Citation: 2011 TCC 532
Date: 20111122
Docket: 2010-3405(IT)I
BETWEEN:
MYRON C. STOGRIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Hogan J.
[1]
This appeal is from
reassessments issued by the Minister of National Revenue (the “Minister”) for
the 2006 and 2007 taxation years.
I. FACTS
[2]
In all relevant years,
Myron C. Stogrin (the “Appellant”) was employed by a transport company
as a long-haul truck driver. He was remunerated at a rate of $0.40 per mile and
certain driving expenses, e.g., fuel, were covered by the employer. His typical
expenses while away on long trips for deliveries and pickups were for meals and
showers, as he slept in his truck most of the time.
[3]
He traveled from places
such as Vancouver and the Okanagan in B.C. to Tampa, Fla., Charlotte, N.C. and
New York, N.Y. Canadian law mandates maximum driving times of 70 hours per
week and 15 hours per day, followed by a mandatory break of 48 hours,
but the Appellant was required to stay with the rig even during downtime to
prevent fuel or goods from being stolen.
[4]
Mr. Stogrin was
audited for 2004, 2005, 2006 and 2007 but he brought separate appeals for 2004‑2005
and 2006‑2007. As regards the instant appeal, for 2006 and 2007, he was reassessed using the simplified method for
calculating expenses as he had not retained his receipts. The Appellant disagreed
with the 50 percent limit on his meal and lodging deductions imposed by
section 67.1 of the Income Tax Act (the “Act”) and believed
that the Court had discretion to allow a greater deduction or could petition
the Minister on his behalf, through this appeal, to change the law. He
attempted to claim the full amount of his daily meal and lodging expenses and
not just the 50 percent allowed by the Minister. He based his claim in
part on the assertion that government employees received a much higher per diem
for lodging, meal and travel expenses.
[5]
The Appellant claims he
had encountered difficulties in dealing with the Canada Revenue Agency (the “CRA”)
in this and another case and faced unwarranted delays in attempting to resolve
this case.
II.
ANALYSIS
Income Tax Act
[6]
The Income Tax Act
provides as follows:
Income Tax Act
8(1) Deductions allowed — In computing a taxpayer’s income for a
taxation year from an office or employment, there may be deducted such of the
following amounts as are wholly applicable to that source or such part of the
following amounts as may reasonably be regarded as applicable thereto:
. . .
(g) Transport employee’s expenses
— where the taxpayer was an
employee of a person whose principal business was passenger, goods, or
passenger and goods transport and the duties of the employment required the
taxpayer, regularly,
(i) to travel, away from the municipality where the employer’s
establishment to which the taxpayer reported for work was located and away from
the metropolitan area, if there is one, where it was located, on vehicles used
by the employer to transport the goods or passengers, and
(ii) while so away from that municipality and metropolitan area, to
make disbursements for meals and lodging,
amounts so disbursed by the taxpayer in the year to the extent that
the taxpayer has not been reimbursed and is not entitled to be reimbursed in
respect thereof;
(h) Travel expenses — where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the office or
employment away from the employer’s place of business or in different places,
and
(ii) was required under the contract of employment to pay the travel
expenses incurred by the taxpayer in the performance of the duties of the
office or employment,
amounts expended by the taxpayer in the year (other than motor
vehicle expenses) for travelling in the course of the office or employment,
except where the taxpayer
(iii) received an allowance for travel expenses that was, because of
subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing the
taxpayer’s income for the year, or
(iv) claims a deduction for the year under paragraph (e), (f)
or (g);
. . .
(2) General limitation — Except as permitted by this section, no
deductions shall be made in computing a taxpayer’s income for a taxation year
from an office or employment.
. . .
(4) Meals — An amount expended in respect of a meal consumed by a taxpayer who
is an officer or employee shall not be included in computing the amount of a
deduction under paragraph (1)(f)
or (h) unless the meal was consumed during a period while the taxpayer
was required by the taxpayer’s duties to be away, for a period of not less than
twelve hours, from the municipality where the employer’s establishment to which
the taxpayer ordinarily reported for work was located and away from the
metropolitan area, if there is one, where it was located.
