Rectification of Tax Mistakes Versus Retroactive Tax Laws: Reconciling Competing Visions of the Rule of Law

Catherine Brown () and Arthur J. Cockfield ()
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Catherine Brown: Faculty of Law, University of Calgary
Arthur J. Cockfield: Faculty of Law, Queen's University, Kingston, Ontario

Canadian Tax Journal, 2013, vol. 61, issue 3, 563-598

Abstract: This article examines the potential conflict between the right of the provinces to determine property rights, including the equitable right of rectification, and the federal government's right to enact retroactive tax legislation. It poses a hypothetical question: Does rectification provide the appropriate remedy for the "unfairness" of retroactive legislation to taxpayers who intend and plan their transactions to minimize or avoid tax? The article reviews the trend toward the judicial broadening of rectification remedies in tax cases, as well as perspectives on reliance on the rule of law to determine if and when rectification would be appropriate. The authors conclude that, in certain circumstances, a provincial court could and should rectify a tax plan to counter the effects of a retroactive tax that does not target abusive tax planning, such as Quebec's proposed (and subsequently withdrawn) tax increase aimed at high income earners.

Keywords: Income taxes; courts; rectification; retroactive; equity; rule of law (search for similar items in EconPapers)
Date: 2013
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