BETWEEN:
and
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Appeals heard on June 8, 2005 at Toronto, Ontario
Before: The Honourable Justice T. O'Connor
Appearances:
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JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 2001 and 2002 taxation years are dismissed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 22nd day of July, 2005.
BETWEEN:
GARY WILLIAM CRAIB,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Issue
[1] These appeals relate to the 2001 and 2002 taxation years of the Appellant ("Mr. Craib"). The principal issue relates to whether the treatment accorded to Mr. Craib in those years under the Income Tax Act and the Employment Insurance Act results in Mr. Craib being discriminated against contrary to section 15(1) of the Canadian Charter of Rights and Freedoms which is Part 1 of the Constitution Act, of 1982.
Facts
[2] The principal facts giving rise to the issue in these appeals are described, with excellent clarity, in the Reply to the Notice of Appeal and may be summarized as follows:
...
2001 taxation year
7. In computing total income, in the amount of $37,201.95 (corrected to $36,851.95), for the 2001 taxation year, the Appellant reported Employment income in the amount of $34,568.01, Taxable amount of Dividends from taxable Canadian corporations in the amount of $448.00 and net Bursary income in the amount of $1,835.94 (the gross amount of bursary received being $4,835.94). In computing net and taxable income in the amount of $34,580.45, the Appellant deducted Registered Retirement Savings Plan ("RRSP") premiums in the amount of $1,500.00, Dues in the amount of $459.54 and carrying charges and interest expense in the amount of $655.88. In computing taxes payable in the 2001 taxation year, the Appellant deducted a non-refundable tax credit for Tuition and Education Amounts totalling $8,258.00 (ie: in respect of tuition fees paid for 2001, reported by the Appellant to be the amount of $3,458.17 plus 12 months of attendance at an educational institution at $400.00 per month. The amount was rounded by the Appellant).
8. The Appellant was initially assessed for the 2001 taxation year. The Notice of Assessment is dated June 6, 2002. The Minister of National Revenue (the "Minister") computed total income in the amount of $36,851.00 to include all of the income as reported by the Appellant. The Minister allowed the deductions from income in the amounts claimed by the Appellant in computing net and taxable income in the amount of $34,237.00. The Minister allowed the deduction of a non-refundable tax credit for Tuition and Education Amounts totalling $8,258.00 as claimed by the Appellant. Federal tax payable was assessed in the amount of $2,584.20.
9. The Appellant was reassessed for the 2001 taxation year. The Notice of Reassessment is dated July 24, 2003. The Appellant's Tuition Amount was increased by the amount of $1,854.00 from the amount of $3,458.17 to the amount of $5,312.17, to agree with the amount reported on an amended TUITION AND EDUCATION AMOUNTS CERTIFICATE submitted by the Appellant. The Appellant was allowed an increased non-refundable tax credit for Tuition and Education Amounts totalling $10,112.00 (computer rounded). Federal tax payable was reassessed to the amount of $2,288.20.
10. The Appellant was not further reassessed for the 2001 taxation year subsequent to July 24, 2003.
2002 taxation year
11. In computing total income, in the amount of $61,907.00, for the 2002 taxation year, the Appellant reported Employment income in the amount of $47,849.42, EI received in the amount of $5,055.00, Interest and other investment income in the amount of $403.58, RRSP income in the amount of $1,400.00 and net Bursary income in the amount of $7,200.00 (the gross amount of bursary received being $10,200.00). In computing net and taxable income in the amount of $47,562.42, the Appellant deducted Dues in the amount of $358.84, support payments in the amount of $1,476.00, carrying charges and interest expense in the amount of $695.80 and Other Deductions, described by the Appellant as "EDUCATION" in the amount of $11,814.00. In computing taxes payable in the 2002 taxation year, the Appellant deducted a non-refundable tax credit for Tuition and Education Amounts totalling $11,814.17 (ie: in respect of unused federal tuition amounts from the 2001 taxation year, reported by the Appellant to be the amount of $1,854.19, plus tuition fees paid for 2002, reported by the Appellant to be the amount of $5,559.98, plus 11 months of attendance at an educational institution at $400.00 per month).
