Executive Summary: Key Legal and Evidentiary Issues

• Whether the Canada Revenue Agency (CRA) acted lawfully in administering a proposed tax rate increase without enacted legislation.

• The legitimacy of challenging a tax policy based on a CRA website announcement rather than a formal assessment.

• Whether the Federal Court has jurisdiction to review CRA actions in this context under section 18.05 of the Federal Courts Act.

• The sufficiency of judicial review as a remedy compared to the objection and appeal process under the Income Tax Act.

• Determination of whether the applicant's claim is premature or moot.

• Whether the CRA’s conduct breaches the rule of law by bypassing parliamentary approval for taxation changes.

Facts and outcome of the case

The case concerns an application for judicial review filed by Debbie Rene Vorsteveld against the Attorney General of Canada, stemming from actions by the Canada Revenue Agency (CRA) regarding proposed changes to capital gains tax policy. The issue arose when the CRA began administering a proposed increase in the individual capital gains inclusion rate—from one-half to two-thirds after the first $250,000—despite the fact that this change had not been enacted by Parliament.

Vorsteveld and her husband sold a jointly owned property in July 2024, after the CRA issued a website notice stating it would apply the proposed inclusion rate effective June 25, 2024. The applicant challenged this action, arguing that the CRA had no legal authority to implement tax changes before legislative approval, characterizing it as “Provisional Tax Implementation.” The applicant sought an order to quash the CRA’s decision, prohibit enforcement of the new rate, and declare the decision ultra vires and contrary to the rule of law.

The respondent, Attorney General of Canada, filed a motion to dismiss the application. The motion was based on three arguments: that the application did not challenge a reviewable decision and was therefore premature, that the Federal Court’s jurisdiction was barred under section 18.05 of the Federal Courts Act, and that the application was moot because the CRA later reverted to applying the existing tax rate. However, the mootness argument was deferred for consideration by the judge who will hear the full judicial review.

The court rejected the respondent’s arguments on prematurity and jurisdiction. It held that the applicant’s case was not a disguised appeal of a tax assessment, but rather a challenge to the CRA’s implementation of an unlegislated tax policy. The court accepted that the applicant was raising legitimate administrative and constitutional concerns, including the absence of parliamentary authorization and the potential violation of the rule of law. It concluded that the application was not “bereft of any possibility of success” and should not be dismissed at this stage.

As a result, the court dismissed the motion to strike brought by the Attorney General of Canada and ordered costs in the amount of $2,880.00 payable to the applicant. The substantive judicial review proceeding remains pending.