Tax & Trade Blog

An out-of-court statement is generally inadmissible as evidence in court to prove the truth of the statement’s contents – this is the general rule against hearsay.  There are a number of exceptions to this rule including an admission – where a party wishes to use a statement made by the opposing party against that opposing party.  An admission is admissible as evidence of the contents of that admission.  Where that opposing party’s agent makes such a statement, it is also admissible as evidence of the truth of its contents.  The recent decision in Spears et al. (2016 NSPC 20) stands for the proposition that a taxpayer’s accountant’s statement to CRA can be admitted as evidence for the truth of its contents.  This is an important case for business-owners who rely on their accountants to deal with the CRA on behalf of the business.

There has been significant jurisprudence on the extent to which recipients are entitled to ITCs in respect of GST paid to so called “rogue suppliers” – suppliers who collect but fail to remit GST to the fisc.  The CRA has often taken the position that where the recipient fails to make efforts to confirm the identity of its supplliers or where the recipient is wilfully blind to the bona fides of its suppliers, the recipient will not be entitled to ITCs. The recent decision of SNF LP (2016 TCC 12) adds another layer to this analysis.  Although the TCC makes a number of distinct findings, the most interesting aspect might be with respect to a briefly explained conclusion regarding a claim for a rebate of tax paid in error.

 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.