12. The Appellant was initially assessed for the 2002 taxation year. The Notice of Assessment is dated July 28, 2003. Total income was assessed in the amount of $61,907.00 as reported by the Appellant. The Minister disallowed the deductions for support payments in the amount of $1,476.00 and Other Deductions, described by the Appellant as "EDUCATION" in the amount of $11,814.00 and allowed a deduction in the amount of $1,516.50 for an EI "clawback" in respect of the EI received by the Appellant in the 2002 taxation year. The Minister allowed the deduction of a non-refundable tax credit for Tuition and Education Amounts totalling $9,959.00 (computer rounded) (ie: in respect of tuition fees paid for 2002, reported by the Appellant to be the amount of $5,559.98, plus 11 months of attendance at an educational institution at $400.00 per month). No amount was allowed in respect of a carry-forward sought by the Appellant for an unused federal tuition amount from the 2001 taxation year that had been reported by the Appellant to be the amount of $1,854.19. The Appellant was assessed a late filing penalty in the amount of $237.95. Federal tax payable was assessed in the amount of $7,768.80.
13. The Appellant objected to the reassessment of the 2001 taxation year, referred to at paragraph 9 above and to assessment of the 2002 taxation year referred to at paragraph 11 above. The Notice of Objection letter is dated August 11, 2003.
14. The reassessment of tax of the Appellant for the 2001 taxation year that is referred to at paragraph 9 above was confirmed. The confirmation notice was dated March 24, 2004.
15. The Appellant was reassessed for the 2002 taxation year. The Notice of Reassessment is dated April 8, 2004 and was issued pursuant to subsection 165(3) of the Income Tax Act R.S.C. 1985, c.1 (5th Supp.) as amended ("Act"), in response to the Appellant's Notice of Objection. The Minister cancelled the late filing penalty in the amount of $237.95.
16. In so confirming the reassessment of tax of the Appellant for the 2001 taxation year and in so reassessing the Appellant, pursuant to subsection 165(3) of the Act, for the 2002 taxation year, the Minister made the following assumptions of fact:
(a) in the 2001 and 2002 taxation years, the Appellant was in receipt of, and reported, net Bursary income in the amount of $1,835.00 (the gross amount of bursary received being $4,835.00) and net Bursary income in the amount of $7,200.00 (the gross amount of bursary received being $10,200.00) respectively;
(b) the Appellant paid tuition fees in the amount of $5,312.17 for the 2001 taxation year and was in attendance at an educational institution for 12 months for the 2001 taxation year;
(c) the Appellant was assessed federal tax payable for the 2001 taxation year in the amount of $2,288.20;
(d) the Appellant paid tuition fees in the amount of $5,559.98 for the 2002 taxation year and was in attendance at an educational institution for 11 months for the 2002 taxation year;
(e) in the 2001 taxation year, the Appellant was in receipt of, and reported, EI in the amount of $5,055.00 and was assessed net income in the amount of $59,338.00;
(f) in the 2002 taxation year, the Appellant paid no amount of support pursuant to an order of a competent tribunal or written agreement;
(g) the deduction, described by the Appellant as "EDUCATION", in the amount of $11,814.00 and claimed by the Appellant in computing income in the 2002 taxation year was unsupported by the Appellant;
...
19. He submits that in the 2001 and 2002 taxation years, the Appellant was in receipt of, and reported, net Bursary income in the amount of $1,835.00 (the gross amount of bursary received being $4,835.00) and net Bursary income in the amount of $7,200.00 (the gross amount of bursary received being $10,200.00) respectively and that the Minister has properly included Bursary income in the amounts of $1,835.00 and $7,200.00 in the Appellant's income in the 2001 and 2002 taxation years respectively in accordance with paragraph 56(1)((n) of the Act.
20. He submits that:
(a) he Appellant paid tuition fees in the amount of $5,312.17 for the 2001 taxation year and was in attendance at an educational institution for 12 months for the 2001 taxation year; and
(b) the Minister has properly allowed the Appellant to deduct a non-refundable tax credit for Tuition and Education Amounts totalling $10,112.17 in computing tax payable in the 2001 taxation year, in accordance with subsections 118.5(1) and 118.6(2) of the Act, respectively;
(c) the Appellant's federal tax payable for the 2001 taxation year, following the deduction of the non-refundable tax credit for Tuition and Education Amounts totalling $10,112.17 that is referred to in paragraph 20(b) above, was the amount of $2,288.20; therefore
(d) there are no unused tuition and education tax credits, as described in subsections 118.61(1) and 118.6(2) of the Act, that are available for carry forward to the 2002 taxation year.
