Federal Court Appeal upholds CRA decision to deny tax remission order to First Nation

This was an appeal from a decision of the Federal Court, dismissing the Waycobah First Nation's application to review the decision of the Canada Revenue Agency (CRA). The Federal Court denied recommending remission of the First Nation's substantial tax debt. Waycobah First Nation is a small impoverished community with significant infrastructure challenges. The tax debt largely comprised the budget deficit and had impeded its ability to borrow funds cover infrastructure deficiencies.

The substantial tax debt arose from the failure of the First Nation to collect harmonized sales tax (HST) from non-Aboriginal individuals who purchased gasoline and tobacco on reserve. This issue had originally proceeded through the courts with the First Nation losing at each level, including being denied leave to appeal by the Supreme Court of Canada in 2003.

Following the court proceedings, the First Nation negotiated repayment of the outstanding amounts with CRA but was ultimately unable to comply. While recognizing the extreme financial difficulties in its decision to not recommend remission, CRA also noted the noncompliance. At the Federal Court, the First Nation's application was dismissed on the basis that it had not been demonstrated that CRA's decision was erroneous.

The Court of Appeal dismissed the First Nation's appeal and upheld the lower court decision. The Court held that the First Nation did not succeed in demonstrating CRA's exercise of discretion was unreasonable. This was a difficult task as the discretion to grant a remission is broad, policy-based and is exercisable within a decision-making context that may result in the grant of extraordinary relief. The Court was persuaded that CRA's decision was made in light of the particular facts and was not improperly predetermined by a rigid approach to policy guidelines without regard to the totality of the facts. Finally, the Court found that there was no breach of procedural fairness as the First Nation was afforded a reasonable opportunity to be heard by an independent decision maker who was informed by representations from the First Nation.

Available at: http://www.canlii.org