Consolidation or reorganization of Canadian courts and support staff.

On October 19, 1995, Tax Executives Institute filed the following comments with the Office of the Auditor General in Canada, concerning a study undertaken by that office to consider proposals to consolidate, merge, or regionalize the Tax Court of Canada (or its support staff) with the Trial Division of the Federal Court of Canada. TEI's comments, took the form of a letter from Jack R. Skinner to Alan Gilmore, Principal, Audit Operations. TEI's comments were prepared under the aegis of its Canadian Income Tax Committee, whose chair is J Andrew (Drew) Glennie of Shell Canada Limited.

On behalf of Tax Executives Institute and in response to your letter of September 5, 1995, to C. Graham Kennedy, I am pleased to provide comments concerning your study of the merger, regionalization, or consolidation of the Federal Court of Canada and the Tax Court of Canada.

Background

Tax Executives Institute, Inc. is an international organization of approximately 5,000 professionals who are responsible -- in an executive, administrative, or managerial capacity -- for the tax affairs of the corporations and other businesses by which they are employed. TEI'S members represent more than 2,800 of the leading corporations in Canada and the United States.

Canadians make up approximately 10 percent of TEI'S membership, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver, which together make up one of our nine geographic regions. In addition, a substantial number of our U.S. members work for companies with significant Canadian operations. In sum, TEI's membership includes representatives from most major industries, including manufacturing, distributing, wholesaling, and retailing; real estate;_ transportation; financial; telecommunications; and natural resources (including timber and integrated oil companies). The comments set forth in this submission reflect the views of the Tax Executives Institute as a whole, but more particularly those of our Canadian constituency.

TEI has historically been concerned with issues of tax policy and administration and is dedicated to working with government agencies in Ottawa (and Washington), as well as in the provinces (and the states), to reduce the costs and burdens of tax compliance and administration to our common benefit. We are convinced that the administration of the tax laws in accordance with the highest standards of professional competence and integrity, as well as in an atmosphere of mutual trust and confidence between business and government, will promote the efficient and equitable operation of the tax system. In furtherance of this principle, TEI supports efforts to improve the tax laws and their administration at all levels and branches of government.

Description of Issues and Questions Posed

As currently structured, the Federal Court of Canada and the Tax Court of Canada are independent courts, each headquartered in Ottawa. In connection with the discharge of matters arising under the separate jurisdiction of each, the courts travel throughout Canada to hear and determine cases. In addition, the courts maintain separate registries in various cities across the country, as well as independent central registries in Ottawa.

Your letter to the Institute describes a study -- undertaken by your office at the request of the Minister of Justice -- to determine the possibility of:

i) the merger and regionalization of the Trial Division of the Federal Court of Canada and the Tax Court of Canada, and

ii) the consolidation of the administrative support staff of the courts.

Further, you requested the Institute's views on these issues.

Discussion

A. General. TEI's member companies are either headquartered, or do business in, every region of Canada. As a result, our members have a keen interest in any decision taken in respect of the merger or consolidation of the courts by their support staffs.

Initially, we observe that the Income Tax Act and the Excise Tax Act play integral roles in Canadian business with a significant financial effect on every commercial transaction. More important, both Acts have grown enormously complex as a result of frequent, confusing, and sometimes inconsistent legislative amendments. Hence, disputes between taxpayers and the government over the interpretation of those laws have grown in terms of the magnitude of the dollars in controversy as well as the number and complexity of the issues involved. As a result, a critical objective of your study should be to maintain and enhance the court system to permit efficient and impartial resolution of tax disputes.

B. Merger or Consolidation of Courts. The Tax Court of Canada was established to replace the Tax Review Board, which replaced the Tax Appeal Board. The establishment of an independent Tax Court with specialized and limited jurisdiction over tax matters was motivated by a desire to improve the nature and function of the Tax Review Board as a judicial body independent of Revenue Canada, the Department of Finance, and Parliament. Improving the perception, and the reality, of the court's independence was to be achieved while retaining its informal structure.

TEI believes that the consistent application of a highly specialized and complex body of tax law is well served by a tribunal independent from the Trial Division of the Federal Court. Specialized courts permit the appointment of specialists as judges. Judicial appointments that reflect the high degree of expertise required to resolve tax disputes expeditiously and fairly is a critical component of efficient and economical judicial action. Moreover, the more relaxed rules of procedure governing Tax Court of Canada proceedings are an important element in speeding the resolution of tax disputes. Consequently, we believe that access to a separate judicial body with the power to resolve tax disputes in a less formal setting than the Trial Division of the Federal Court of Canada should be preserved. Finally, we believe that the volume of both tax and non-tax cases is sufficient to justify maintaining the separate jurisdictions of the courts.

C. Regionalization. Under the current system, taxpayers with multiple business units have a degree of flexibility concerning where, and before which court, tax disputes are to be heard. This flexibility enhances judicial administration because it permits taxpayers to file their petitions in courts where the caseload may be lighter. We recommend that this flexibility be retained.

Regardless of the flexibility over where a case is to be heard, TEI believes it is critical that taxpayers and the government alike be treated consistently, and have recourse to a consistent body of tax principles and case law. Hence, while regionalization of the courts may produce economies of scale and lower administrative costs, the savings -- if any -- will likely be achieved at a price of increasingly inconsistent decisions and uneven application of the tax law to similarly situated taxpayers. We believe that the inconsistent application of the tax laws would undermine their legitimacy since those laws are national in scope and effect and, hence, should be interpreted consistently across Canada. To illustrate the problems that arise from regionalized courts, consider the confusion that often results from conflicting tax decisions among the eleven regional Federal Courts of Appeals in the United States. Consequently, we are not convinced that regionalization of the courts should be pursued.

D. Consolidation of Support Staff TEI recognizes and supports the government's drive to eliminate redundant administrative services and to reduce costs wherever possible. Whether savings can be achieved through a consolidation of the administrative support staff of the separate court systems is a matter worthy of study. We believe, however, that it is imperative that the expertise and efficiency of the Tax Court of Canada be preserved and that the goal of consistent application of national tax laws be enhanced. In the absence of a more detailed and concrete proposal in respect of a proposed consolidation of the court's administrative support staff, it is difficult for us to comment on whether this approach will yield a positive overall result. When such details are available, we shall be pleased to provide you with further comments in respect of your study and any resulting consolidation proposal.

Conclusion

We are pleased to have had the opportunity to provide comments concerning the Auditor General's study of the possible consolidation of the Trial Division of the Federal Court and the Tax Court of Canada. TEI'S comments were prepared under the aegis of its Canadian Income Tax Committee, whose chair is J. Andrew (Drew) Glennie of Shell Canada Limited. If you should have any questions concerning TEI'S comments, please feel free to contact Mr. Glennie at [phone], or Vincent Alicandri, TEI's Vice President of Canadian Affairs, at [phone].