21. He submits that:
(a) the Appellant paid tuition fees in the amount of $5,559.98 for the 2002 taxation year and was in attendance at an educational institution for 11 months for the 2002 taxation year; and
(b) the Minister has properly allowed the Appellant to deduct a non-refundable tax credit for Tuition and Education Amounts totalling $9,959.00 (computer rounded) in computing tax payable in the 2002 taxation year in accordance with subsections 118.5(1) and 118.6(2) of the Act, respectively; also
(c) as referred to in paragraph 20 above, there are no unused tuition and education tax credits available from the 2001 taxation year for deduction by the Appellant under subsection 118.61(2) of the Act, in the 2002 taxation year.
22. He submits that in the 2002 taxation year, the Appellant was in receipt of, and reported, EI in the amount of $5,055.00 and was assessed net income in the amount of $59,338.00. Accordingly, the Appellant has been properly charged an EI "clawback" in the amount of $1,516.50 in respect of the EI received by the Appellant in the 2002 taxation year and properly allowed a deduction from income in the amount of $1,516.50 under paragraph 60(v.1) of the Act.
23. He submits that in the 2002 taxation year, the Appellant made no payment(s) of support pursuant to an order of a competent tribunal or written agreement and therefore the Appellant paid no "support amount", as defined in subsection 56.1(4) of the Act, and as referred to in paragraph 60(b) of the Act. Accordingly, the Appellant is entitled to no deduction for support payments, under paragraph 60(b) of the Act, in the 2002 taxation year.
24. He submits that in the 2002 taxation year, the Minister has properly allowed the Appellant to deduct a non-refundable tax credit for Tuition and Education Amounts totalling $9,959.00 in computing tax payable in the 2002 taxation year in accordance with subsections 118.5(1) and 118.6(2) of the Act respectively. The Other deduction, described by the Appellant as "EDUCATION", in the amount of $11,814.00, and claimed by the Appellant in computing income in the 2002 taxation year, was unsupported by the Appellant. Accordingly, the Appellant is not entitled to a deduction from income in the amount of $11,814.00 for "EDUCATION" under any provision of the Act in the 2002 taxation year.
25. He submits that the Minister's assessments and/or reassessments of tax of the Appellant for the 2001 and 2002 taxation years do not represent an interference with the Appellant's rights pursuant to either section 7 or section 15 of the Charter.
...
[3] It should be observed that there is no objection by Mr. Craib as to the amounts ultimately assessed for 2001/2002. More particularly there is no objection to the disallowances of the support payments in the amount of $1,476 and the "EDUCATION" amount of $11,814, nor of the disallowance of the carry-forward amount regarding unused federal tuition amount from 2001 of $1,854.19. It is also to be observed that the late filing penalty of $237.95 with respect to 2002 was cancelled.
[4] Consequently, I believe the only issue is whether Mr. Craib has been discriminated against contrary to the provisions of section 15(1) of the Charter. In this connection it appears that notice has been given to all of the Attorneys-General in accordance with section 19.2 of the Tax Court of Canada Act.
Submissions of the Appellant
[5] Mr. Craib filed a Notice of Appeal and a Revised Statement of Claim. Both documents are quite lengthy and address many matters in addition to the issue in this appeal.
[6] I believe the best and fairest way of expressing the position of Mr. Craib is firstly to quote from his Notice of Constitutional Question apparently faxed to the various Attorneys-General. This document is annexed to the Revised Statement of Claim and so far as material reads as follows:
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The following are the material facts giving rise to the constitutional question:
1) I am a Ph.D. student at the University of Toronto and a teacher. From August 2001 through June 2002 I was employed as a high school teacher at a private school. I was hired on a one-year maternity contract August 2001 through June 2002 and paid $52,000 for the academic year. During my teaching contract I paid source deductions of income tax at 25% and EI benefits. In June of 2002 - at the end of the teaching contract I was laid off and then applied for and received an EI claim for five weeks ending when I returned to my Ph.D. program in September 2002.
2) While employed as a teacher during 2001-2002 I was ineligible for "needs" based funding from the University of Toronto because I was fully employed. My entire graduate support for the winter-spring 2002 term was $5000 as a research assistant and a $3800 bursary assigned to pay my tuition in September 2001. All of my income for 2001 - 2002 was planned and paid based on an academic year 2001 - 2002 but $61,000 was reported within the January - December 2002 tax year. The result of reporting inaccuracies is my incomes for both 2001 and 2003 are reported too low and income for 2002 is $22,000 too high. High incomes in 2002 triggered the EI section 145 clawback clause and my attempts to correct this unfair and unreasonable situation through mediation and communication have failed.
