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Citation: 2004TCC33
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Date: 20040109
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Docket: 2001-3555(PGRT)G
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BETWEEN:
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EXXONMOBIL CANADA LTD.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bowie J.
[1] On April 26, 2000, the Minister of
National Revenue (the Minister) reassessed the Appellant's
liability for tax under the Petroleum and Gas Revenue Tax
Act[1]
(PGRTA) for the 1986 taxation year. The result of the
reassessment was that the Appellant became entitled to a refund
of tax paid amounting to $913,022.47. The Minister credited the
Appellant with simple interest on this refund, which amounts to
$1,088,532.30 for the period of approximately 13 years
between the date of payment of the tax and the date of the
refund. The Appellant is content with the reassessment of its
liability for tax, but says that it is entitled to have the
interest compounded daily; the Minister maintains that she was
correct to pay only simple interest. That is the narrow issue for
decision in this appeal. The amount at issue is substantial,
because if the Appellant is correct the compounding would be
daily.
[2] The Appellant's case is based
entirely on the applicable legislation. A reference to interest
must be taken to mean simple interest unless compound interest is
specified.[2] The
authority for paying interest on a refund of tax under the
PGRTA is found in subsection 18(3):
18(3) Where an amount in respect of an
overpayment is refunded to a taxpayer or applied under this
section on other liability, interest at the rate per annum
referred to in subsection 15(1) shall be paid or applied thereon
for the period commencing with the latest of
(a) the day
when the overpayment occurred,
(b) the day
on or before which the return of the production revenue in
respect of which the tax was paid was required to be filed,
and
(c) the day
when the return of the production revenue was actually filed,
and ending with the day of the refund or the application on
the other liability, as the case may be, unless the amount of the
interest so calculated is less than one dollar, in which event no
interest shall be paid or applied under this subsection.
Subsection 15(1) reads:
15(1) Where at any particular time after the
day on or before which a return of a taxpayer's production
revenue was required to be filed under this Part for a taxation
year,
(a) the
amount of the taxpayer's tax payable for the year under this
Part
exceeds
(b) the
aggregate of all amounts each of which is an amount paid at or
before the particular time on account of the taxpayer's tax
payable and applied as at that time by the Minister against the
taxpayer's liability for an amount payable under this Part
for the year,
the person liable to pay the tax shall pay interest on such
excess, for the period during which it is outstanding, at such
rates per annum prescribed for the purposes of subsection 161(1)
of the Income Tax Act as are in effect from time to time
during the period.
The parties are agreed that the effect of the concluding words
of this subsection is to make the provision an ambulatory one,
which is to say that as the rate that is prescribed for the
purposes of subsection 161(1) of the Income Tax Act (the
Act) is changed then the rate to be applied for purposes
of the PGRTA changes as well. That seems to me to be
obvious, but it does little to clarify the issue before me.
[3] Counsel for the Appellant provided
me with a comprehensive written argument. Paragraphs 14 to 20 of
it are entitled "Overview". They express her
argument succinctly, and so are worth reproducing here. Before I
do so, however, it would be useful to set out the relevant parts
of Regulation 4301 made under the Act, as well as
subsection 161(1), the definition of the word
"prescribed" found in subsection 248(1), and subsection
248(11) of that Act, because the essence of her argument
is that it is not just Regulation 4301 but all of these
provisions that the PGRTA adopts by reference
[4] Income Tax Regulations,
section 4301:
4301 Subject to section 4302, for the
purposes of
(a) ...
(b) every
provision of the Act that requires interest at a
prescribed rate to be paid or applied on an amount payable by the
Minister to a taxpayer, the prescribed rate in effect during any
particular quarter is the total of
(i) the rate
determined under subparagraph (a)(i) in respect of the
particular quarter, and
(ii) 2 per cent;
...
