Strategies for Executive Compensation: Design and Tax Issues for a ...

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Even if the clawback could meet the test of a mistake under Canadian law, which
seems very unlikely, the taxpayer would have to navigate the procedural and
jurisdictional hurdles.
In Fradette v. The Queen, [20] the taxpayer mistakenly received approximately $26,000
from a provincial pension commission over a period of years, which was included in the
taxpayer’s income and subject to provincial and federal income tax. When the payer
discovered the error years later, it required the taxpayer to repay the sums paid in error,
which the taxpayer did.
While Revenue Quebec agreed to reimburse the taxpayer for the provincial tax paid on
the repaid amount, the CRA did not so agree, and issued a nil assessment for the year
of the final repayment. The taxpayer’s appeal to the Court was met with the Crown’s
motion to dismiss on the basis that no appeal lies from a nil assessment. The Crown’s
motion was successful. However, Mr. Justice Tardif made the following comments:
This is a very special case which causes one to have great
sympathy for the appellant, who must bear unaided the
consequences of a mistake in which he had no part.
Unfortunately, I have no jurisdiction to correct this injustice
except that I would like to think that Parliament had such a
situation in mind when it adopted the [Financial
Administration Act].
Remission
Remission orders are extraordinary measures that provide for complete or partial relief
from taxes, interest or penalties. Remission orders are granted by the Governor
General in Council, under the authority of subsection 23(2) of the Financial
Administration Act:
The Governor in Council may, on the recommendation of the
appropriate Minister, remit any tax or penalty, including any