Full History of the Court
Board of Referees, 1917-1923
With the passing of the Military Service Bill in 1917, which called an additional 100,000 men to the armed forces of Canada, it became necessary to adopt further taxation measures to maintain the credit of the Dominion. Until then, the war effort had been supported by the duties of customs and excise, by postal rates and other miscellaneous sources of revenue, and, following the outbreak of the war, by the Business Profits War Tax and Victory Loans.
Sir Thomas White, then Minister of Finance in the Conservative government of Sir Robert Borden, voiced several concerns when introducing a resolution concerning a War Tax Upon Incomes to the House of Commons. As the provinces were already raising income through a direct tax on incomes, he was concerned lest the level of tax be too high. It was not thought desirable that Canada, as a country encouraging immigration, should be known for its heavy individual taxation. For that reason, he believed that the Canadian income tax should not be significantly heavier than that imposed in the United States. He also recognized that the cost of administration of an income tax would be quite substantial. Nonetheless, he recommended a graduated income tax to the House, while suggesting that the measure be reviewed by the government a year or two after the end of the war to judge the continuing suitability of the tax.
The Income War Tax Act, 1917, received Royal Assent on September 20, 1917. The scheme of the legislation provided for a simple and accessible appeals procedure, but not one without hazard for the taxpayer. Taxes were to be paid within one month from the date of mailing of the notice of assessment. Any objection to the assessment was to be made personally or by an agent (not necessarily a solicitor), in writing and in a form prescribed by the Act to the Minister of Finance within 20 days after the mailing of the notice of assessment. Failing that, the right to appeal was lost, unless the Minister exercised his discretion to extend the appeal period.
Appeals were to be heard by a Board of Referees composed of not more than three members, acting as a court of revision, with local jurisdiction for a territory or district and invested with the powers and authority of a commissioner appointed under the Inquiries Act. The Board, after hearing the evidence and making any other inquiry it deemed advisable, was to confirm or amend the assessment, which amendment, the statute expressly provided, could include increasing the assessment. The Board had the power to order costs against an unsuccessful appellant and could recommend that costs be paid by the Crown. A taxpayer dissatisfied with the Board's decision had 20 days to give written notice to the Minister of his desire to appeal further. If the taxpayer gave such notice, or if the Minister himself was dissatisfied with a decision, the Minister was to refer the matter to the Exchequer Court, which had exclusive jurisdiction to hear and determine all questions arising in connection with any proceedings taken under the Act. This further appeal to the Exchequer Court was an appeal on the record, with the Court having the power to direct the taxpayer or Crown to produce additional evidence. The decision of the Exchequer Court was final and conclusive.
The government did not contemplate appointing permanent Boards of Referees, but foresaw ad hoc local or provincial boards, comprised of county judges, lawyers, or businessmen of standing, to hear and dispose of appeals in summary fashion.
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Exchequer Court, 1923-1946
In 1923, the appeal provisions of the Income War Tax Act were substantially revised. In proposing the amendments, the Minister of Finance explained that, up to 1923, no Board of Referees had been created. Where appeals had been brought, settlements were negotiated. It remained the government's hope that appeals to the courts could be avoided with friendly settlements, so the Boards of Referees were abolished. However, the Minister of Finance felt that it should be open to a taxpayer unable to obtain satisfaction from the Department, to go to the Exchequer Court, which was given exclusive original jurisdiction to hear appeals from assessments.
There was little in the appeal procedure that could be viewed as favourable to the taxpayer. Within one month from the date of mailing of the notice of assessment, the taxpayer or his solicitor was obliged to serve on the Minister of Finance, by registered mail, a written notice of appeal in prescribed form. The practice also developed that some taxpayers would meet with the District Inspector of Taxes informally and, if not satisfied locally, would request that the matter be referred to Ottawa for review. An appeal filed with the Minister of Finance from an assessment made under the authority of the Commissioner of Taxation was, in practice, heard by the Commissioner of Taxation on behalf of the Minister, who considered the appeal, confirmed or amended the assessment, and notified the appellant of his decision by registered mail.
