SCC: Constitutional Immunity From Tax Superseded By Intergovernmental Agreement

On December 12, 2019 the Supreme Court of Canada issued a rare GST/HST decision in Canada (Attorney General) v. British Columbia Investment Management Corp., 2019 SCC 63.

The main issue was whether a provincial Crown corporation responsible for managing public sector pension funds was subject to the obligations under the Excise Tax Act (the Act) to collect and remit GST in this case in respect of investment management services provided in respect of investments held in pooled investment portfolios (the portfolios). The court held that the Crown corporation was constitutionally immune from taxation, but that any applicable GST was required to be charged and collected because the provincial government had agreed to do so.

The decision is important for its comments on the test for a trust in tax legislation, for its interpretation of the Constitution Act and intergovernmental agreements, and for its holding on jurisdiction in tax litigation.

Factual overview

British Columbia Investment Management Corporation (BCI) is a Crown corporation formed by the government of British Columbia in 1999. BCI owns and manages the investment assets held in the portfolios that the BC government had previously held and managed.

BCI holds investments in the portfolios and also in segregated funds. For investment management services relating to the segregated funds, BCI charged fees directly to its client and collected and remitted GST on these amounts. However, in respect of the portfolios, BCI did not charge fees but recovered its costs of managing the portfolios from the income realized on the portfolio assets. BCI did not charge, collect or remit GST on these amounts.

The governments of BC and Canada agreed to certain tax payment obligations under a long-standing Reciprocal Taxation Agreement (RTC), and under a Comprehensive Integrated Tax Coordination Agreement (CITCA) relating to the planned harmonization of BC provincial sales tax with the GST.

Procedural history

The Canada Revenue Agency audited BCI and formed the view that BCI had failed to collect and remit GST in respect of the portfolios. While the audit was ongoing, BCI sought a declaration from the BC Supreme Court that it was immune from GST in respect of the portfolios under the Constitution Act, 1867, which supersedes the Act.

The BC Supreme Court held that section 125 of the Constitution Act, 1867 immunized BCI from taxation by Canada under the Act in respect of assets held in the portfolios and...