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Prince v ACE: extra-territorial effect of US tax laws?

By Rahim Punjani 

Should a Canadian court exercise its jurisdiction to hear a class action lawsuit against Air Canada for improperly collecting US travel taxes on ticket purchases in Canada and on air travel in Canada?

That was the question in Prince v ACE Aviation Holdings Inc (2014 ONCA 285), in which the Ontario Court of Appeal declined to exercise its jurisdiction and stayed the class action on the basis that the US was clearly a more appropriate forum until the plaintiffs exhaust their rights in the US by first applying to the Internal Revenue Service (IRS) for a refund and, if refused, appealing to the US courts.

In Prince, a class action was commenced in Ontario against Air Canada for improperly collecting US travel taxes on ticket purchases in Canada and on air travel in Canada. Effectively, the plaintiffs alleged that Air Canada was giving extra-territorial effect to US tax laws. The plaintiffs claim raised issues about the taxes imposed by the US government, the methods used to collect those taxes, the immunity conferred on intermediaries who collect the taxes, the procedures established for the recovery of those taxes and the interpretation of the taxing statute…

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