Certainty

In rejecting a submission of the taxpayer that s. 161(7)(b)(iv) was inapplicable to the computation of interest in the situation where its request to carryback a loss to an earlier year was in response to a proposed audit adjustment for the earlier year rather than the situation of a carryback request not being prompted by an unforeseeable adjustment, Woods JA found that, given that “Parliament seeks certainty, predictability and fairness in tax legislation … [i]f Parliament did not intend to impose interest when a loss carryback is claimed as a result of an audit adjustment, it is likely that Parliament would have provided for this with explicit language” (para. 39).

After finding that s. 84(2) extended to the indirect distribution of liquid assets of the target to the taxpayers through its sale to an arm’s length purchaser cum “facilitator” for cash proceeds, Noël C.J. stated (at para. 82):

[T]he appellants argue that the trial judge’s broad interpretation of subsection 84(2) makes the application of this provision unpredictable, uncertain and unfair, and that it should be rejected on that account (Memorandum of the appellants, para. 106). However, an anti-avoidance measure will necessarily raise question marks in the minds of those who choose to test its limits. In the case of subsection 84(2), this uncertainty necessarily looms over taxpayers who, with the assistance of third-party facilitators, use the sale of their business to extract surpluses without tax or at a reduced rate.

In connection with finding that the “business conducted” by a Barbados subsidiary of the taxpayer did not include its activities of raising capital from its shareholder (the taxpayer), Côté J stated (at para. 61, after having made the same point at greater length at para. 41):

[I]f taxpayers are to act with any degree of certainty, then full effect should be given to Parliament’s precise and unequivocal words.

In finding that there should not be an expansive interpretation of what constitutes de facto control in s. 256(5.1), Ryer JA stated (at para. 50):

…An interpretation of subsection 256(5.1) that encompasses “operational” control would import a degree of subjectivity into the de facto analysis that, in my view, would lead to unpredictability, rather than predictability, as mandated by the Canada Trustco [2005 SCC 54, [2005] 2 S.C.R. 601] interpretative approach.

In rejecting the Minister’s position that s. 95(6)(b) had a broader scope than addressing situations where Canadian taxpayers manipulate share ownership in foreign corporations to achieve more favourable tax consequences under the foreign affiliate rules, Stratas JA stated (at para. 67):

Absent clear wording, I would be loath to interpret paragraph 95(6)(b) in a way that gives the Minister such a broad and ill-defined discretion – a standardless sweep – as to whether or not a tax is owing, limited only by her view of unacceptability. It would be contrary to fundamental principle. It would also promote arbitrary application, the bane of consistency, predictability and fairness.

In indicating that judges should not apply taxation policies that are not grounded in the specific provisions of the Act, McLaughlin C.J. and Major J. stated (at para. 42) that such an approach "would run counter to the overall policy of Parliament that tax law be certain, predictable and fair, so that taxpayers can intelligently order their affairs. Although Parliament's general purpose in enacting the GAAR was to preserve legitimate tax minimization schemes while prohibiting abusive tax avoidance, Parliament must also be taken to seek consistency, predictability and fairness in tax law. These three latter purposes would be frustrated if the Minister and/or the courts overrode the provisions of the Income Tax Act without any basis in a textual, contextual and purposive interpretation of those provisions."

Before finding that for purposes of the requirement in s. 20(1)(c)(i) that money must have been borrowed for an income-producing purpose in order to give rise to deductible interest, "income" referred to income before deductions, Iacobucci J. stated (at p. 5515):

"Nowhere in the language of the provision is a quantitative test suggested. Nor is there any support in the text of the Act for an interpretation of 'income' that involves a judicial assessment of sufficiency of income. Such an approach would be too subjective and certainty is to be preferred in the area of tax law."

In finding that the proceeds of disposition of a property to the taxpayer were established by the actual sale price rather than by the formula in s. 79(c) of the Act, Linden J.A. stated (at p. 6575) that "normally, the Income Tax Act taxes someone on the basis of what has actually been received, not on the basis of some theoretical formula.".

Major J. accepted the following comments in P.W. Hogg's Notes on Income Tax:

"It would introduce intolerable uncertainty into the Income Tax Act if clear language and a detailed provision of the Act were to be qualified by unexpressed exceptions derived from a court's view of the object and purpose of the provision ... . When a provision is couched in specific language that admits of no doubt or ambiguity in its application to the facts, then the provision must be applied regardless of its object and purpose."

In finding that a federal sales tax refund should not be considered to have been receivable by the taxpayer until the Minister had given some public irrevocable indication thereof, Hugessen J.A. stated (p. 6128):

"The decision creates rights and starts time running and it is as much in the public interest as in that of those immediately concerned that there be a basic minimum of certainty as to when it is made and what it is. A decision in Pectore would be an abomination in law."

Nöel A.C.J. stated (at p. 5427) that in order for an accountant's report to give the taxpayer a general picture of his affairs "it is not necessary for the profit shown to be exact but it must be reasonably close, while the Income Tax Act requires it to be exact, and it is thus necessarily arbitrary".