If the appellant was dissatisfied with the Minister's decision, he could, within 30 days, mail to the Minister a notice of dissatisfaction, stating that the appellant wanted the matter set down for trial in the Exchequer Court and setting out the facts, statutory provisions, and grounds to be submitted to that Court. The appellant was required to provide security of $400 for the costs of the appeal within one month of mailing the notice or lose his right to appeal. The Minister, within no fixed time, and only after the deposit of the security for costs, had to reply to the notice of dissatisfaction by admitting or denying the facts alleged and, further, by confirming or amending the assessment. Within two months from the mailing of his reply, the Minister was required to transmit to the Registrar of the Exchequer Court the income tax return of the appellant, the notice of assessment, the notice of appeal, the decision of the Minister, the notice of dissatisfaction, the reply, and all other documents and papers relative to the assessment under appeal. Although the matter was at that point deemed to be an action in the Exchequer Court ready for trial or hearing, the general rule in practice was for pleadings to be filed, which could only be done after obtaining an order of the Court. The Court, on hearing the appeal, was empowered to make such order as to payment of any tax, interest, penalty, or costs as it deemed right or proper. This too was a change, for before the amendment, the Court was directed to determine the true and proper amount of tax to be paid.
Whatever latitude of practice may have existed in the Exchequer Court, it did not extend to a taxpayer who failed to serve a notice of appeal or notice of dissatisfaction within the one-month limit. The discretion of the Minister of Finance to extend this period, originally provided for in the Act, was removed and the amended Act now provided that failure to make a timely appeal was fatal to the appeal.
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Income Tax Appeal Board, 1946-1950
In 1946, following the report of a special committee of the Senate appointed to examine the system of taxation under the Income War Tax Act the appeal procedure was amended significantly. Part VIII of the Income War Tax Act, dealing with appeals to the Exchequer Court, remained in force for assessments prior to 1946, but appeals from assessments for 1946 and afterwards would fall under new Part VIIIA and within the exclusive original jurisdiction of a new body, the Income Tax Appeal Board, which was to provide a convenient method of obtaining judicial decisions without great expense and would decide questions of fact and law in the same manner as a court.
Under the new procedure, a notice of objection was to be served in prescribed form on the Minister of National Revenue either by registered mail or by personal service on the appropriate Inspector of Income Tax, within two months from the date of mailing of the notice of assessment. The Minister was thereupon required to reconsider the assessment and to vacate or confirm it or to reassess.
A taxpayer could appeal to the Income Tax Appeal Board within three months from the date of mailing of the Minister's notice of confirmation or within six months after the service of the notice of objection where the Minister had done nothing. Appeals were instituted by serving a notice of appeal in prescribed form on the local Inspector of Income Tax and by paying a small filing fee. Failure to object or appeal within the statutory time limits remained fatal. As no costs could be awarded, appellants were no longer burdened by the requirement of posting security for costs.
The Income Tax Appeal Board was constituted as a court of record and consisted of a chairman, two assistant chairmen, and not less than three nor more than nine other members. The chairman and assistant chairmen were required to have been superior court judges or to have practised as lawyers for at least 10 years. All members were appointed for a term of 10 years.
After hearing an appeal, the Board could dismiss it, make the assessment that should have been made, or vacate the assessment and refer it back to the Minister for reconsideration and reassessment.
Responsibility for the administration of the Board, including recommendations as to appointments, remained with the Minister of National Revenue.
Within four months of the date of its mailing, the Board's decision could be appealed to the Exchequer Court by either party. That court could dispose of the appeal by dismissing it, vacating the assessment, varying the assessment, or by referring the assessment back to the Minister for reconsideration and reassessment.
In certain instances taxpayers could apply for leave to appeal to the Supreme Court of Canada against the judgment of the Exchequer Court.
The Income Tax Appeal Board as constituted in 1946 was affected by further amendments. A new Income Tax Act, applicable to 1948 and subsequent years, made sweeping changes to tax legislation. Appeals to the Income Tax Appeal Board remained, but there were changes. Among these was the reduction of the Board's composition to a chairman and not less than two nor more than four other members, one of whom might be appointed assistant chairman.
