https://decisia.lexum.com/fca-caf/decisions/en/item/301408/index.do
Canada v. 407 ETR Concession Company Limited (November 14, 2017 – 2017 FCA 220, Webb (author), Near, Gleason, JJ. A.).
Précis: The sole issue in this case was whether policing services provided by the Ontario Provincial Police along Highway 407 in Ontario were exempt “municipal services” for GST/HST purposes. The taxpayer claimed that they were exempt “municipal services” and was successful in the Tax Court. The Crown appealed to the Federal Court of Appeal. The Court of Appeal affirmed the decision of the Tax Court, dismissing the Crown’s appeals, with costs.
Decision: The nub of this decision, both in the Court of Appeal and in the Tax Court, was that the statute provided for “municipal services” to be provided by a “government or municipality”, hence the taxpayer’s argument that the Province of Ontario provided these policing services which were therefore “municipal services” provided by a “government”:
[7] In this appeal, the relevant provision is section 21 of Part VI of Schedule V:
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21 A supply of a municipal service, if
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21 La fourniture d’un service municipal si, à la fois :
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(a) the supply is
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a) la fourniture est effectuée :
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(i) made by a government or municipality to a recipient that is an owner or occupant of real property situated in a particular geographic area, or
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(i) soit par un gouvernement ou une municipalité au profit d’un acquéreur qui est le propriétaire ou l’occupant d’un immeuble situé dans une région géographique donnée,
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(ii) made on behalf of a government or municipality to a recipient that is an owner or occupant of real property situated in a particular geographic area and that is not the government or municipality;
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(ii) soit pour le compte d’un gouvernement ou d’une municipalité au profit d’un acquéreur, autre que le gouvernement ou la municipalité, qui est le propriétaire ou l’occupant d’un immeuble situé dans une région géographique donnée;
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(b) the service is
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b) il s’agit d’un service, selon le cas :
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(i) one which the owner or occupant has no option but to receive, or
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(i) que le propriétaire ou l’occupant ne peut refuser,
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(ii) supplied because of a failure by the owner or occupant to comply with an obligation imposed under a law; and
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(ii) qui est fourni du fait que le propriétaire ou l’occupant a manqué à une obligation imposée par une loi;
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(c) the service is not one of testing or inspecting any property for the purpose of verifying or certifying that the property meets particular standards of quality or is suitable for consumption, use or supply in a particular manner.
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c) il ne s’agit pas d’un service d’essai ou d’inspection d’un bien pour vérifier s’il est conforme à certaines normes de qualité ou s’il se prête à un certain mode de consommation, d’utilisation ou de fourniture, ou pour le confirmer.
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CRA’s interpretation effectively eliminated the word “government” from the provision:
[23] This argument is essentially that a municipal service can only be a service that a municipality (and not the federal or provincial government) is obligated to provide. As the Tax Court judge noted, if a “municipal service” was only a service that a municipality had the mandate or the responsibility to provide, it is difficult to determine what services provided by a federal or provincial government would be an exempt supply under section 21.
[24] Applying this interpretation to the national park example would mean that for any residents of a national park, for whom no municipality is obligated to provide services, the services provided by the federal government would not be “municipal services” for the purpose of section 21, even though such services would normally be provided by a municipality. For example, the provision of a garbage removal service by the federal government to the residents of a national park (where there is no municipality) would not be an exempt supply as no municipality would have the mandate to provide such services.
[25] In my view, this result is not the result that Parliament intended and does not take into account that section 21 applies to services provided by a government or a municipality. The reference to the national park example reinforces, rather than derogates from, the interpretation adopted by the Tax Court judge.
As a result the Crown’s appeals were dismissed with one set of costs.