Provincial Tax on Legal Services

There has been quite a bit of action this year on the topic of taxes on legal services. In a case called Christie, the BC Supreme court found that the tax of legal services for people under a certain annual income ($28,000 - however there is debate whether that is increasing to $32,000) is unconstitutional as it act as a barrier to access to the judicial system.

The government has appealed the decision, however, in the mean time has taken the position that any award that is made should be counted in calculating the "income" of the individual. This created an injustice as people who have the money pay a lawyer by the hour would not have to pay the tax, however, people too poor to pay a lawyer by the hour, but rather pay the lawyer out of the settlement would be paying the tax.

Recently, in the Muira case, the court found that the settlement funds should not be considered in calculating annual income.

To date, there has been no direction from the government or the law society of British Columbia.

The cases can be found at:

Muira
http://www.courts.gov.bc.ca/Jdb-txt/SC/05/15/2005BCSC1569.htm

Christie
http://www.courts.gov.bc.ca/Jdb-txt/SC/05/01/2005BCSC0122err1.htm

Past Wage Loss

The Supreme Court of Canada has said that tax consequences are not an appropriate consideration for a court in a claim for personal injuries. This means that the Plaintiff's loss is his or her ablility to earn income and the fact that some of that is taxable is not a reason to reduce the amount the defendant has to pay the Plaintiff.

In BC the government did an end run around this decision by making payments by ICBC for past wage loss only on a "net" of tax basis.

Is it right? Is it fair? Well, that is certainly open to debate, however, it does appear to be outside of the jurisdiction of the Provincial government, because they are essentially taxing the lost income of the Plaintiff through ICBC...which is in the exclusive jurisdiction of the Federal government an CCRA (formerly Revenue Canada).