The link #11 ... April 2003

The Tax Law Team of the Bijuralism & Drafting Support Services Group of the Department of Justice of Canada is pleased to keep you posted on the most recent harmonization news.


The Supreme Court of Canada released its decision in the Markevich case on March 6th.  In that case, the taxpayer was assessed for the 1980 to 1985 taxation years.  In 1986, after a partial payment, Revenue Canada sent the taxpayer a notice of assessment showing a balance due of approximately $235 000.  In 1987, the debt was internally written off but was neither extinguished nor forgiven.  From 1987 to 1998, Revenue Canada did nothing to recover the debt which did not figure on the statements sent to the taxpayer.  In 1998, Revenue Canada sent the taxpayer a statement of account indicating a balance of approximately $770 000 (including interests and penalties) for the 1980-1985 taxation years.  The taxpayer applied to the Federal Court, Trial Decision for judicial review of that claim and sought a declaration that the Crown was prohibited, because of the limitation period, from taking collection measures to recover tax debts for any taxation year prior to 1991.  The taxpayer took the position that the Crown was prohibited from taking steps to recover the debt.  He argued that the Crown Liability and Proceedings Act applied and consequently that the laws relating to prescription and the limitation of actions in force, in that case the British Columbia Limitations Act, applied to preclude the Crown from taking any measures to recover the debt.

The Court decided that section 32 of the Crown Liability and Proceedings Act applied.  The majority was of the view, however, that the cause of action, the tax debt, did not arise in a province.  Consequently, the Court applied the six (6) year limitation period provided in section 32 in fine and not provincial law.

On March 25, 2003, the Federal Court of Appeal applied the Markevich decision in MacKinnon (2003 FCA 158) in the part of its decision pertaining to the moment the limitation period begins to run and the effect, on the limitation period, of the registration of a certificate in accordance with subsection 223(3) of the I.T.A.

Finally, it is to be noted that the Federal Court of Appeal released the Manrell decision on March 11, 2003 on the taxation of payments under a non-competition agreement as well as the meaning of the concept of "property" as defined at subsection 248(1) I.T.A.

Publication on Bijuralism

Another column on the harmonization of federal tax legislation, written by Martin Lamoureux, will be published in the A.P.F.F.'s Revue de planification fiscale et successorale (Vol. 23, no. 4).  This column focusses on the concept of dissociation of federal tax legislation with provincial private law.