Section 122

Cases

British Columbia Investment Management Corp. v. Canada (A. G.), 2018 BCCA 47, leave to appeal to SCC granted on 11 October 2018

deeming services provided by B.C. Crown agent in managing assets held in trust trenched on B.C. crown immunity

bcIMC was a BC Crown agent which was formed to manage and hold investments for the provincial pension plans. The governing Act created a statutory trust under which each pension plan only had an entitlement to units in the investment pools managed by bcIMC and did not have ownership in any investment pool assets.

CRA took the view (and ultimately assessed bcIMC for $40M in uncollected GST on the basis) that ETA s. 267.1(5)(a) deemed the statutory trust to be a person separate from bcIMC as agent for the provincial Crown, so that the investment services of bcIMC were supplied to that separate person. Willcock JA found that s. 267.1(5)(a) indeed had this effect, which was an “effect of separating the Crown from its assets” and that instead “bcIMC is immune from Canada’s taxation” under s. 125 of the Constitution Act, 1867.

However, he found that such immunity was taken away by the reciprocal taxation agreement between B.C. and Canada in which the Province committed itself and its agents to pay any tax imposed under the ETA. He stated that “agreements between the federal and provincial governments may be mere political agreements,” but found that the terms of the Agreement here evinced an intention to be legally bound, and stated that “enforcement of the [Agreement] is possible” pursuant to s. 19 of the Federal Courts Act (Canada) and s. 1(1)(a) of the Federal Courts Jurisdiction Act (B.C.).

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 125 imposition of GST on investment assets held by a provincial Crown agent would have been prohibited by its governmental immunity but for the reciprocal taxation agreement 483
Tax Topics - Excise Tax Act - Section 267.1 - Subsection 267.1(5) - Paragraph 267.1(5)(a) services of trustees of managing assets held in trust would not be supply in absence of s. 267.1(5)(a) 164
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) arrangement under which the beneficiaries only had rights to units and no ownership of underlying assets was treated as a trust 164
Tax Topics - Other Legislation/Constitution - Federal - Federal Court Act - Section 19 enforcement of a reciprocal taxation agreement was possible pursuant to the Federal Courts Act 232

Reference re Bill C-62, [1992] GSTC 2 (SCC)

The collection and remittance obligations imposed on a province by s. 122(b) could not be equated to an appropriation of money from the Provincial Consolidated Revenue Fund, without the consent of the provincial legislature, for federal purposes. Accordingly, the province was required to bear this administrative burden.

See Also

British Columbia Investment Management Corp. v. Canada (A. G.), 2016 BCSC 1803

BC Crown agent bound by agreement only to pay tax on fees chargeable against the investments held by it

The petitioner (bcIMC) was a BC Crown agent which was formed to manage and hold, under a provincial statutory trust, investments for the provincial pension plans. Weatherill J rejected a federal Crown argument that bcIMC was not immune under s. 125 of the Constitution Act from HST otherwise payable on the fees taken out of the funds under its management on the grounds that ETA s. 267.1(5) deemed the statutory trust impressed on bcIMC’s investments to be a separate (non-Crown) person who thus was not exempt from federal tax on such fees, stating that “Canada cannot, under the guise of the deemed trust provisions of the ETA or otherwise, defeat the Province’s immunity from taxation.” However, he found that such immunity was taken away by agreements between B.C. and Canada in which the Province committed itself and its agents to pay any tax imposed under the ETA. He stated:

Section 16 of [bcIMC’s incorporating legislation] states that bcIMC “…is not liable for taxation except as the government is liable for taxation”. That language, in my view, is the specific legislative authority required to bind bcIMC to the Agreements and should be interpreted accordingly.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 125 BC Crown agent immune from HST otherwise imposed on investments held by it in a statutory trust, but bound to such HST based on intergovernmental agreement 472

Administrative Policy

31 May 2012 Quebec Information Bulletin 2012-4

To achieve greater harmonization of Québec's sales tax (QST) system with the federal goods and services tax (GST) and harmonized sales tax (HST) system, the governments of Canada and Québec entered into, in March 2012, a comprehensive integrated tax coordination agreement (Canada-Québec CITCA) with various commitments in this regard. This information bulletin specifies the changes that will be made to the QST system pursuant to the undertakings to harmonize it with the GST/HST system applicable in 2013. Essentially, these commitments are as follows:

  • the GST will be removed from the QST base as of January 1, 2013; to ensure that this removal has no impact on Québec's public finances, the 9.5% rate of the QST will, at the same time, be raised to 9.975%, i.e. the effective rate of the QST applicable until then;
  • financial services that are currently zero-rated under the QST system will become exempt as under the GST/HST system as of January 1, 2013; as a corollary, the portion of the compensation tax on financial institutions attributable to the impact on public finances to the fact that input tax refunds are granted to suppliers of financial services will be eliminated as of the same date;
  • the existing exemption mechanism from payment of taxes by governments and certain of their mandataries will be replaced by a tax payment and rebate mechanism as of April 1, 2013.

Related Provisions

Comprehensive Integrated Tax Coordination Agreement Between The Government of Canada and The Government of Ontario

Part XVI Government Purchases

51. Canada and the Province agree to pay the harmonized sales taxes in respect of supplies acquired by their respective governments or by agents and entities thereof.

52. Where inter-jurisdictional immunity from taxation applies, any harmonized sales taxes paid by Canada or the Province, as provided for in clause 51, will be subject to rebate on application to the Minister of National Revenue, except to the extent that any such taxes are payable under any agreement regarding the reciprocal payment of sales or commodity taxes as between Canada and the Province or are otherwise recoverable.

53. In the case of the provincial government or of agents and entities thereof, any rebates payable under clause 52 shall be made on a bi-weekly basis and, at the direction of the Province, shall be paid either to the Province or to the government entity of the Province which paid the tax and which is identified as the recipient of the rebate in the application therefor.