. . .
67.1(1) Expenses for food, etc. [or entertainment] — Subject to
subsection (1.1), for the purposes of this Act, other than sections 62, 63,
118.01 and 118.2, an amount paid or payable in respect of the human consumption
of food or beverages or the enjoyment of entertainment is deemed to be 50 per
cent of the lesser of
(a) the amount actually paid or payable in
respect thereof, and
(b) an amount in respect thereof that would be reasonable in
the circumstances.
(1.1) Expenses for food and beverages of long‑haul truck
drivers — An amount paid or payable by a long‑haul truck driver in
respect of the consumption of food or beverages by the driver during an
eligible travel period of the driver is deemed to be the amount determined by
multiplying the specified percentage in respect of the amount so paid or
payable by the lesser of
(a) the amount so paid or payable, and
(b) a reasonable amount in the circumstances.
. . .
(5) Definitions — The following definitions apply for the purpose of this section.
. . .
“specified percentage” in respect of an
amount paid or payable is
(a) 60 per cent, if the amount is paid or becomes payable on
or after March 19, 2007 and before 2008;
(b) 65 per cent, if the amount is paid or becomes payable in
2008;
(c) 70 per cent, if the amount is paid or becomes payable in
2009;
(d) 75 per cent, if the amount is paid or becomes payable in
2010; and
(e) 80 per cent, if the amount is paid or becomes payable
after 2010.
Canadian Charter of Rights and Freedoms
[7]
The Canadian Charter
of Rights and Freedoms (the “Charter”) provides as follows:
Rights and freedoms in Canada
1. The Canadian Charter of Rights and Freedoms guarantees the
rights and freedoms set out in it subject only to such reasonable limits
prescribed by law as can be demonstrably justified in a free and democratic
society.
. . .
Life, liberty and security of person
7. Everyone has the right to life, liberty and security
of the person and the right not to be deprived thereof except in accordance
with the principles of fundamental justice.
Search or seizure
8. Everyone has the right to be secure against unreasonable search
or seizure.
. . .
Proceedings in criminal and penal matters
11. Any person charged with an offence has the right
. . .
(b) to be tried within a reasonable time;
. . .
(h) if finally acquitted of the offence, not to be tried for
it again and, if finally found guilty and punished for the offence, not to be
tried or punished for it again; and
. . .
Equality before and under law and equal protection and benefit of
law
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.
[8]
Information Circular 73-21R9 “Claims for Meals and
Lodging Expenses of Transport Employees” (applicable for 2006 and 2007)
describes the two methods of calculating deductions accepted by the CRA. According
to the CRA, the detailed method requires anyone who claims a deduction
to maintain a record book detailing:
·
the date the expense
was paid;
·
the time the trip
started and ended;
·
the geographical location
(e.g., name of the town);
·
the name of the
restaurant or hotel where the amount was paid;
·
the type of expense;
and
·
the amount paid.
[9]
The recorded expenses
will be allowed to the extent that they are reasonable and supported by
vouchers, i.e., receipts. These expenses are subject to the 50 percent
limitation in section 67.1 of the Act.
[10]
The simplified
method, on the other hand, merely requires the transport employee to
maintain a record of his or her trips actually taken during the taxation year. There
is a flat rate per meal of $17 to a maximum of $51 for three meals per day,
without any need to produce receipts for, or proofs of the expenditures. This
is, again, subject to the 50 percent limitation or to a higher limitation
in prescribed circumstances.
[11]
As a preliminary
matter, the Appellant argued that the reassessments should be vacated on the
grounds that the Respondent failed to deal with the matter in a timely manner.
The Appellant also raised Charter‑based arguments against the
reassessments.
[12]
In Rahey (C.R.) v. M.N.R., this Court
dismissed an application to vacate an assessment on the basis that the near
decade‑long delay in having the case heard was so unreasonable as to have
violated the Appellant’s rights under section 7 and paragraph 11(b)
of the Charter. In addressing the paragraph 11(b) argument, the
Court stated:
. . . In my view, section 11 of the Charter has no
application in cases of this sort. The respondent in assessing tax and
penalties did not charge the appellant with an offence within the
meaning of the Charter. . . . Nothing said in Wigglesworth
v. The Queen, [1987] 2 S.C.R. 541, supports a contrary view, that is to
say a view that an assessment of a penalty under subsection 163(2) of the Income
Tax Act involves a prosecution of an offence in a civil or criminal
proceeding. . . .