The powers of the Board, which continued as a court of record, were altered to match those of the Exchequer Court that is, the Board could dismiss the appeal, vacate the assessment, vary the assessment, or refer the assessment back to the Minister for reconsideration and reassessment.
Notices of appeal to the Board were now to be served by registered mail on the Deputy Minister of National Revenue for Taxation in Ottawa.
In December 1948, the first three members of the Board were appointed under the chairmanship of the Honourable Roy T. Graham. They approved their first set of rules on February 10, 1949 and heard their first appeal on April 12, 1949. The Board reached its maximum complement of five members in 1958. By that time, it was hearing appeals at the rate of twice per year in the West and six times per year in the East. While the Exchequer Court had heard only 150 tax appeals from 1917 to 1947, in 1951 alone the Board heard 289 appeals.
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Tax Appeal Board / Exchequer Court, 1950-1970
In 1950, the Income Tax Act was amended to provide that appeals to the Board might be heard by one member. Until the end of April 1950, it had been customary for the full board to sit on each appeal.
The Act was further amended to provide for an option of a direct appeal to the Exchequer Court in place of appealing to the Board, and, in those circumstances, the Minister was to transmit all documents relevant to the assessment directly to the Court. Thus ended the Board's short-lived, exclusive original jurisdiction over income tax appeals.
The procedure for filing appeals changed somewhat in 1953, with all copies of the notice of appeal to the Board being filed with the Registrar of the Board, who would transmit two copies to the Deputy Minister of Taxation. A minor amendment was also made to the powers of the Board to include allowing an appeal, which power, up to that time, had only been present by necessary implication.
In 1958, when the Board gained jurisdiction over assessments of estate tax, its name was reduced to the Tax Appeal Board.
Many of the early reports of tax cases bear numbers rather than names. In 1957, however, the Exchequer Court, in M.N.R. v. Publishers Guild of Canada Ltd., held that the right to an in camera hearing provided for in subsection 91(2) of the Income Tax Act did not entitle taxpayers to have their name kept secret. Following that decision, the Tax Appeal Board reversed its policy and appeals reported after February 1960 appear under the names of the parties.
When the Board was created in 1946, it was intended that the Board's rules would operate so as to provide taxpayers with convenient access to judicial decisions in disputed tax matters. It appears that when the Board's formation was being discussed, it was thought that proceedings would be informal. However, this view fell out of favour with the first members of the Board.
By 1960, practice before the Board was sufficiently established to have become the subject of comment by practitioners and academics. The Board was viewed as useful and popular and was even seen to have a desirable aspect of informality. However, those who appeared before the Board were expressing some frustration at not being able to have their appeals heard and to obtain judgments in a timely manner. Commentators encouraged oral judgments in appropriate cases, but the Board felt itself obliged to provide written reasons in every case. The Canadian Bar Association called for more members on the Board, advocated that salaries be raised to superior court levels, with appointments on good behaviour, and urged that the Board be divorced from the Department of National Revenue. The Bar Association, however, did caution that the more closely Board members resembled judges, the more likely it was that the tribunal would become a court. An alternative suggestion was that the Board lose its status as a court of record. Informality was favoured but was seen as incompatible with a body which had a legislated status that invited it to follow court procedure. Other proposals included permitting only a single adjournment of a case and permitting the awarding of costs to the Minister to discourage frivolous appeals.
In 1965, the Income Tax Act was amended to give the Tax Appeal Board and Exchequer Court the power to extend relief in the case of a late filed objection or appeal in the limited circumstances of death, incapacitating sickness, or bankruptcy of a taxpayer.
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Tax Review Board / Federal Court, 1970-1983
The Royal Commission on Taxation, under the chairmanship of Kenneth Carter, made recommendations for the restructuring of taxation appeals. The Commission's main proposal was for a new tax court combining the functions of the Tax Appeal Board and the Tariff Board.