The following is the legal basis for the constitutional question:
1) I believe that Canada Customs and Revenue or the Employment Commission's practice of using the 'average weekly income' ratio to clawback benefits is inconsistent and inequitable in terms of reporting practices because geography, personal expenses, industry and profession create inequitable treatment between citizens. This inconsistency evolves because the ratio was created from July - June reporting model that discriminates against seasonal or academic employees whose income remains tied to academic or seasonal contacts. The "average weekly income" ratio as applied by Canada Customs and Revenue is now a nine-year-old value of personal income (created during a 1996 reform of the EI Act) and has never been updated and is inconsistent with contemporary evaluations of income in Canada. If - for the sole purpose of determining a threshold for EI repayment and my income was assessed on academic year basis (just as the "average weekly income" ratio was based) - my problems with the EI clawback would disappear because teaching income would be reported within the academic year 2001 and EI benefits which occur after the end of that academic year would be reported and combined with graduate funding and research assistant funding for 2002.
2) Canada Customs eliminated an appeal mechanism for income reporting errors from tax regulations in 2002 creating an unfair model of income reporting. Errors happen and basic fairness flowing from Canadian traditions requires it is incumbent on anyone who makes a decision to make that decision fairly. When applied to Canada Customs and Revenue - the fact that no mechanism exists to review incorrect income reporting or average or transfer income when an error has been made creates a constitution problem. Canada Customs and Revenue's actions and policy are both unfair and unreasonable. When Canada Customs and Revenue eliminated the income transfer provisions that had been present in the regulations - they created an unfair and unconstitutional situation where they now simply refuse to consider facts or evidence. This is a fundamental failure of basic right to a fair hearing. Simply described - A fair hearing is not possible if an individual and their evidence could not be heard.
[7] Secondly, I quote from the Notice of Appeal as follows:
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The fundamental issue is one of equity with other citizens.
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Now, when academic income is reported on an calendar basis the lack of a mechanism to redistribution income limits me from redistributing income and places a unreasonable penalty on me and others whose (sic) income is reported over academic terms. I have had this right in the past and I my rights have been undermined if I can no longer make this adjustment.
The Charter section 15 provides that I have an equal right to both the protection of the law and the benefit of the law in this particular situation the shortage of a mechanism to allow correction of reporting errors disadvantage those whose income is reported in an academic calendar.
...
The failure of tax department to provide a mechanism for redistribution amounts to a failure of my constitution rights and the government action that removed the mechanism to allow redistribution of income is a basic violation of charter rights. This action that removed my right to redistribute income must then be considered null and void as it conflicts with basic charter rights. One important point to remember is I had that right last year and this year I don't. Revenue Canada has assisted me to redistribute income in the past - but refuses to do so now.
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In 2002 the paper income reported by calendar year pushes my teaching income and support bursaries (on paper) beyond the threshold for Employment Insurance and as a result has created a tax bill of over five thousand dollars including about $1600 in clawback from Employment Insurance based on what is inflated income 2002. I respectfully request that I be allowed to redistribute the bursaries to the tuition payments and years for which they were original destined to be paid and not based on when they ended up reported. This will allow me to reduce my income below the threshold for the Employment Insurance clawback.
Simply put: my argument is that universities are reporting income on an academic basis that disadvantages me against other citizens who report on calendar basis.
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I estimate if all income was averaged over the academic years involved my gross income each year would be about $35,000 to $40000 or so. This drops me down below the threshold for clawback for repaying the Employment and my overall income is then taxed at the rate appropriate to a Phd student who has reported an income in the $34000 - 40000 dollar range over the last six years. I don't believe I am cheating or avoiding my tax responsibility but instead I am correcting minor reporting errors.
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[8] Thirdly, the following are extracts from the Revised Statement of Claim of Mr. Craib:
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3) In 2002 my graduate support was reported as $31,000 and teaching earnings of $30,000. - But I was ineligible for graduate support because I was employed. However the university combined support for the 2001-2002 academic year and the 2002-2003 academic years and reported most of my income during 2002. If we break down that $31,000 through documentation - I can document $3800 assigned pay my tuition in September 2001. I received $5000 for a research assistantship during the spring of 2002 and the balance of about $22,000 in graduate funding represented student support for following 2002-2003 academic year. About 1/2 of that amount was assigned for support for spring 2003 term based on university calculations for the 2002-2003 academic year. OISE/UT was at the time experimenting with different models for student funding and this resulted in disparities in income reporting between reporting years. Unfortunately when $30,000 earned from teaching during the 2001-2002 school year was added to 2002 income my graduate funding for years 2001, 2002, and 2003 was directly involved pushing my income on paper to a radically higher income bracket and clawed back my EI benefits. The direct result was an unreasonable high income was reported for tax year 2002 and unreasonable low incomes reported for tax years 2001 and 2003.
