Citation: 2012 TCC 77
Date: 20120314
Docket: 2008-1999(IT)G
BETWEEN:
JOSÉE OUELLET,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
AMENDED REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal from
an assessment made pursuant to section 160 of the Income Tax Act, R.S.C.
1985, c. 1 (5th Supp.), as amended (the Act), dated December 20, 2005, and bearing
the number 35111. In this assessment, the Minister of National Revenue (the
Minister) is claiming $33,264.64 from the appellant. At the hearing, the
Minister agreed to reduce the assessment to $20,622 on grounds of
fairness, following an out-of-court settlement between the appellant and the
Quebec tax authorities, in particular with respect to the application of
section 14.4 of the Tax Administration Act (TAA) (formerly the Act
respecting the Ministère du Revenu), a recovery provision that is Quebec’s
provincial equivalent to section 160 of the Act.
[2]
In making and confirming
the assessment, the Minister relied on the following assumptions of fact:
[translation]
(a) According to the Minister’s
records, the appellant and Mario Gagnon (hereinafter, the husband), have been
married since 1990;
(b) During the 2003, 2004 and 2005
taxation years, the husband made transfers through bank deposits into the
appellant’s account (hereinafter, the property);
(c) In regard to the property, the
Minister determined that a benefit had been conferred on the appellant in the
amount of $60,480.87, calculated as follows:
|
Description
Value of
property
|
Amount
$60,480.87
|
|
Consideration
given
|
$0
|
|
|
|
|
Benefit received
|
$60,480.87
|
(d) As of December 20, 2005, the
husband owed the Minister for the 2000, 2001 and 2004 taxation years a debt
totalling $33,264.64, broken down as follows:
|
Description
Taxes
Penalties
Interest
|
Amount
$18,321.95
$6,631.44
$8,311.25
|
(e) The husband, who was the
transferor, had, as of December 20, 2005, an outstanding tax liability totalling
$33,264.64 (taxes, penalties and interest) for the 2000, 2001 and 2004 taxation
years, and as the appellant had received from him a benefit of $60,480.87, the
Minister found that the appellant and the husband were jointly and severally
liable for the husband’s debt to the extent of $33,264.64.
Appellant’s position
[3]
During the hearing, the
appellant did not challenge the validity of the assessments made against her
husband for the 2000, 2001 and 2004 taxation years, or the amount of the
transfers made by her husband to her bank accounts.
[4]
However, the appellant
made the following submissions:
(a) the
payment of funds by her husband into the appellant’s bank accounts are not
transfers within the meaning of section 160 of the Act because the money was
deposited to bank accounts by him as a mandatary only, because her husband’s
bank accounts and the couple’s joint accounts had been seized by the federal
and Quebec tax authorities;
(b) her
husband transferred the funds to the appellant’s bank accounts to fulfil his
legal obligation to contribute toward the expenses of the marriage. The
appellant has only a modest income and her family includes four teenagers;
(c) the
appellant provided consideration for the funds paid by her husband, which
consideration consisted in her contributing to meeting the family obligations
by performing housework;
(d) there was
no enrichment of the appellant following the payment of the funds by her
husband;
(e) section
160 of the Act violates section 15 of the Canadian Charter of Rights and
Freedoms (the Charter) and, consequently, is unconstitutional. According to
counsel for the appellant, section 160 of the Act creates a double taxation of the
amounts transferred through its combined effect with section 14.4 of the
TAA, thereby creating inequality between residents of Quebec and those of other
provinces as regards federal tax payable.
Respondent’s position
[5]
The Minister argued that
because of her husband’s tax liability and the amounts she received from her
husband, the appellant is jointly and severally liable for her husband’s debt to
the amount of $33,264.64 pursuant to section 160 of the Act.
[6]
Counsel for the
respondent also submitted that section 160 of the Act does not violate section 15
of the Charter and is therefore not invalid.
The testimony
[7]
The appellant and her
husband, Mario Gagnon, testified at the hearing, as did Stéphane Georgeff from
the Canada Revenue Agency (the CRA).
[8]
Mario Gagnon, a roofer
who worked for himself and for other contractors, explained that he went
bankrupt on September 1, 2000. He confirmed that all his bank accounts were
seized in 2001 by the federal and Quebec tax authorities because of tax liabilities
that arose after the bankruptcy. To remedy the situation, two bank accounts
were opened in the appellant’s name at the Caisse populaire Les Estacades: one for
the deposit of Mario Gagnon’s cheques and the other for the appellant’s
personal transactions. Mario Gagnon explained that the account in which he
deposited his cheques was used to pay for groceries and the children’s school
supplies and to cover family expenses of all sorts and the mortgage payments on
the family residence. He said he had an ATM card for this account, which
enabled him to withdraw funds as needed. He stated that the appellant also had
an ATM card giving her access to both bank accounts at the Caisse populaire Les
Estacades.
