Broadcasters demand return of $790 million in fees
Last Updated: Friday, January 12, 2007 | 6:22 PM ET
CBC News
Canada's private broadcasters are demanding the return of $790 million in licensing fees that the courts have ruled were collected unlawfully by the federal government over the previous eight years.
Glenn O'Farrell, president and CEO of the Canadian Association of Broadcasters, cited a groundbreaking decision Thursday by the Supreme Court of Canada to back up his demand.
The Supreme Court said the New Brunswick Liquor Corp. must pay back money that it collected illegally from a bar owner, a decision that could have immense ramifications for Canadian businesses.
Canadian courts have never before ordered a government to return tax money that was collected illegally.
While the long-term cost of the decision will not be known for months or even years, it could stretch into the billions of dollars.
"We can't say what the value of the decision is because it is still early days," said regulatory lawyer David Stratas of Heenan Blaikie LLP in Toronto. "But it could be millions or billions of dollars. Tens of thousands of tax measures across the country could be affected."
What is fairly certain, lawyers say, is that Kingstreet Investments Ltd. will soon get a cheque for $750,000, courtesy of the New Brunswick liquor board. Other bar owners in the province will be lining up to get their own cheques.
Kingstreet shook up the Canadian tax establishment Thursday when the Supreme Court ruled unanimously that it was entitled to compensation after years of paying what was deemed an unconstitutional tax to the provincial liquor board.
The case stretches back to the early 1980s, when the liquor board began to charge bars a handling fee of five to 11 per cent of the cost of the liquor that they bought.
The Supreme Court ruled the fee was illegal because it bore no relationship to the true cost of providing the service. It was, the court ruled, simply a tax in disguise, and taxes can only be collected by the authority of a provincial or federal Parliament.
The Kingstreet ruling was very important, but it was not unique, said Brian Pell, a tax lawyer with McCarthy Tétrault LLP in Toronto. The courts have ruled in the past that other user fees, including probate fees and broadcast licence fees, are also unconstitutional.
But Pell said the Kingstreet ruling will open the door to claims by Canadian businesses that believe they have been obliged to pay user fees that were actually taxes in disguise.
Pell said it will take some time to sort all the claims out. The ruling could affect tens of thousands of user and licence fees, such as those for building permits and business licences, and possibly even parking tickets, where the cost of the fee bears no relationship to the cost of the service.
Sorting out which fees are legitimate could be a long process.
Companies will have to take a close look at each fee they pay to determine whether they are, in fact, legitimate, and possibly launch class-action lawsuits to recover their money.
Pell warned that the road may not be straight or easy. Governments have been known to change the law to bypass court rulings they did not appreciate, and some provinces specifically ban follow-on claims by related parties.
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