Canada: Recent Legal Developments In Tax And Tax Dispute Resolution
02 July 2014
Posted by: Author: Gowling Lafleur Henderson LLP
Author: Gowling Lafleur Henderson LLP
The following is a summary of recent legal developments affecting tax and tax dispute resolution in Canada:
On May 29, 2014, the Supreme Court of Canada (SCC) dismissed with costs the leave application in TransAlta Corporation v The Queen, a case concerning the Tax Court of Canada (TCC) decision to not award costs on a substantial indemnity basis to a successful litigant. At trial before the TCC, the taxpayer obtained a better result than the settlement offer that the taxpayer proposed and the Crown rejected, which outcome would presumably trigger an enhanced cost award.
On May 15, 2014, the SCC dismissed the leave application in Kossow v The Queen, a case involving a charitable donation tax program. The TCC upheld the CRA's denial of the charitable tax credits, as did the Federal Court of Appeal (FCA).
On May 9, 2014, the SCC released its reasons for judgment in John Doe v Ontario (Minister of Finance), a case concerning efforts to obtain information about amendments to the Ontario Corporations Tax Act under provincial freedom of information legislation. The court held that policy opinions of public servants constituted advice that was exempt from disclosure.
On May 8, 2014, the SCC dismissed the leave application in Maureen McLean v Helen McLean, executrix of the Estate of Wilmur McLean, a rectification case. The Ontario Court of Appeal (OCA) had confirmed that the trial judge erred by holding that "convincing proof" was required in rectification cases: the court confirmed that the standard of proof in rectification is the same as any other civil action, namely, "balance of probabilities." The OCA further confirmed that a court must seek to confirm the parties' mutual intentions, objectively determined, based on the evidence available from the time the contract was formed.
On May 6, 2014, the Auditor General of Canada released his Spring 2014 report, Chapter 3 of which deals with steps taken by the Government of Canada to address "aggressive tax planning."
On April 30, 2014, the BC Supreme Court dismissed the plaintiff's case in Leroux v CRA. Although the taxpayer did not obtain the remedy he was seeking, the judgment was helpful to taxpayers because it confirmed that the CRA owes a duty of care to taxpayers, which is a threshold issue in any civil claim in tort. The decision has been appealed.
CRA Interpretation Letter 2014-0524191I7, dated April 25, 2014, confirmed that court costs ordered against a taxpayer in an unsuccessful tax appeal may be deducted under para. 60(o) of the Income Tax Act (Canada) (ITA). Paragraph 60(o) allows for the deduction of fees or expenses incurred in preparing, instituting or prosecuting an objection or appeal of an assessment of tax, interest or penalties under the ITA or similar provincial statute. The paragraph also allows for deductions in relation to disputes under the Employment Insurance Act and the Canada Pension Plan. According to the letter, the fees and expenses are deductible regardless of whether they are paid to a lawyer or other legal representative.
On April 22, 2014, the SCC dismissed the leave application in Stanley J Tessmer Law Corporation v The Queen, a case concerning whether the state may tax legal fees for criminal defense work. The TCC held that the imposition of GST on legal services did not infringe citizen's rights under s. 10(b) of the Charter and the FCA upheld that decision.
On April 10, 2014, the CRA issued a revised directors' liability information circular, IC89-2R3.
On April 3, 2014, the SCC dismissed the leave application in GF Partnership v The Queen, a GST case concerning the interpretation of purchase and sale agreements. The FCA decision upholding the TCC's judgment dismissing the taxpayer's appeal stands.
On March 21, 2014, the CRA issued a new voluntary disclosures program information circular, IC00-1R4, with minor differences from the previous version of the information circular. The CRA has also updated its website to confirm that it has adopted and will apply the FCA's decision in Bozzer v The Queen, a move that the tax community has been expecting since Bozzer was decided. The CRA has also released a revised VD program RC199 taxpayer agreement form.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
This article first appeared on mondaq.com.