If its recommendations for the creation of a single tax court were not to be adopted, the commission alternatively proposed that the Tax Appeal Board be removed from its close association with the Minister of National Revenue by placing responsibility for it with the Minister of Justice. The commission also advised measures to enhance the prestige of the Board, including granting its members the title, distinction, and tenure of judges, giving it exclusive original jurisdiction under the statutes assigned to it, and providing for discovery of documents and examinations for discovery.
On October 30, 1970, the Minister of Justice, John Turner, rose in the House to introduce what he described as the first major overhaul of the legislation relating to the review of income and estate tax assessments since the creation of the Tax Appeal Board in 1946: Bill C-174 for the establishment of the Tax Review Board.
In order to ensure that the Tax Review Board would be informal, the Bill provided that:
- no special form of pleading or petition would be necessary to institute an appeal from an assessment;
- the requirement of a filing fee would be dispensed with;
- the Board was not to be bound by any legal or technical rules of evidence;
- all appeals would be dealt with as informally and expeditiously as the circumstances and considerations of fairness permitted, without written reasons being required (however, the ability to request a hearing based on sworn written submissions would disappear);
- the appellant could appear personally or by counsel or agent; and
- no costs could be awarded on the disposition of an appeal.
The Board was designed to be an administrative body positioned somewhere between the administration and the courts. Responsibility for the Board was shifted to the Department of Justice from the Minister of National Revenue and the enabling legislation was moved out of the Income Tax Act to stand by itself. Further, the Tax Review Board's members held office, as did judges, on good behaviour. The Board could have as many as seven members, and the requirement that the chairman and assistant chairman have legal training continued, with the additional proviso that one of the two be or have been a judge of the Superior Court of Quebec or a member of the bar of that province.
To reinforce its informal nature, and in keeping with an earlier recommendation of the Bar Association, the Board lost its status as a court of record but was given, as regards the attendance, swearing, and examination of witnesses, and the production and inspection of documents, and other matters necessary or proper for the due exercise of its jurisdiction all the powers, rights and privileges vested in a superior court of record.
The volume of work before the Board quickly required that cases be heard by a single member. The Tax Review Board Act, by indicating that a single member would sit on an appeal, subsequently acknowledged the practice of the Board in this regard.
The new chairman of the Tax Review Board, K. A. Flanigan, Q.C., described the Tax Review Board as having many advantages over the Tax Appeal Board, including being easily accessible to the ordinary taxpayer, at no cost, and without formal procedures.
Pursuant to its authority under section 11 of the Tax Review Board Act, the Tax Review Board, on August 8, 1973, adopted its own rules of practice and procedure. Significant changes over the Tax Appeal Board's rules included the introduction of a requirement that the Minister file a reply to the notice of appeal within 60 days of service of the notice of appeal.
The Board shared original jurisdiction in tax matters with the Trial Division of the new Federal Court, with appeals being possible to the new Federal Court of Appeal and from there to the Supreme Court of Canada.
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Tax Court of Canada / Federal Court, 1983-1990
Further changes came with the introduction in 1983 of Bill C-167, an Act respecting the Tax Court of Canada and to amend the Federal Court Act, the Judges Act and the Unemployment Insurance Act, 1971.
The Minister of Justice, the Honourable Mark MacGuigan, explained to the House that the name of the Tax Review Board tended to give the mistaken impression to the general public that it was an extension of the Department of National Revenue. Consequently, the government proposed to make the board a court in both name and status, establishing clearly its judicial independence. To enhance the independence of the new court, responsibility for its administration and management was given to the Commissioner for Federal Judicial Affairs.
The number of members was increased from seven to twelve. By virtue of transitional provisions, all members of the Tax Review Board continued in office as judges of the Court. Any new appointment to the Court was required to be a lawyer of at least 10 years' standing or a judge of a superior, county, or district court. Provision was also made for deputy judges.
While changing the name and status of the Board and its members, the Minister made it clear that he did not want to make more difficult taxpayers' access to this tribunal or to introduce formality into the conduct of proceedings. The provisions regarding procedure before the Tax Review Board remained substantially intact. Though no special form of pleading was required, the taxpayer was now required to set out in general terms the reasons for the appeal and the relevant facts. One other change was that taxpayers could no longer have in camera hearings as of right.