4) Every time I received graduate funding I receive documentation demonstrating exactly what date, month, academic year or academic purpose the funding was designed to support. Canada Customs and Revenue refuse to consider this documentation. As my income was planned and delivered on an academic year model and I believe that I am disadvantaged and as a group academic employees and students are disadvantaged because they are forced to earn income planned, created and delivered on academic year models but then are forced to report income with January-December tax reporting models. When Canada Customs and Revenue argue all income must be reported in the year it was received - regardless of documentation they are acting in a manner that is too arbitrary to be fair, equitable or reasonable.
...
Income reporting or clawback policy becomes too arbitrary and unreasonable to be considered fair and this leads directly to my constitutional complaint. When Canada Customs and Revenue eliminated income transfer provisions that had been present in the regulations and demand all income reported in the same manner regardless of documentation - Canada Customs and Revenue has created an unfair and unconstitutional situation where they can unfairly refuse to consider facts or evidence or consider any income transfer applications. This is a fundamental failure of basic right to a fair hearing. I have several complaints concerning inequity, basic fairness and reporting practice of income and credits.
My princpal complaint lies within the EI clawback found in section 145 of the Act, which reads -
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The Tax Act is inconsistent and inequitable on this point because the Act does allow reporting for corporation on fiscal or academic years.
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The Supreme Court in Law v. Canada [1999 2 S.C.R. 497] provided a three-step analysis to determine validity of claims under section 15.1
The first step asks - "Is differential treatment imposed?
Clearly, the answer is yes.
The "average weekly earnings" ratio based on a July-June reporting model but compared to calendar reporting models is discriminatory. The value is no longer contemporary and has not been updated in nine years to keep pace with market dynamics. Even more important the average income ration was created solely for the purpose of clawing back benefits and thus section 145 creates an inequitable and artificial income ratios that is inconsistent with between, citizens, geography, occupation profession, region and status. An effective, consistent and fair income reporting practices could easily be established just as other areas of the EI Act are defined by region and industry. There exists discriminatory treatment both inside the working of the Act and within application of the Act (sic).
The Income Tax Act also imposes differential treatment for students and seasonal workers. Inequitable treatment develops directly when employers plan for employees or students based their academic September-June models - but then report income based not on their planning and mechanisms for support but are forced to report academic employment or graduate student funding on a calendar January-December model.
The second inquiry applied in Law V Canada provided?
Is the differential treatment based on an enumerated or analogous ground of distinction?
Enumerated grounds can function as legislative markers of suspect grounds associated with stereotypical, discriminatory decision making. They exist as expression of a general characteristic - not a contextual, fact-based conclusion about discrimination within particular cases. Enumerated grounds need be distinguished from a finding that discrimination exists since enumerated grounds are only indicators of suspect grounds of distinction. It follows that decisions on these grounds are not always discriminatory and distinction need to be based on personal characteristics attributed to an individual solely on the basis of association with a group. As such governments will rarely escape a charge of discrimination while complaints based on individual merits or capacities will rarely be so classed. In assessing a complainant's rights - it is not enough to focus only on alleged grounds of discrimination and then to decide whether or not it is an enumerated or analogous ground. The effect of the classification on the complainant must be considered. Once it is accepted that not all distinctions and differentiations created by law are discriminatory - then a role must be assigned to s. 15(1) which goes beyond the mere recognition of a legal distinction (Law Society of B.C. v. Andrews, [1989] 1 S.C.R. 143; R. v. Turpin, [1989] 1 S.C.R. 1296; McKinney v. University of Guelph, [1990] 3 S.C.R. 229; Symes v. Canada, [1993] 4 S.C.R. 695; Law v. Canada (M.E.I.), [199] 1 S.C.R. 497; Granovsky v. Canada (M.E.I.), [2000] 1 S.C.R. 703, 2000 SCC 28).
Therefore, to be effective - a complainant under section 15 must demonstrate not only that a complainant is not receiving equal treatment before and under the law or the law has a differential impact on them or a benefit accorded by law but - in addition I must also demonstrate that the legislative impact of the law is discriminatory. Where discrimination has been found and breaches of section 15(1) have occurred (and where section 15(2) is not applicable) - any justification or consideration of the reasonableness of the enactment, or an consideration of factors which could justify the discrimination and support the constitutionality of the impugned enactment could take place under section 1 of the Charter (underlining added).
