I have a great deal of sympathy for the notion that the “taxes” imposed in respect of TFSAs by sections 207.05 and 207.06 of the Income Tax Act (Canada) are in fact penalties and not “taxes”. It’s unfortunate that Parliament has in effect given the CRA the discretion to impose the “taxes” and removed the usual procedural protections afforded to taxpayers on whom penalties are imposed. The Tax Court, however, was not so sympathetic in Hunt v R, 2022 TCC 67: the Court held that the 207.05 and 207.06 “taxes” are in fact taxes and that they are not unconstitutional under section 53 of the Constitution Act, 1867. Parliament, like Humpty Dumpty, gets to choose what a word means.
