The Tax Court of Canada’s decision in Birchcliff Energy Ltd. v. The Queen sets an important precedent compelling the Canada Revenue Agency (CRA) to provide greater disclosure in the pleadings it files when litigating a case under the general anti-avoidance rule (GAAR). While most GAAR litigation focuses on two issues—whether the tax policy that the CRA alleges to have been abused exists, and if so, whether it was in fact abused by the taxpayer’s transactions—the CRA historically has not identified the relevant tax policy in the pleadings it files with the court in GAAR cases.

In Birchcliff, the Tax Court ruled in favour of the taxpayer that the CRA must set out as a material fact the relevant tax policy underlying the legislative provisions that the CRA assessor relied upon in reassessing the taxpayer under the GAAR. While the Tax Court acknowledged that it is open to the CRA to allege before the court the existence of a different tax policy than that relied upon in issuing the reassessment, nevertheless the taxpayer is entitled in the pleadings to know what the basis of the CRA’s reassessment was at the time it was made.  

To read more about the Birchcliff decision, please see Steve Suarez’s article published in Tax Notes International. Click Here