The Tax Court has said it before, and it will say it again: it has no jurisdiction to hear an appeal from a “nil assessment” (an assessment where no federal taxes are payable) or from an assessment that relates only to Ontario taxes. See Baluyot v. The Queen, 2007 TCC 682.
An individual taxpayer would likely find both of these rules counter-intuitive, but the latter rule is perhaps strangest of all. The CRA, after all, administers the Ontario Income Tax Act, which applies to individuals and trusts. When one thinks of appealing a CRA decision, one thinks of an appeal to the Tax Court. Moreover, a successful appeal to the Tax Court generally results in an automatic adjustment to both federal and provincial taxes owing although legally the provincial tax is imposed by the Ontario Income Tax Act over which the Tax Court supposedly has no jurisdiction.
The Tax Court of Canada Act is quite clear, however, that the Tax Court’s jurisdiction is limited to the determination of taxes owing under the federal Act. In Bluyot, the Court cited section 12 of the Tax Court Act, which reads as follows:
12.(1) The Court has exclusive original jurisdiction to hear and determine references and appeals to the Court on matters arising under the Air Travellers Security Charge Act, the Canada Pension Plan, the Cultural Property Export and Import Act, Part V.1 of the Customs Act, the Employment Insurance Act, the Excise Act, 2001, Part IX of the Excise Tax Act, the Income Tax Act, the Old Age Security Act, the Petroleum and Gas Revenue Tax Act and the Softwood Lumber Products Export Charge Act, 2006 when references or appeals to the Court are provided for in those Acts.
Jurisdiction
(2) The Court has exclusive original jurisdiction to hear and determine appeals on matters arising under the War Veterans Allowance Act and the Civilian War-related Benefits Act and referred to in section 33 of the Veterans Review and Appeal Board Act.
Further jurisdiction
(3) The Court has exclusive original jurisdiction to hear and determine questions referred to it under section 51 or 52 of the Air Travellers Security Charge Act, section 97.58 of the Customs Act, section 204 or 205 of the Excise Act, 2001, section 310 or 311 of the Excise Tax Act, section 173 or 174 of the Income Tax Act or section 62 or 63 of the Softwood Lumber Products Export Charge Act, 2006.
Strictly speaking it is true that the Tax Court has no jurisdiction over Ontario taxes. Why, then, does a Tax Court decision affect Ontario taxes owing in most appeals? The key lies in subsection 1(1) of the Ontario Act, where the definition of “taxable income” reads as follows:
“taxable income” means taxable income as determined in accordance with and for the purposes of the Federal Act subject to variation on objection or on appeal, if any, in accordance with the Federal Act; [Emphasis added.]
Ordinary Ontario income tax, of course, is computed by reference to taxable income as determined for the purposes of the federal Act. The definition of the phrase in the Ontario Act means that any adjustment to taxable income for federal purposes automatically adjusts Ontario taxable income and, in most cases, Ontario tax payable. Where, however, a Tax Court decision does not or cannot affect Ontario tax, it will be necessary for the taxpayer to launch an appeal to the Ontario Superior Court to have the assessment imposing the tax varied or vacated.
