Canadian Tax Highlights

Authors: Michael H. Lubetsky and John J. Lennard

Litigants must consider cost implications at every stage of litigation. Generally, a cost-benefit analysis is required at the outset, at different stages in the litigation proceedings, and before and during settlement negotiation. In tax litigation, the cost-benefit analysis can be a fairly simple exercise—an analysis of the anticipated cost of litigation, the chance of success at trial or on appeal, consideration of the assessed amount in dispute, and the ongoing effect of a judicial decision on the taxpayer’s position. Historically, awards of costs by a court usually have not been factored into this analysis because they have been negligible. Recently, however, three awards of costs by the TCC to successful taxpayers on GST/HST appeals (each involving unique facts) seem to suggest that the TCC is adopting a new approach—namely, to reward a successful taxpayer with true and proper costs awards that reflect at least a substantial part of the actual legal costs.

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