[Emphasis added.]
[13]
The Court also quickly
dismissed the section 7 argument, stating that it does not protect
property rights and that “no frailty in proceedings taken to collect the tax
(if any such frailty exists) can justify vacating the assessment of tax
itself.”
[14]
In Bolton v. R., the Federal Court
of Appeal considered the effect of the Minister’s failure to consider the
taxpayer’s assessment “with all due dispatch” as required by section 152(1)
of the Act. The Federal Court of Appeal concluded as follows:
. . . Parliament clearly did not intend that the
Minister’s failure to reconsider an assessment with all due dispatch should
have the effect of vacating such assessment. If the Minister does not act, the
taxpayer’s recourse is to appeal pursuant to section 169 . . . .
[15]
In Kasaboski v. R., Bowie J.
explains the policy behind the use of the simplified method:
While it has no legal foundation, the Minister's willingness to
accept meal claims by transport employees on the so-called simplified basis is
a recognition of the injustice that would result if claims were to be totally
denied if the taxpayer could not produce a corroborating log. The $33.00 per
day that he allows is a recognition of what I consider to be a truism — a
taxpayer should never benefit from a failure to keep proper records. . . .
It is generally true, however, that taxpayers who estimate their expenditures
are more likely to overestimate them than to underestimate them.
[16]
Several cases have
established that the fact that public servants travelling on government
business receive a per diem that is higher than the meal and lodging deduction
permitted by section 67.1 is not a violation of a person’s rights under
the Charter.
[17]
In Smith v. Canada, truck drivers
representing each province and the Yukon Territory
brought a class action against the Federal Government claiming that they and
all other non‑government workers who travel for a living should be
allowed deductions at the same rate as government employees who travel on
business. They sought to have section 67.1 of the Act struck down
as a violation of section 8 and subsection 15(1) of the Charter.
[18]
Beames J. addresses the
question of the inequality created by section 67.1 of the Act as
follows:
5 . . . Most employees in Canada are not permitted any deduction from
their income for meal expenses. However, s. 8(1)(g) of the Income Tax
Act provides that transport employees whose duties of employment require
regular travel outside the municipality where the employer is located and where
they report to work, and who are required to incur expenses for meals and
lodging which are not reimbursed by the employer, may deduct meal expenses.
6 Section 67.1 of the Income Tax Act provides
that all deductions in respect of meals shall be deemed to be 50 percent of the
lesser of the amount actually paid and the amount that would be reasonable in
the circumstances. Section 67.1 has general application to meal and
entertainment expenses, and it is not limited to the meal expenses of truck
drivers or transport workers.
. . .
9 As the defendants' counsel said in submissions, the
plaintiffs are not just trying to compare apples and bananas; they are seeking
to compare apples and monkeys. The federal government, as an employer, enters
into employment contracts with its employees. That one of the terms of its
employment contracts relates to meal allowances does not entitle the
plaintiffs, who are employed by other employers, to say that they are entitled
in some way to a deduction for tax purposes equivalent to the federal
government employment contract allowance. As Bowie J. said in Kasaboski v.
R., 2005 TCC 356 . . .
Allowances paid to public servants are established as a term of
their employment. They are not at all relevant to the matter before me...they
certainly cannot establish an entitlement to a deduction from income not found
in the Act.
10 The federal government is not obliged to
confer a tax benefit on any particular group. Truck drivers are, in fact, the
recipients of a tax benefit that is not available to all Canadians, namely,
that they can, if eligible, deduct meal expenses at 50 percent of either actual
expenditures, capped only by what is reasonable, or a flat rate of $15 per meal
or $45 per day. If a truck driver had claims of $75 for meals, supported by
receipts, and Canada Revenue Agency took the position that the amount was not
reasonable, then perhaps some comparison between that position and the federal
government employee allowance might be warranted. However, it is illogical to
compare the tax benefit of the deduction allowed to truck drivers to meal allowances
granted to government employees.
