Federal Appeal


Goods and Services Tax


Police services provided to company by province of Ontario were taxable supplies of such services

Company was operator of toll highway near Toronto as result of concession and ground lease agreement between company and province of Ontario (province). Responsibility for maintaining traffic patrol on highway rested with Ontario Provincial Police (OPP). Province charges company fee for providing policing services of OPP in relation to highway. Issue was whether provision of these policing services was exempt supply which would not be subject to GST or HST. Effective July 2010, province added HST to invoices charged to company. Tax Court of Canada allowed company’s appeal from certain reassessments that were issued under Excise Tax Act (ETA). Company was reassessed on basis that police services provided to company by province of Ontario were taxable supplies of such services. Tax Court determined that such services were municipal services and therefore supply of services were exempt supply for purposes of ETA. Crown appealed. Appeal dismissed. Issue on appeal was whether opening words of s. 21 of ETA “supply of municipal service” would support conclusion that s. 21 was intended to apply to provision of particular type of service such as municipal service. This section simply required that relevant service be provided by government or municipality. To read s. 21 as limiting “municipal service” to only service provided by government acting as municipal authority would required reading into provision limitation applicable to government in relation to authority under which service was being provided. As Tax Court judge noted, if “municipal service” was only service that municipality had mandate or responsibility to provide, it was difficult to determine what service provided by federal or provincial government would be exempt supply under s. 21 ETA. Applying this interpretation to national park example would mean that for any residents of national park, for whom no municipality was obligated to provide services, services provided by federal government would not be “municipal services” for purpose of s. 21, even though such services would normally be provided by municipality. This was not result that Parliament intended and did not take into account that s. 21 applied to services provided by government or municipality. Crown’s reference to national park example reinforced, rather than derogating from, interpretation adopted by Tax Court.

The Queen v. 407 ETR Concession Company Limited (2017), 2017 CarswellNat 6586, 2017 FCA 220, Wyman W. Webb J.A., D.G. Near J.A., and Mary J.L. Gleason J.A. (F.C.A.); affirmed (2016), 2016 CarswellNat 4743, 2016 TCC 213, Steven K. D’Arcy J. (T.C.C. [General Procedure]).

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