Background
In April 2024, the Canadian government announced a proposal to increase the capital gains inclusion rate from 50% to 66.67% on annual gains exceeding $250,000 for individuals, effective June 25, 2024. The government tabled a Notice of Ways and Means Motion in September 2024 to implement this change. Following parliamentary convention, the CRA began administering the proposed rate in early 2025 through administrative forms, despite Parliament never enacting the legislation. This practice—called “Provisional Tax Implementation” (PTI)—allows the CRA to administer proposed tax changes after tabling but before legislative passage.
Debbie Rene Vorsteveld had sold property in July 2024 and realized capital gains exceeding $250,000. Facing uncertainty about her filing obligations, she filed for judicial review in January 2025. However, on January 31, 2025, the CRA deferred the effective date to January 1, 2026, and on March 21, 2025, the new government abandoned the policy entirely. Vorsteveld filed her return under the existing (lower) inclusion rate.
The Court’s Holding
Justice McVeigh dismissed the application on two independent grounds. First, there was no reviewable administrative decision: PTI compliance was voluntary, Vorsteveld was never legally obligated to file under the proposed rate, and she retained the choice to file under either the new or existing rate. Because her legal rights were never affected, she lacked standing to challenge the CRA’s conduct. The court distinguished this from a hypothetical scenario where the CRA had mandated the new rate or pursued enforcement action.
Second, even if a reviewable decision existed, the application was moot. The concrete dispute over Vorsteveld’s tax liability was resolved by January 31, 2025 (when the effective date was deferred) and definitively by March 21, 2025 (when the policy was abandoned). The court declined to exercise discretion to hear the moot application under the Borowski test, noting that the case lacked sufficient evidentiary record for meaningful adjudication of PTI’s constitutionality, other taxpayers might present stronger claims, and courts should not design tax administration policy. The Applicant was ordered to pay costs of $4,000.
Key Takeaways
- Taxpayers cannot challenge voluntary CRA tax administration practices through judicial review if they retain the choice of filing methods and face no legal consequences for choosing differently.
- Tax disputes arising from unenacted legislation become moot once legislative uncertainty is resolved, and courts will not undertake academic review of abandoned tax proposals.
- PTI—the administrative practice of collecting unlegislated taxes following Ways and Means tabling—remains untested constitutionally; the court did not address whether it violates section 53 of the Constitution Act, 1867 (requiring tax measures to originate in the House of Commons).
Why It Matters
This decision confirms a significant procedural barrier to challenging tax administration: absent legal compulsion or enforcement action, taxpayers have difficulty establishing standing to attack CRA policies. The court’s reluctance to address PTI’s constitutionality—despite decades of academic and parliamentary criticism—reflects judicial caution about intervening in tax procedure absent concrete injury. However, Justice McVeigh’s reasoning hints that future cases involving taxpayers who actually filed and paid under unlegislated rates might succeed where Vorsteveld failed. The decision leaves unresolved whether PTI violates constitutional limits on taxation without parliamentary enactment, a question that may resurface when parliamentary circumstances prevent proposed legislation from passing.