Supreme Court To Consider Tax Court Jurisdiction

• Published date: 13 April 2023
• Subject Matter: Litigation, Mediation & Arbitration, Tax, Trials & Appeals & Compensation, Income Tax, Transfer Pricing
• Law Firm: Borden Ladner Gervais LLP
• Author: Ms Elizabeth Egberts and Laurie A. Goldbach

What you need to know

• On Feb. 23, 2023 and March 16, 2023, the Supreme Court of Canada (SCC) granted leave to appeal in two important cases considering the jurisdiction of the Tax Court of Canada (TCC): Canada v Dow Chemical Canada ULC, 2022 FCA 70(Dow) and Canada (Attorney General) v. Iris Technologies Inc., 2022 FCA 101 (Iris). The Court confirmed that it will hear the appeals in Dow and Iris together.
• These appeals give the SCC the opportunity to assist taxpayers and practitioners in navigating the often complex and confusing jurisdictional conflicts between the TCC and the Federal Court (FC).

Background

Jurisdiction denotes a court's authority to render decisions on specific types of matters brought before it.

As a statutory court, the TCC derives its authority from Parliament and the Tax Court of Canada Act (R.S.C., 1985, c. T-2) (the Tax Court Act). The Tax Court Act provides that the TCC has the exclusive original jurisdiction to hear and determine references and appeals (i.e., no other court may hear an initial dispute with respect to) matters arising under the Income Tax Act, RSC 1985 c 1 (5^th Supp) (the ITA), certain parts of the Excise Tax Act, RSC, 1985, c E-15 (the ETA), and other statutes, when such references and appeals are specifically provided for under the act from which the appeal arises. Both the ITA and ETA stipulate, in sections 169 and 302 respectively, that the TCC is the court to which taxpayers may appeal assessments arising under these acts. Therefore, it is generally within the exclusive original jurisdiction of the TCC to determine the validity of assessments under the ITA and ETA.

In contrast, the FC has exclusive original jurisdiction under the Federal Courts Act, RSC 1985, c F-17 to review and provide remedies for discretionary decisions of the Minister of National Revenue (the Minister).

The issue is in determining the boundaries between the actions and decisions of both the Minister and the Canada Revenue Agency (the CRA) reflected in an assessment, versus the validity of the assessment itself. The question of who has the appropriate jurisdiction has given rise to persistent conflict in tax disputes in both courts and often leads to taxpayers initiating disputes in both courts in order to ensure they protect their rights.¹

Questions before the SCC

In the Dow and Iris joint hearing, the SCC will consider whether the Federal Court of Appeal (FCA) was correct in holding:

1. that a review of the decision by the Minister to...