Income Tax Act, sections 161 and 248
161(1) Where at any time after a taxpayer's
balance-due day for a taxation year
(a) the total
of the taxpayer's taxes payable under this Part and Parts
I.3, VI and VI.1 for the year
exceeds
(b) the total
of all amounts each of which is an amount paid at or before that
time on account of the taxpayer's tax payable and applied as
at that time by the Minister against the taxpayer's liability
for an amount payable under this Part or Part I.3, VI or VI.1 for
the year,
the taxpayer shall pay to the Receiver General interest at the
prescribed rate on the excess, computed for the period during
which that excess is outstanding.
248(1) In this Act,
"prescribed" means
(a)
...
(b) in any
other case, prescribed by regulation or determined in accordance
with rules prescribed by regulation.
248(11) Interest computed at a prescribed rate under any
of subsections ... 161(1), (2) and (11), ... shall be
compounded daily and, where interest is computed on an amount
under any of those provisions and is unpaid or unapplied on the
day it would, but for this subsection, have ceased to be computed
under that provision, interest at the prescribed rate shall be
computed and compounded daily on the unpaid or unapplied interest
from that day to the day it is paid or applied and shall be paid
or applied as would be the case if interest had continued to be
computed under that provision after that day.
[5] Paragraphs 14 to 20 from the
Appellant's written submission state:
14. The PGRTA contains no
separate legislative scheme for the payment of interest but
specifically adopts the legislative scheme regarding the payment
of interest, including refund interest, as provided by the ITA.
The use of the legislative tool of "incorporation by
reference" makes clear Parliament's intent that the
mechanic for calculating interest under the ITA determines
interest payable by and to taxpayers under the PGRTA without any
additional legislative action on the part of Parliament. Given
the frequency with which the ITA is amended, this ensures that
the PGRTA, like the ITA, remains current without any specific
legislative action. The Respondent should not challenge that
statement of Parliamentary intent.
15. The Appellant submits
that the structure of the law in the PGRTA clearly anticipates
"anticipatory incorporation by reference". That is,
Parliament intended that as the provisions for interest
calculation under subsection 161(1) of the ITA changed, interest
as calculated under the PGRTA would follow suit. This must be
acknowledged by the Respondent. Without that ambulatory intent,
interest would be frozen in time.
16. Given the agreement
between the parties that the intention of Parliament in relation
to the PGRTA is that the law be ambulatory and guided by the ITA,
the only legal issue is whether the Court in interpreting the
ambit of the language used in relation to subsection 161(1) in
the PGRTA should have regard only to Regulation 4301 and
disregard Parliament's explicit and mandatory direction
regarding the compounding of interest for the purposes of
subsection 161(1) in the body of the statute itself.
17. The Appellant says
that to do so would be to ignore the most basic of principles
applicable to statutory construction - that an Act should be read
as a whole and that the Court in interpreting an act should have
regard to the words used, related provisions and the scheme of
the act as a whole - and that regulations are to be read in the
context of both the regulation and the enabling act as a
whole.
18. The Respondent would
have the Court truncate its analysis contrary to the most basic
principles of statutory interpretation on the astounding theory
that compounding is not relevant to rates of interest on amounts
payable by or to taxpayers under the ITA. The Appellant submits
that this approach is and should be found to be at odds with the
Parliamentary intent that interest under the ITA reflect the
commercial reality of compounding rates and that the PGRTA follow
suit and that absent a specific direction in a statute, the
ordinary principles of interpretation apply. Nothing in the PGRTA
or ordinary principles of interpretation of statutes directs a
departure of the magnitude the Respondent urges.
19. The Appellant submits
that from its introduction into the ITA, subsection 248(11)
was a critical and mandatory feature of subsection 161(1).
It is an integral part of the statutory regime regarding interest
in subsection 161(1). To ignore it, would fundamentally and
erroneously change the legislative landscape. As a matter of law,
regard must be had to it for the purposes of both subsection
161(1) of the ITA and hence subsection 18(1) of the PGRTA.
20. Having regard to the
overall legislative context: the specific words used in the
PGRTA; and the principles of statutory interpretation; the
Appellant submits that it is clear that the PGRTA payment of
compound interest on tax arrears and overpayments was intended by
Parliament.
