Recent Development in Litigation - Corporate Tax

• the taxation of commercial transactions or agreements;

 
• the taxation of particular corporate structures, reorganizations, etc;

 
• industry-specific taxation;

 
• particular types of tax, such as GST, withholding, etc;

 
• tax planning or estate/trust structures for high net worth individuals;

 
• the determination of proper tax jurisdiction or challenges to the exercise of purported tax jurisdictions; and

 
• international tax matters such as transfer pricing.

In Tele-Mobile Company Partnership v. Canada Revenue Agency, the CRA sought to reassess GST on international roaming fees charged by Telus and associated companies since 2004. While acknowledging that an actual reassessment decision could only be appealed to the Tax Court of Canada, the Federal Court determined that unlike under the Income Tax Act, the Excise Tax Act grants the Minister discretion in determining whether to conduct an assessment or reassessment. The exercise of that discretion was, in the view of the Court, subject to judicial review.

The Federal Court of Appeal allowed the CRA's appeal. The Court observed that granting prohibition would force the Minister to forgive a tax liability solely because of alleged hardships to the taxpayer, and that the Court could not do.

The first ruling, from the Tax Court of Canada, came in Saipem UK Limited v. The Queen. The issue was whether the limitation on the deductibility of carry-forward losses in subsection 88 (1.1) of the Income Tax Act was discriminatory because it only applied to parent companies who were 90 per cent Canadian-owned.

The Court ruled that the provision was not discriminatory as it did not discriminate strictly on nationality. The residence of the taxpayers was one of the factors that had to be taken into account when determining whether discrimination existed.

The court ruled that the equal treatment principles only applied to the taxation of the business activities of the permanent establishment in question. It did not, however, extend to provisions that took into account the relationship between an enterprise and other enterprises and that allowed the transfer of losses.