These conclusions were affirmed on appeal
to the British Columbia Court of Appeal. That court dismissed the appeal on the
grounds that “tax deductions cannot be compared with employment benefits.”
[19]
Two fairly recent cases
in this Court stand out as dealing with similar facts and arguments to those in
the present case. Both were decided under the informal procedure.
[20]
In Kozmeniuk v. R., the appellant,
Ms. Kozmeniuk, was a long‑distance transport driver who did not maintain
receipts or records for his meal expenses and chose to claim a deduction based
on the simplified method. Mr. Kozmeniuk appealed a reassessment
disallowing his claimed meal and lodging expenses above the $45 per day maximum.
He had claimed $54 per day, including meals eaten at his home base, arguing, in
essence, that civil servants were allowed $54 per day and so should he.
[21]
This Court began its
reasoning by pointing out that “[a]n overriding problem in this appeal is the lack
of receipts” and that the appellant chose to use the simplified method. It concluded
that $45 per day or $15 per meal was reasonable and that if the Appellant had had
receipts as factual evidence to establish a higher deduction, the Court would
have allowed it.
[22]
In the 2009 case of Neault
v. The Queen,
the appellant again was employed as a long‑distance truck driver. For the
2004 taxation year, Mr. Neault opted to use the simplified method and did
not keep his meal receipts. The Court explains at paragraph 6:
I cannot allow Mr. Neault any amount greater than the $45
daily maximum permitted by the simplified method and used by the CRA in reassessing
his 2004 tax year. If Mr. Neault wanted to claim more he could have
followed the detailed vouchered and logged method that income tax law otherwise
requires. While the Treasury Board amounts for meal allowances may show that
$45 is not the maximum reasonable amount that could be deducted by a taxpayer,
it cannot help Mr. Neault's claim unless he can show in evidence that he
spent more than $45 each day and that each day qualified. This he did not do.
III. CONCLUSION
[23]
There is no question
that during the relevant taxation years Mr. Stogrin incurred, as a
transport employee, unreimbursed meal and lodging expenses while away from the
municipality in which his employer was located as is required for the deduction
in paragraphs 8(1)(g) and (h) of the Act.
[24]
Section 8 and subsection
15(1) of the Charter were relied on to argue that the application of the
simplified method is unfair. The cases in this area establish that the
limitation in section 67.1 of the Act does not give rise to a
seizure or create a distinction that, by its purpose or effect, violates the Charter.
[25]
Like the appellants in Smith,
supra, and Gaudet v. the Queen,
the Appellant alleges that he is being discriminated against on the basis of his
employee status. He contends that he should receive a tax deduction that would
produce a tax saving roughly equivalent to the economic benefits enjoyed by
government employees with respect to similar expenses. This argument has failed
before the Supreme Court of Canada. Section 67.1 has been repeatedly
affirmed to be fair in light of the Charter.
[26]
Thus, the CRA has not
discriminated against Mr. Stogrin by applying the limitation to his meal
and lodging deductions claimed under section 67.1 of the Act. His
arguments based on the Charter fail for the reasons noted in the
above-cited cases. The deductions calculated for Mr. Stogrin’s 2006 and
2007 tax assessments after applying the limitation should stand. I note,
however, that counsel for the Respondent wrote to the Court after the trial to
concede that the Appellant is entitled to deduct further employment expenses of
$1,020 and $1,224 for the 2006 and 2007 taxation years respectively, pursuant
to sections 8 and 67.1 of the Act. These amounts represent 40
more days of travel.
[27]
For the reasons noted
above, the appeal is allowed in part only and the matter is referred back to
the Minister for reconsideration and reassessment on the basis that the
Appellant is entitled to additional deductions of $1,020 and $1,224 for the
2006 and 2007 taxation years respectively.
Signed at Ottawa, Canada, this 22nd day of November 2011.
"Robert J. Hogan"
Email this Content