The Rules of Practice and Procedure of the Tax Review Board, to the extent they were not inconsistent with the new Act, remained in force until the Court exercised its rule-making power to amend, vary, or revoke them.
The jurisdiction of the Court was expanded by the transfer to it of appeals relating to the determination of coverage under Part IV of the Unemployment Insurance Act, 1971. By the time of the creation of the Court, the Board's jurisdiction also included matters arising under the Canada Pension Plan and the Petroleum and Gas Revenue Tax Act.
The Tax Court of Canada Act was amended in 1984 to provide for the award of costs to the appellant in the manner and to the extent provided for in the Rules. The Tax Court of Canada Rules of Practice and Procedure for the Award of Costs (Income Tax Act) were approved by the Governor in Council on January 24, 1985.
While in opposition, the Progressive Conservative Party formed a task force on Revenue Canada and, after the task force's investigation, published a report on April 8, 1984. The task force reported finding evidence of lengthy delays facing appellants in the Tax Court because of an unprecedented volume of cases. To alleviate this problem, it recommended an informal process to deal with disputes involving less than $5,000.
The government recognized that it was desirable to encourage access for taxpayers with small claims and, on August 11, 1988, the Honourable Ramon Hnatyshyn introduced Bill C-146, an Act to amend the Tax Court of Canada Act and other Acts in consequence thereof in the House of Commons. This legislation was designed to simplify the system by which federal tax and other assessments were appealed. Though given Royal Assent on September 22, 1988, only those parts of the Act relating to the bench and the Rules Committee were declared in force on September 29, 1988, with the Court increasing to a total of 18 judges and its Rules Committee being given a broad mandate to develop the procedure required to regulate practice in the new court.
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Tax Court of Canada, January 1, 1991 to the present
The amended Tax Court of Canada Act was brought into force effective January 1, 1991. Amendments to the Excise Tax Act introducing the goods and services tax included further consequential amendments to the Tax Court of Canada Act. This Act as amended gave exclusive original jurisdiction to the Court to hear:
- appeals under the Income Tax Act, Part IX of the Excise Tax Act, the Canada Pension Plan, the 0ld Age Security Act, the Petroleum and Gas Revenue Tax Act and Part III of the Unemployment Insurance Act, 1971;
- appeals under the War Veterans Allowance Act and the Civilian War Pensions and Allowances Act referred to in section 17 of the Veterans Appeal Board Act;
- references to determine questions of law, fact, or mixed law and fact under sections 173 and 174 of the Income Tax Act and sections 310 and 311 of the Excise Tax Act; and
- applications to extend the time to object or appeal pursuant to section 167 of the Income Tax Act and sections 304 and 305 of the Excise Tax Act.
In 2003 the Tax Court of Canada becomes a Superior Court of Record.
In 2006, the Tax Court of Canada's jurisdiction was further enhanced resulting in its current jurisdiction. The Court now has 22 judges and two modes of procedure.
For those appeals where the General Procedure is available, an elective Informal Procedure is also available as long as:
- the aggregate of all amounts at issue, excluding interest, is $25,000 or less;
- the amount of the loss determined under subsection 152(1.1) of the Income Tax is $50,000 or less; or
- the only subject matter of the appeal is an amount of interest assessed under the Income Tax Act.
Under the Informal Procedure, no special form of written pleading is required; the appellant may appear personally or by counsel or agent, and at the hearing the Court is not bound by any legal or technical rules of evidence. All appeals subject to the Informal Procedure are to be dealt with by the Court as informally and expeditiously as circumstances permit. In both the General and Informal Procedures, the Minister is required to file a reply within 60 days of service of the notice of appeal and the Court is expected to hear the appeal within 180 days from the last day for filing that reply, or where impracticable in the circumstances, within 365 days after the date for filing the reply.
Appeals from a decision of the Tax Court of Canada go directly to the Federal Court of Appeal, with all of the ordinary grounds of appeal available.