Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
ISSUE/QUESTION
With regard to the 1992 ruling which the Auditor General reported on, a caller to Minister Stewart on her CJOB Radio interview in Winnipeg (hosted by Peter Warren) said that the Minister of National Revenue has the authority under the Income Tax Act to refer rulings (such as the type reported on by the Auditor General) to the federal courts for a determination of the issue. The caller asked why this law was not used and why it is never used.
RESPONSE
Taxpayers request advance income tax rulings where there is uncertainty about the tax consequences of proposed transactions that frequently involve complex business arrangements with significant tax implications. Taxpayers require certainty in order to proceed with legitimate business transactions. In granting an advance ruling, Revenue Canada provides binding interpretations to the taxpayer.
The caller suggests that given the magnitude of tax involved in the 1992 ruling, Revenue Canada could have referred the matter to the Tax Court of Canada to resolve the issue of whether the public company shares were taxable Canadian property. The authority for this is section 173 of the Income Tax Act. It requires the consent of both parties and it only applies when there is a reassessment or a proposed reassessment. Consequently, it can not be used in the advance income tax ruling process as there is no actual or proposed reassessment.
As Minister Stewart explained to the caller, the 1992 ruling is an acceptable ruling. It is correct in law and Revenue Canada consulted with the Department of Finance to ensure that its interpretation is consistent with the intent of the law.
John Chan
957-8976
August 13, 1996