Clearly policy makers and parliamentarians are experts in reporting income and they recognize differences between reporting January 1-December 31 as opposed to reporting from July-June. Policy makers clearly choose to codify legislation that captured the maximum income from both seasonal and academic employees rather than apply the established standard of reporting income January-December. There are arbitrary differences when applying an "average weekly earning" ratio, to calendar reported incomes that disadvantage those in academic employment or studies.
The third inquiry under Law V Queen requires a claimant establish that the differentiation amounts to a form of discrimination that has the effect of demeaning the claimant's human dignity. The "dignity" aspect of the test is designed to weed out trivial or other complaints that do not engage the purpose of the equality provision.
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In summary I request that the Tax Court find Canada Customs and Revenue actions to be unreasonable, unfair and discriminatory. I request a ruling from the Tax Court of Canada demonstrating the need for Canada Customs and Revenue to reform arbitrary and inequitable treatment and update legislation to reflect fairness.
1) I would likethe courts to reinstate into tax regulations a mechanism for income transfer based on documentation. For example - when I receive a letter from the university awarding me a scholarship, bursary or fellowship based on a specific year and that time frame is clearly defined - Canada Customs and Revenue should allow transfer of income based on when and why the income was awarded in that manner.
2) I request that CanadaCustoms and Revenue create policy that recognizes the difference between academic year income reporting and calendar reporting for those individuals whose (sic) income is based on academic planning and can document that fact. Alternately - I request I to be allowed to file my income for 2002 and 2003 on (fiscal) academic year based on July-June - just as the "average weekly income" ratio was compiled or just as my teaching contracts are written.
3) The current model of the "average weekly income" ratio is inconsistent in reporting by region, industry, and professions and was based on the 1996 census data. CanadaCustoms and Revenue has ignored 2000 census data and as a direct result the 1996 based $39000 value is inconsistent with contemporary market conditions. The average weekly income model needs to be reformed and updated and probably need to be aligned with the Calendar reporting model to be consistent and equitable.
Submissions of Counsel for the Respondent
[9] The following are the principal submissions of counsel for the Respondent (counsel's verbal Argument presented at the hearing):
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The Appellant complains that he is not able to allocate his income on an academic basis as opposed to a calendar basis, which would be more advantageous to him from a taxation perspective. He states that income amounts that he received during the 2002 calendar year were meant for other taxation years and that he should be able to allocate them to those other years. ...
The Appellant also claims the lack of such a mechanism results in discriminatory conduct by the Minister and represents an infringement of the Appellant's Section 15 Charter rights. He claims that both Section 145 of the Employment Insurance Act and Section 249 of the Income Tax Act operate to discriminate against him as a student and as a teacher. ... Law v. Canada, the general approach is to conduct a purposive and contextual analysis as opposed to an application of a fixed formula. Where the Court is called upon to determine a discrimination claim under subsection 15(1) of the Charter, it should make these three broad inquiries:
(a) Does the impugned law draw a formal distinction between the claimant and others based on one or more personal characteristics, or fail to take into account the claimant's already-disadvantaged position in Canadian society resulting in substantively differential treatment between the claimant and others based on one or more personal characteristics;
(b) Is the claimant subject to differential treatment based on one or more enumerated or analogous grounds;
(c) Does the differential treatment discriminate by imposing a burden upon or withholding a benefit from the claimant in a way that reflects the stereotypical application of presumed group or personal characteristics or which otherwise has the effect of perpetuating or promoting the view that the individual is less capable or worthy of recognition or value as a human being or as a member of Canadian society equally deserving of concern, respect and consideration.
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However, what is consistent with all Section 15 analyses is that the onus of establishing infringement is upon the claimant and, in the present matter, the Appellant has not established that his Section 15 rights have been infringed.
Now I would like to apply the law to the current appeal. The Respondent submits that the impugned provisions do not infringe the Appellant's Section 15 rights. With respect to the first question in the Section 15 analysis, the answer is that there is no differential treatment between the claimant and others. Therefore the Section 15 claim must fail. Sections 3 and 5 of the Income Tax Act deal with the inclusion of income during the year in which it is received. Section 3 sets out what qualifies as the income of a taxpayer for a taxation year. Beyond corporations which are permitted to report income on the basis of a fiscal as opposed to a calendar year, all taxpayers are required to report income earned during the calendar year as a result of Section 3.
Subsection 5(2) of the Income Tax Act states that, subject to the part of the Act dealing with income from an office or employment:
"... a taxpayer's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year."
