
Peter Aprile, Senior Counsel at Counter LLP, describes three inflection points that define how CRA challenges develop and are resolved. The framework reflects insights drawn from years of representing Canadian private companies in high-stakes tax disputes.
CRA reviews and challenges are often described procedurally: audit, objection, and Tax Court appeal. In practice, the decisive inflection points are not the formal stages, but the moments when the conditions of the file shift — when CRA sets out its likely position, when it formalizes that position, and when external oversight becomes available.
Executives cannot control when CRA acts, but they can control how and when they respond. Each inflection point brings different dynamics: what facts are on the table, how CRA is framing its position, and what levers remain to influence the trajectory of the file.
Executive Summary
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When CRA sets out its likely position
Proposal letters show CRA’s reasoning. In complex, interpretation-driven cases, when CRA makes its position explicit, it rarely changes. Decisions and submissions at this point, however, shape the facts, framing, and positioning that define how the file is carried forward. -
When CRA formalizes its position
A reassessment or confirmation makes CRA’s view binding. Exposure is clear, and this is when most executives typically take action. Options narrow, but the record and trajectory can still be reset. -
When external oversight is in play
Tax Court appeal is the first stage involving a rule-based system and an independent decision-maker. Oversight shifts probabilities, but outcomes still depend on the strength of the earlier record.
Why Inflection Points, Not Stages
Procedural stages describe the “tax review and challenge” process. Inflection points describe the structural shifts that matter to executives: when a position is visible, when it is binding, and when external counsel is engaged.
The Three Inflection Points
Figure 1. The three critical inflection points in CRA challenges.
1. When CRA Sets Out Its Likely Position
CRA may issue an audit or objection proposal letter, setting out its likely position. These letters are not legally binding, but they make CRA’s intention and reasoning explicit. Decisions at this stage influence whether positions harden and shape the record — meaning the facts established, the framing of those facts, and the positioning that will carry forward into future stages. Missteps here can narrow options later; careful choices can strengthen the foundation for the next decision-maker and arena.
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Context: CRA’s view is visible but not binding; choices here influence whether the position hardens within self-adjudication.
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Exposure Dynamics: Moderate → dollar exposure not yet binding, but the severity lies in how facts and framing are set for the future.
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Executive Imperative: Engage deliberately — shape the record while anticipating future arenas.
2. When CRA Formalizes Its Position (Reassessment / Confirmation)
CRA may issue a notice of reassessment (post-audit) or a notice of confirmation or re-reassessment (post-objection). At this stage, CRA’s position is binding unless overturned. For many executives, this is the point that triggers engagement.
The record — facts, framing, and positioning — is largely set by this point, but filings and strategy here still influence how the matter will be seen at the next stage. Consequences now combine monetary exposure and the weaknesses in the record that will carry forward.
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Context: CRA’s view is crystallized and reinforced through self-adjudication, narrowing options but clarifying negotiation levers.
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Exposure Dynamics: High → exposure is binding, severity now includes dollar amounts, and the durability of the CRA's position and the record moving forward.
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Executive Imperative: Reassert position — treat formalization as the pivot for negotiation and defensible resolution.
3. When External Oversight Is in Play
When CRA has formalized its position, taxpayers may move to the Tax Court appeal process. In complex or high-stakes cases, CRA’s objection stage rarely changes outcomes, whereas in many cases, the Tax Court appeal process offers equal or better chances under independent oversight — without the added risk, time, and cost of continuing self-adjudication.
This is the first stage where external and independent oversight is in play. Earlier stages involve CRA evaluating and deciding on its own work; this stage introduces an external decision-maker and a structured, rule-based environment for resolution. A hearing is not inevitable. The presence of oversight often creates conditions for negotiated settlement before trial.
The quality of the record — facts, framing, and positioning established earlier — rarely determines the outcome on its own, but it almost always influences the probabilities at this stage. Weak records tend to constrain options and increase downside exposure, while stronger records usually improve the room for resolution.
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Context: External oversight introduced; new procedural and negotiation dynamics in play.
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Exposure Dynamics: Very high → consequences are significant, and the earlier record strongly influences probabilities here, often to the taxpayer’s disadvantage if mishandled.
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Executive Imperative: Secure advocacy — prepare for resolution in a structured, rule-based environment.
Related Insight: CRA’s Objection Process: Full Engagement vs. Strategic Disengagement examines when executives may benefit from continuing within CRA’s self-adjudication process at the objection stage, or to disengage and leverage the Tax Court’s rule-based system and independent oversight.
Executive Perspective
“In the successful cases, executives engage at the earliest inflection point — moving decisively, when judgment and leverage matter most.”
— Peter Aprile, Senior Counsel, Counter LLP
Strategic Reflection
Inflection points rarely appear urgent until they are behind you. By the time CRA has formalized its position, options are already constrained by what came before. The cost of waiting is measured not only in dollars but in how the record — facts, framing, and positioning — limits or enables what can be achieved under independent oversight. Executives who anticipate these shifts and act deliberately at each point improve the probabilities of a favourable outcome.
Closing Note
Executives cannot control when CRA acts. What matters is how and when they respond. The decisive inflection points are when CRA sets out its likely position, when it formalizes that position, and when external oversight becomes available — the moments when judgment and discipline change the outcome.