Fighting With CRA? Pick The Right Forum For Tax Disputes: Federal Court Or Tax Court That Has Jurisdiction

• Law Firm: Rotfleisch & Samulovitch P.C.
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Tax, Constitutional & Administrative Law, Trials & Appeals & Compensation, Sales Taxes: VAT, GST, Tax Authorities
• Author: Mr David Rotfleisch
• Published date: 31 May 2023

The Federal Court of Appeal decision in Canada (Attorney General) v. Iris Technologies Inc. (2022) FCA 101, which deals with Tax and Federal Court jurisdictions exemplifies the need for determining the appropriate forum at which to resolve your tax grievance with the Canada Revenue Agency (CRA). It also highlights the court's approach of holistically reviewing Judicial Review applications for what they purport to do rather than how they are 'worded'.

Case Facts and Legal Issues before the Federal Court

Iris Technologies Inc. was assessed by the CRA with respect to GST under the Excise Tax Act, RSC 1985. C-15 (ETA). Iris Technologies Inc. filed a Judicial Review Application to the federal court claiming that the CRA had not provided them with procedural fairness and natural justice. Most notably their Judicial Review Application claimed:

1. The CRA denied Iris Technologies Inc. procedural fairness during the tax audit and assessment process
2. There was no evidentiary foundation upon which the tax assessment could be issued under the ETA
3. The tax assessments were issued for the improper purpose of depriving the Federal Court of jurisdiction in the matter and preventing Iris from availing Administrative Law remedies.

The experienced Canadian tax litigation lawyers acting for Iris Technologies Inc. asserted that they challenged the conduct of the CRA in issuing the tax assessment, rather than the assessment itself. Iris Technologies submitted that this was the purview of the Federal Court under s.18 and s.18.1 of the Federal Courts Act, RSC 1985, c F-7 since they deal with unfairness and improper use of tax audit assessments. They sought relief under Rule 64 of the Federal Court Rules which provides declaratory relief.

The CRA's Canadian tax litigation lawyers moved to strike out the Judicial Review Application arguing that the Application was an attack on CRA's tax assessment under the Excise Tax Act itself. The CRA claimed that the Federal Court was precluded from matters that were under the jurisdiction of specialized courts i.e., the Tax Court of Canada.

Federal Court or Tax Court: Determine the Appropriate Forum for your Tax Appeals

The appropriate forum to address most taxpayer grievances is the Tax Court of Canada. The legislative intention underlying the creation of the Tax Court is that tax matters should be adjudicated in a specialized court, that has the requisite technical expertise to make efficient and informed judgments.

However, there are two main...