Tab for return of proceeds of unlawful taxation pegged at $1 billion-plus
Michael Kane
Sun
British Columbia taxpayers could be on the hook for more than $1 billion as the result of a Supreme Court of Canada ruling that governments must return the proceeds of unlawful taxation.
Before the ruling, governments could refuse restitution, even when a tax was struck down by the courts, Bruce Cran, Vancouver-based national president of the Consumers Association of Canada, said Friday.
“This is an enormous decision,” Cran said. “It means that governments are now accountable for their actions.”
On Thursday the Supreme Court ruled the New Brunswick government must repay more than $1 million, plus interest, to nightclubs forced to pay an alcohol user tax found to be unlawful because it strayed into a federal area of taxation.
The ruling means prohibitions that prevent citizens and corporations from suing for money paid under unconstitutional legislation will have to be lifted.
It also appears to close a potential escape route for the B.C. government which faces returning an estimated $1.3 billion to lawyers if it loses its appeal against a B.C. Supreme Court ruling that a provincial sales tax on legal services is unconstitutional.
In 2005, the B.C. court ruled that the tax on legal services limited “the fundamental right of access to the court of low-income persons.” Subsequently the court of appeal broadened the ruling to say that the tax “adversely affects all persons requiring legal services.”
Victoria’s appeal is due to be heard by the Supreme Court of Canada on March 21.
On Friday, staff of the B.C. finance ministry were working with Attorney-General Wally Oppal’s staff to look at the implications of the New Brunswick ruling. B.C., along with Alberta and Manitoba, all intervened in the case to side with New Brunswick.
Cran said the ruling draws on the Boston Tea Party and the principle that there can be no taxation without representation.
“To be a lawful tax it has to be approved by the government bodies,” he said. “It can’t be levied by an agency like the Canadian Radio-television and Telecommunications Commission which has no right to tax anybody.
“The big point is that if a government is found to be charging unlawful taxes, they must refund them. In the past governments have said they would keep any money, even if they had to drop a tax because it was unlawful.”
The ruling could potentially reopen cases where taxes have been struck down by the courts but no restitution could be ordered. The Canadian Association of Broadcasters promptly cited it in its attempt to recover more than $790-million in CRTC licence fees that were recently deemed an unlawful tax by the Federal Court of Appeal.
In the New Brunswick ruling, Mr. Justice Michel Bastarache rejected any notion that public authorities can escape paying financial restitution for money collected under invalid legislation.
“The court’s central concern must be to guarantee respect for constitutional principles,” Bastarache wrote.
“One such principle is that the Crown may not levy a tax except with the authority of the Parliament or the legislature. This principle of ‘no taxation without representation’ is central to our conception of democracy and the rule of law.”
© The Vancouver Sun 2007
