Estoppel or Officially Induced Error in Tax Appeals

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Estoppel or Officially Induced Error in Tax Appeals

Academy of Applied Pharmaceutical Sciences v The Queen, 2014 TCC 171

The taxpayer argued that the apportionment of input tax credits as between taxable and exempt services were made in reliance on statements made by CRA officials and that either estoppel or the doctrine of officially induced error ought to operate to prevent the reassessment on its tax liability.

The Court stated that the doctrine of estoppel is of very little use in tax appeals, (para 23) because:

  1. Agreements by the Minister to tax otherwise than according to the act are a dereliction of the duty to administer the act, and illegal: Wenger’s Ltd. v. M.N.R., [1992] 2 C.T.C. 2479;
  2. The Minister is free to change his view of the facts for any different taxation year so that the Minister is not bound by one concession in one year: Admiral Investments Ltd. v. Minister of National Revenue, [1967] 2 Ex. C. R. 308;
  3. The Minister is free to change his interpretation of the law, or the application of the law to the facts: Denhaan v. R., 2008 TCC 126
  4. Estoppel does not operate on the basis of a representation as to an interpretation of the law: Panar v. R., 2001 G.T.C. 400 (TCC); Minister of National Revenue v. Inland Industries Ltd., [(1971), 72 D.T.C. 6013 (S.C.C.), at 6017;
  5. Estoppel cannot override the law of the land: Minister of National Revenue v. Stickel [(1972), 72 D.T.C. 6178 (Fed. T.D.), at 6185;
  6. Estopple against the crown only applied as to representations of fact: Goldstein v. R. [(1995), 96 D.T.C. 1029 (T.C.C.), at 1034; which in tax matters only applied to any one given tax year.

The Court also stated that the same limitations, as regards to tax appeals, that apply to estoppel also apply to the doctrine of officially induced error. The doctrine does not operate in cases of appeals of tax assessments, when the error is that of law: Brenda G. Klassen v. The Queen, 2007 FCA 339, para 27.

Either doctrine may be used, for example in a tort action for negligence, or to defend a criminal charge.

 – Sas Ansari, JD LLM PhD (exp)

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