Fifty Years of Taxation at the Federal Court of Appeal and the Federal Court

• Author: Annick Provencher
• Profession: Associate Professor at Université de Montréal's Faculty of Law and co-director of the master's program in tax law, a joint program between HEC Montréal and Université de Montréal's Faculty of Law
• Pages: 543-585

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Fifty Years of Taxation at the Federal

Court of Appeal and the Federal Court

Annick Provencher*

  ,   Court of Canada has exclusive original

jurisdiction to hear appeals from assessments made by the Minister of

National Revenue. e Fe deral Court generally has jurisdiction over all other

questions relating to the administration and enforcement of the Income Tax

Act,1 particularly with respect to judicial review of the minister’s decisions,

which cannot be appealed to the Tax Court of Canada, as well as audit power

and collection power issues. e Federal Court of Appeal hears appeals from

both the Tax Court of Canada and the Federal Court.

Tax law is a vast f‌ield with many specializations. Hundreds of sections

and pages of legislation make this an area that is both complex and widely

supported by extensive caselaw. Highlighting in a few pages the important

* Associate Professor at Université de Montréal’s Faculty of Law and co-director of the

master’s program in tax law, a joint program between HEC Montréal and Université

de Montréal’s Faculty of Law. The author f‌irst wishes to extend warm thanks to the

Hon Noël CJ of the Federal Court of Appeal for his valuable time and for his sugges-

tions regarding the content of this chapter. The author also wishes to thank Marie-

Ève Plamondon, the Honourable Chief Justice’s law clerk, for participating in the

caselaw research. Special thanks to Philippe Dupuis, a former colleague and friend,

whose judicious, relevant, and constructive comments greatly helped to improve the

quality of this text. Finally, the author would like to thank Victor Larrouquère, doctoral

student in tax law, for reviewing this article and providing relevant comments.

1 Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA].

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        

contribution of the Federal Court and the Federal Court of Appeal in this

area is therefore an impossible exercise. As a result, we had to make very

dicult choice s.

is chapter will f‌irst cover issues related to the jurisdiction of the Fed-

eral Court. is jurisdiction over tax matters has changed over the past f‌ifty

years, and as a result, the determination of the court’s jurisdiction has caused

a lot of ink to f‌low. e second part will examine the important role played

by the Federal Court and the Federal Court of Appeal in the interpretation

of undef‌ined concepts in tax laws. Finally, it is impossible to ignore the role

of the courts regarding questions of tax avoidance. O ver the years, they have

developed legal tools to combat abusive tax avoidance practices but have also

had to interpret legislative tools. e f‌inal part of this chapter will therefore

look at the inf‌luence the Federal Courts have had on the tools used to counter

tax avoidance.

Income Tax and the Jurisdiction of the Federal Court

 ,    tax reform in Canada culminated with

the adoption of major amendments to the Income Tax Act. e Royal Com-

mission on Taxation laid the groundwork for this reform when it published

its report, popularly known as the Carter Report.2 is anniversary and the

concomitant anniversary of the Federal Courts are closely linked. As we will

see, the Carter Report has inf‌luenced the jurisdiction of the Federal Court

for almost all of its f‌ifty years of existence. While most tax specialists are

aware of the Carter Report’s impact on the fundamentals of taxation, the

taxation of several sources, and tax practice in general, the f‌indings regarding

the courts’ jurisdiction in tax matters are often overlooked. e extent of the

Federal Court’s jurisdiction in tax matters has also produced an abundance

of caselaw that has helped to enlighten tax specialists on the issues that fall

within the exclusive jurisdiction of the Tax Court of Canada.

KMesurier Carter, Royal Commission on Taxation, Report of the Royal

Commission on Taxation (Toronto: Queen’s Printer, 1966), online: https://

epe.lac-bac.gc.ca/100/200/301/pco-bcp/commissions-ef/carter1966-eng/

carter1966-eng.htm [Carter Report].

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Fifty Years of Taxation at the Federal Court of Appeal and the Federal Court

Implications of the Carter Report on the Jurisdiction

of the Federal Court, Trial Division

In the latter half of the twentieth century but before the Federal Court was

created in , taxpayers who wished to appeal a tax assessment could only

appeal to the Tax Appeal Board or to the Exchequer Court. ese two courts

had concurrent original jurisdiction over to hear appeals of a tax ass essment.3

An appeal from a decision of the Tax Appeal Board to the Exchequer Court

was then, according to caselaw at the time, a trial de novo.4 In Goldman v Canada

(Minister of National Revenue), Justice orson explained the nature of this

appeal to the Exchequer Court:

considerations lead to the conclusion that the appeal to this

Court from a decision of the Income Tax Appeal Board, whether by the

taxpayer or by the Minister, is a trial de novo of the issues involved, that

the parties are not restricted to the issues either of fact or of law that

were before the Board but are free to raise whatever issues they wish

even if dif‌ferent from those raised before the Board and that it is the duty

of the Court to hear and determine such issues without regard to the

proceedings before the Board and without being af‌fected by any f‌indings

made by it.

3 An Act to amend the Income Tax Act, SC 1950, c 40 at ss 20, 29, & 30 amending ss55,

79, and 89 of the ITA, above note 1 (as it reads in its application). See also Wilfrid

Lefebvre, Ian MacGregor & Deen Olsen, “Income Tax Litigation” (1995) 43:5 Canadian

Tax Journal 1861 at 1882; David Jacyk, “The Dividing Line Between Jurisdictions of the

Tax Court of Canada and Other Superior Courts” (2008) 56:3 Canadian Tax Journal

661 at 666; Canada, Minister of Finance, Annual Financial Statement of the Minister of

Finance, House of Commons Debates, 21st Parl, 2nd Sess, v 2 (28 March 1950) at 1206

and 1217 (Hon Douglas Abbott).

4 Jacyk, above note 3 at 665; Carter Report, above note 2, vol5 at113–14.

5 Goldman v Canada (Minister of National Revenue), [1951] Ex CR 274 [Goldman] atpara

7. This decision was appealed to the Supreme Court of Canada, which did not rule on

this issue (Goldman v Canada (Minister of National Revenue), [1953] 1 SCR 211). In the

appeal of a Tax Review Board decision, the Federal Court relied on Goldman when it

reiterated that this was an appeal de novo: Midwest Oil Production Ltd v Canada, [1982]

2 FC 357 (TD) at paras 7–8; Kagna v Canada (Minister of National Revenue), 74 DTC

6221 (FC TD ). Even during the period when the Tax Court of Canada and the Federal

Court, Trial Division had concurrent jurisdiction to hear tax assessment appeals (from

1983 to 1991 inclusive), an appeal to the Federal Court, Trial Division constituted an

appeal de novo, as described in Goldman, above. See in this regard the Federal Court of

Appeal’s decision in Canada v Apollo 8 Maintenance Services Ltd, 91 DTC 5417 (FCA) at

5418; Jacyk, above note 3 at 665.