Subsection 249(1) defines the term "taxation year," and the term is defined to mean a calendar year for individuals. That means all individuals. Paragraph 56(1)(n), ... of the Income Tax Act requires that bursaries be reported in the taxation year in which they are received. Section 145 of the Employment Insurance Act requires a taxpayer who has received EI benefits in the past to repay some of those benefits once the taxpayer's income reaches the threshold amount of $48,750.00. As with all other taxpayers, the Appellant is required to pay tax on income earned during the year and to pay back some of the EI benefits he received once he makes sufficient income.
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Now if in fact the Court finds that there is differential treatment here, it is not on the basis of a personal characteristic. Here the Appellant's complaint is purely a financial complaint, and economic status is not a personal characteristic.
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However, if the Court considers that we do need to advance to the second question of the Section 15 analysis, the Respondent submits that the Appellant is not treated differently on the basis of one or more of the enumerated or analogous grounds. Students and teachers do not constitute a group within the meaning of subsection 15(1) of the Charter. The comparator group that the Appellant appears to have selected is those people who are students with academic institutions who are in receipt of grant or bursary funds. The allegation is that people engaged in these activities are discriminated against by the Employment Insurance Act and the Income Tax Act because they earn income differently than people engaged in different activities or occupations.
Specifically, the Appellant claims that he is discriminated against because he is a student who receives scholarship or bursary income on an irregular basis from the universities that he is associated with. He claims that his inability to income-average has the effect of being discriminatory in a manner that infringes subsection 15(1) of the Charter. He claims that he is being denied procedural fairness because the Income Tax Act lacks provisions that reflect his needs and the agency is not willing to accommodate his request for income-averaging. Your Honour, students who receive income during the year through grants or bursaries are in the same position as any Canadian who receives income in that they may be required to pay a large amount of tax on that income. However, they have to include that income in the calendar year that it is received.
The fact that students or teachers may earn less income than other Canadians, or that they may receive this income at times different than other Canadians, does not amount to differential treatment and certainly not to discriminatory treatment under the Charter. Students and teachers are not subject to differential treatment based on one or more of the enumerated or analogous grounds.
Now if the Court does find that there is differential treatment based on an enumerated or analogous ground and that the third question in the analysis must be addressed, then the Respondent submits that differential treatment is not discriminatory. It is trite law at this point in the Charter jurisprudence that the Income Tax Act is full of distinctions between different taxpayers, as are most acts of Parliament and the legislatures. The issue is not whether distinctions are made in legislation, but whether the effect of the legislation is discriminatory on an individual or group because it either imposes a burden or withholds a benefit from that individual or group because of a relevant personal characteristic in a way that makes the individual or group less worthy of concern, respect or consideration.
That is not the case here. The effect of the impugned provisions is non-discriminatory. The Appellant is required, as all taxpayers are under the Act, to report income earned in the year, whether from employment, from a bursary or from other sources. If he receives more income in one year than in others, it may affect the rate at which he pays tax and the amount he has to pay, but this is the same as it would be for any individual taxpayer. If he or any other student receives more income during one year because of the accounting practices of a particular institution that is providing him with the income, it is not a reflection on the fairness of the provisions of the EI Act or the Income Tax Act, ...
Further Submissions of the Appellant Mr. Craib
[10]In response to Respondent counsel's Submissions mentioned above, Mr. Craib stated as follows:
...
with respect to the Section 15 Charter argument, the Respondent submits that the Appellant has not proved that his Charter rights have been violated and the Respondent submits that in fact there is no such violation ...
... In dealing with the three characteristics from Law, the first one -- the three questions from Law -- the first one, personal characteristics; yes, there is a definite personal characteristic here ... As a student or academic employee, my income is compiled on an academic basis, not a calendar basis. That personal characteristic relates directly to how I pay my bills and how I survive. Now, I am disadvantaged because the planning is done academically but the reporting is done on a calendar basis, ... We're ignoring the fact that there is a difference and that it's a difference that impacts a specific group of people, not everyone. So there is a class personal characteristic there.
The second one is well, what is this differential treatment? The differential treatment is in order to be a student I have to pay tuition, and that's $6,600.00 right now. That is part of this personal characteristic. I can't be a student if I don't pay the tuition. The tuition is reported as part of the income. So the characteristic is actually embedded in the whole process. If we drop the tuition credit from my income -- because what the university is doing is they give me a bursary for the tuition so that I can continue to do my research on school boards. It's the way they do business. The biggest problem there is that I don't get a right to a hearing on those personal characteristics. There is no mechanism, so how would they know?
