsfold
Communications Lead
Counter Insitute
Email: nworsfold@countertax.ca