[6] The Appellant's argument then
turns to an examination of the history of not only the
PGRTA and the ITA but the Canada Pension
Plan (CPP) and the Unemployment Insurance Act
(UIA) as well, all in support of the proposition that
Parliament intended that generally, where there are to be refunds
of overpayments made under a statute, compound interest as
provided for in the ITA would be payable. Certainly this
was the case so far as the CPP and the UIA were
concerned. Provision for the payment of compound interest under
the ITA, the CPP and the UIA were all
introduced by S.C. 1986 c. 6. Section 126 of that Act
added subsection 248(11) to the ITA, and sections 132 and
137 adopted it by reference into the CPP and the
UIA, respectively. It is significant, I think, that
although S.C. 1986 c.6 made certain amendments to the
PGRTA, it did not adopt subsection 248(11) into that
Act. This, the Appellant argues, is because the wording of
subsection 15(1) already had the effect of adopting into the
PGRTA the entire legislative scheme in relation to
interest on overpayments and underpayments found in the
ITA, and Parliament would not enact a tautologous
provision. That explanation, of course, is valid only if one
accepts the Appellant's initial submission that the words
"... such rates per annum prescribed for the purposes
of subsection 161(1) of the Income Tax Act as are in
effect from time to time ..." in subsection 15(1) refer not
only the percentage rate of interest that is to be applied, but
also the method of computation by which it is to be applied. In
my view, this argument founders at the outset on the most basic
rule of statutory construction, which is that there is no place
for interpretation unless an ambiguity is first identified.
[7] In my view, the words "...
such rates per annum prescribed for the purposes of Income Tax
Act as are in effect from time to time ..." are simply
not capable of bearing the meaning that the Appellant would give
them, and the Courts have no mandate to alter the words used by
Parliament if they are clear and unambiguous: see Friesen v.
Canada, [1995] 3 S.C.R. 103 at paragraph 11. The operative
words that subsection 15(1) adopts by using the phrase "...
such rates per annum prescribed for the purposes of subsection
161(1) of the Income Tax Act as are in effect from time to
time" are simply the words of section 4301 of the
Regulations. Those deal with the rate per annum and
nothing more.
[8] There are two separate, although
related, concepts that together will always govern the
computation of interest on a capital sum between two dates. One
of these is the rate per annum to be paid, and the other is
whether the interest is to be compounded, and if so at what
interval. I have found no dictionary that combines these two
concepts within the meaning of the words "rate",
"interest rate", or "rate per annum", and
certainly none was cited to me in argument.
[9] That rate and compounding are two
separate concepts may be seen by examining the words of
subsections 161(1) and 248(11) of the ITA and
Regulation 4301. Subsection 161(1) is a substantive
provision creating the right to receive interest, and delegating
to the Governor-in-Council the authority to fix the rate at which
it shall be computed from time to time. For the most part,
section 248 is a definition section, but subsection (11) is a
substantive provision creating the right to have the interest
computed by the compound method. In enacting[3] it, and later in amending[4] it, Parliament
itself fixed the periodic interval for compounding. Subsection
15(1) of the PGRTA unequivocally adopts the former, but
not the latter. Nor must they go hand in hand.
Subsection 161(1) was enacted prior to subsection 248(11),
and was able to operate perfectly well alone until January 1,
1987 when subsection 248(11) came into force. It is simply
untenable to say, as the Appellant does here, that Parliament
could not adopt by reference the rate prescribed by the
Governor-in-Council, but not the compounding of it that is
provided for in subsection 248(11) of the Act. Indeed, to
adopt the compound method of computation into the PGRTA,
Parliament would have had to add the words "... and
computed in accordance with subsection 248(11) of that Act
..." at the end of subsection 15(1). It chose not to do
so, and it is trite that I cannot do so, however socially or
economically beneficial I might consider such an addition to be:
see Friesen[5] and Markevitch v. Canada.[6]
[10] The appeal is dismissed, with
costs.
Signed at Ottawa, Canada, this 9th day of January, 2004.
Bowie J.
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