In Industrielle Alliance vs. Mazraani and MNR, the Federal Court of Appeal recently quashed a Tax Court of Canada decision on the basis that the trial judge violated the linguistic rights of both witnesses and counsel for Industrielle Alliance. The reasons for judgment can be found here in English and French.
The Tax Court of Canada decision
Before the Tax Court of Canada (TCC), Kassem Mazraani appealed the Minister’s determination that he was not engaged in insurable employment while working for Industrielle Alliance between April and November 2012. Industrielle was an intervenor to the appeal and had taken the position that the Minister’s determination was correct since an independent contractor agreement had been concluded with Mazraani. The appeal was heard under the informal procedure before Justice Archambault and the hearing lasted 6 days. Mazraani filed his appeal in English, the Minister’s reply was in English also and Industrielle’ s intervention was in French.
In a massive 160 page decision, the TCC concluded that Mazraani was engaged in insurable employment.
Solicitor-client privilege is a constitutionally-entrenched right that protects communications between a lawyer and his or her client. The foundation of such privilege is to encourage full and frank disclosure between lawyers and their clients for the purpose of providing legal advice. A lawyer cannot be compelled to disclose information shared by his or her client and only the client can waive privilege. In the tax planning context, protecting the confidentiality of taxpayer information is important to ensure that a taxpayer’s tax position is not unfairly prejudiced by legal requirements to provide subjective analysis or information to taxing authorities where such analysis or information was communicated or created for purposes of providing tax advice. Further, to better ensure taxpayer compliance under a self-reporting tax system, the confidentiality of communications with one’s tax lawyer is protected to encourage full and complete disclosure of the facts necessary to provide tax advice.
The Federal Court of Appeal’s decision in Imperial Oil Resources Limited v. Canada (Attorney General)[i] concerns refund interest on amounts relating to remission orders. The specific issue before the Court was whether, in computing the amount required to be paid by Imperial Oil Resources on account of its tax liability pursuant to the Income Tax Act (Canada) (the “ITA”), the Minister of National Revenue was required to credit the amount of a tax debt remitted to it pursuant to the Financial Administration Act[ii] (the FAA) and pay refund interest on the resulting overpayment.
As a bit of background, the ITA requires a taxpayer to include in its income resource royalties receivable by a province and prohibits the deduction of resource royalties payable to a province. The Federal government passed the Syncrude Remission Order[iii] (the SRO), which granted to each participant of the Alberta Syncrude Project remission of any tax payable with respect to related royalties.