The differential tuition makes me a different person. It makes me, in the eyes of the law, affected differently than other people would be who don't have to pay out the $6,600.00 or go through this round-about way of getting a bursary to pay for it so that I can continue my research. There is a significant problem here.
The third one she suggested is that the actions are not discriminatory, that the university should change. ...
To suggest that it's not discriminatory is to ignore the fact that we're dealing with two different worlds and nobody is willing to take a real world view of the complex problems that develop between the two of them. The university is trapped by legislation, it's trapped by statute, and it's unreasonable to expect that they have to change. She admits that there's a problem, but it's not our problem. That's unfair. That's unreasonable and that's a violation of the Charter.
Now what benefit do I get from this? What do I lose from this? There's no mechanism for me to appeal any of this. They're saying it's arbitrary, it's unreasonable, but this is the way it is and there's nothing we can do about it. Well, that's patently unfair.
There are distinctions between taxpayers, and you're not going to get around that, but the huge distinction right here is that people whose academic income is planned and paid on academic years are not going to fit into the mould of calendar years the way that things work now, with no mechanism to change this, with no benefit, no fairness. We're just simply not being reasonable, and if we're not being reasonable, it can't exist under the Charter. Our whole system of government is sited on the reasonable man and what should be reasonable, not the arbitrary, the effective and efficient nature of just saying, "All income to be reported in the year that it's received, period, no exceptions."
...
Analysis and Conclusion
[11]The principal relevant sections of the Income Tax Act are as follows:
3. The income of a taxpayer for a taxation year for the purposes of this Part is the taxpayer's income for the year determined by the following rules:
(a) determine the total of all amounts each of which is the taxpayer's income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer's income for the year from each office, employment, business and property,
...
56.(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
Pension benefits, unemployment insurance benefits, etc.
(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,
(i) a superannuation or pension benefit including, without limiting the generality of the foregoing.
Scholarships, bursaries, etc.
(n) the amount, if any, by which
(i) the total of all amounts (other than amounts described in paragraph 56(1)(q), amounts received in the course of business, and amounts received in respect of, in the course of or by virtue of an office or employment) received by the taxpayer in the year, each of which is an amount received by the taxpayer as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer, other than a prescribed prize,
exceeds
(ii) the taxpayer's scholarship exemption for the year computed under subsection (3);
...
249.(1) For the purpose of this Act, a "taxation year" is
(a) in the case of a corporation, a fiscal period, and
(b) in the case of an individual, a calendar year,
and when a taxation year is referred to be reference to a calendar year, the reference is to the taxation year or years coinciding with, or ending in, that year.
...
[12]The relevant provision of the Employment Insurance Act is section 145(1) which provides as follows:
145.(1) If a claimant's income for a taxation year exceeds 1.25 times the maximum yearly insurable earnings, the claimant shall repay to the Receiver General 30% of the lesser of
(a) the total benefits, other than special benefits, paid to the claimant in the taxation year, and
(b) the amount by which the claimant's income for the taxation year exceeds 1.25 times the maximum yearly insurable earnings.
...
[Applying this formula resulted in the EI "clawback" and deduction referred to in paragraph 22 above.]
[13]The relevant provision of the Charter is section 15(1) which reads as follows:
Equality Rights
...
15.(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
...
[14]It is clear from the provisions of the Income Tax Act that, with very few exceptions which are not applicable in this case, the income and deductions for an individual are calculated on a calendar year basis and this is the same for all individuals. The conclusion is that since the assessments and reassessments in question were based upon this rule, they are correct and in accordance with the Income Tax Act. Also, the provision of the Employment Insurance Act related to the clawback has been applied in accordance with its terms and consequently the treatment accorded to Mr. Craib as a result of the application of that provision is in accordance with the applicable law. Lastly, the Charter argument of Mr. Craib cannot succeed for all the reasons set forth in the Argument of Counsel for the Respondent quoted above, in particular, the reasons and principles described by the Supreme Court of Canada in Law v. Canada (supra). In conclusion the appeals are dismissed.
Signed at Ottawa, Canada, this 22nd day of July, 2005.
"T. O'Connor"
O'Connor, J.
COURT FILE NO.: Gary William Craib
STYLE OF CAUSE: Gary William Craib and Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
REASONS FOR JUDGEMENT BY: The Honourable Justice T. O'Connor
DATE OF JUDGMENT: July 22, 2005
APPEARANCES:
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Jenny P. Mboutsiadis |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada