Tax & Trade Blog

 The principle of solicitor-client privilege holds that communications between a client and his or her lawyer cannot be compelled to be disclosed without permission of the client.  Although this principle started as an evidentiary rule, it has developed into a principle of fundamental justice. 

Canadian tax legislation endows the CRA with various powers to compel individuals and businesses to disclose information and documentation in support of administering or enforcing that tax legislation.  Failure to comply with CRA’s requirements undert these rules can result in fines or imprisonment.  Solicitor-client privilege and these disclosure rules collide where CRA attempts to compel client-related information and documentation from lawyers.  The Supreme Court of Canada has recently dealt with this issue in Chambre des notaires du Québec (2016 SCC 20) and its companion case Thompson (2016 SCC 21).  The decisions make clear that solicitor-client privilege will be upheld in the face of these disclosure provisions.

CRA has recently been issuing assessments to taxicab fleet management companies for failing to charge GST/HST on pass-through insurance premium expenses. 

Disgruntled taxpayers have often attempted to seek remedies against tax authorities through civil actions – albeit with very limited success.  A 2014 BC Supreme Court’s decision in Leroux v. CRA (2014 BCSC 720) did confirm that CRA owes a duty of care to the taxpayer, and has likely lead to an increase in these types of proceedings.

A recent motions decision in the BCSC case in Samaroo v. CRA et al. (2016 BCSC 531), deals with the extent to which a taxpayer in one of these types of suits against the Crown is able to rely on information produced by the Crown in that action during the Tax Court of Canada appeal – and the news was good for the taxpayer!  But the case remains an interesting example of the “implied undertaking rule” – perhaps a little known rule to anyone other than a litigator – and the balance of this article explains the in’s and the out’s of that rule, with reference to the Samaroo decision.

When faced with Notices of Assessment from CRA that run contrary to a particular tax practice, taxpayers often defend their practice on the basis that CRA had not previously taken issue with it.  For tax litigators it is common to hear from clients: “CRA did not take issue with our tax compliance procedures in the past, so they should not be able to now!” 

Unfortunately, this argument will not be successful in the Tax Court of Canada, as was the case in the recent case of Academy of Applied Pharmaceutical Sciences (2014 TCC 171) – which reinforces that there is really no substitute for proper professional advice when determining GST/HST compliance.

New Brunswick is increasing its HST by 2%, effective July 1, 2016, resulting in an HST rate of 15%.

Businesses will need to consider which tax rate – the existing HST rate of 13% or the new HST rate of 15%, will apply to transactions that straddle July 1, 2016.