E. Rebecca Potter

This appeal concerned whether taxes collected by Enterprise Rent-A-Car on insurance products were Retail Sales Tax (RST) or Harmonized Sales Tax (HST) for assessment purposes.

Enterprise had collected and remitted these taxes as HST to the Canada Revenue Agency (CRA).

The Minister of Finance assessed Enterprise for RST, arguing Enterprise had erroneously remitted RST as HST.

The Court of Appeal found the motion judge erred by focusing on Enterprise's belief about the tax collected, rather than the factual question of what tax was actually collected.

The Court concluded that Enterprise had, in fact, collected HST, based on its invoicing practices and remittances.

As the Minister's assessments were based on "tax collected" under the Retail Sales Tax Act, and Enterprise had collected HST, the assessments had no legal basis.

The appeal was allowed, and the Minister's assessments were set aside.

A Luxembourg corporation created as a tax conduit sold shares in its Canadian subsidiary for approximately $680 million, realizing a capital gain in excess of $380 million, and claimed an exemption from Canadian income tax under the Canada-Luxembourg tax treaty's business property exemption for capital gains on shares deriving value principally from immovable property used in a business.

The Minister denied the treaty exemption and argued the general anti-avoidance rule (GAAR) applied because the respondent lacked genuine economic connections to Luxembourg.

The majority held that the Minister failed to discharge the burden of proving abusive tax avoidance, finding that the provisions of the Treaty operated as intended and that Canada had deliberately chosen not to include anti-conduit provisions in the Treaty.

The dissent would have allowed the appeal, finding that the respondent's patent lack of economic connection to Luxembourg frustrated the underlying rationale of the Treaty's allocation of taxing rights.