[9]
Mr. Gagnon confirmed
that he had lived continuously at the family residence at 2360 Notre-Dame
Street in Sainte-Marthe-du-Cap-de-la-Madeleine. Mr. Gagnon and the appellant
acquired the property on September 19, 1994, for $49,500, having financed the
purchase through loans from the Caisse populaire Notre-Dame at an interest rate
of 6.95% per year and guaranteed by primary hypothecs totalling $37,125 and
an additional hypothec of $7,425.
[10]
According to Mr. Gagnon,
on April 12, 1995, he and the appellant borrowed $20,000 from Michel
Mayrand to carry out renovations to the residence; this loan had an interest
rate of 18% per year, and was secured by hypothecs totalling $20,000 and an
additional hypothec of $4,000.
[11]
Mr. Gagnon confirmed
that on May 3, 2000, he and his wife received from Mr. Mayrand notice of
the exercise of a hypothecary right (taking in payment) when they had been in default
only since May 1, 2000, and the arrears due and payable only amounted to $410.77.
The balance owing on the debt on April 30, 2000, was $17,691.92 in total,
consisting of $17,430.46 in principal and $261.46 in interest.
[12]
Mr. Gagnon acknowledged
that a judgment was rendered by the Superior Court of Quebec on August 8, 2000,
ordering the respondents Mario Gagnon and Josée Ouellet to
surrender their residence to the claimant, Michel Mayrand, for the purposes of
taking in payment and declaring that the claimant had taken the building in
question in payment and was the sole owner thereof retroactively to the date
the notice was registered, namely, May 12, 2000. On September 8, 2000, counsel
for Michel Mayrand attested to the content of the summary of the Superior
Court judgment and signed the statements or particulars required under the Act
respecting duties on transfers of immovables (R.S.Q., c. D-15.1) indicating
in particular that the amount of the consideration was $18,000 and the
amount constituting the basis of imposition for the transfer tax was $115,600.
[13]
Mr. Gagnon admits he
went bankrupt on September 1, 2000, at which time he had only $21,500 in total
assets, including $15,000 in a registered retirement savings plan, which is
exempt from seizure.
[14]
Mr. Gagnon also
admitted that, by a deed of sale dated November 21, 2000, Mr. Mayrand sold
the family residence to the appellant for $58,625.04, payable, as to the amount
of $31,942.81, through payment to the Caisse populaire de Notre-Dame des
Trois-Rivières of the balance of the principal owing on November 11, 2000, and
the $26,682.23 balance of the sale price at an interest rate of 18% was payable
in equal and consecutive monthly payments of $469.83 from December 1, 2000,
to November 1, 2001. The balance of the sale price was guaranteed by hypothecs on
the residence. The basis of imposition of the transfer tax was $126,600
(residence and land) at that time.
[15]
The witness explained
that he deposited all his cheques in the appellant’s accounts and paid his
personal expenses through withdrawals made with his ATM card. He further stated
that he had made transfers of funds into three accounts opened in the appellant’s
name. The account at the Caisse populaire Les Estacades was opened on October
31, 2003, and the following amounts were deposited in that account:
2003 = $5,467.15
2004 = $33,677.28
2005 = $3,867.04
[16]
The account at the
Caisse populaire Laviolette was opened on June 26, 2003, and Mr. Gagnon
deposited $10,459.77 in that account in 2003. From 2000 to 2003, the
appellant and her husband had a joint bank account at that institution.
[17]
The account at the Bank
of Montreal was opened on May 8, 2003, and Mr. Gagnon deposited the
following amounts in that account:
|
2004 = $6,188.78
2005 = $1,434.00
|
[18]
The amounts Mr. Gagnon
deposited to these three bank accounts totalled $61,094.02.
[19]
According to Mr. Gagnon,
the appellant did not have to ask his permission to make withdrawals from the
accounts mentioned in the preceding paragraph.
[20]
The appellant testified
at the hearing. From 2004, she was a monitor for drivers of buses for people
with disabilities. She was on call for two-hour periods in the morning or
afternoon, and earned $9 an hour.
[21]
The appellant
acknowledged she had had discussions with Mr. Mayrand in the context of the taking
in payment of the residence. She did not want to move her family. She said she paid
rent to Mr. Mayrand in order to be able to stay there until she bought the
residence back. According to her, Mr. Mayrand was not interested in keeping the
residence because it was not in good condition.
[22]
During her testimony,
she explained that she had her own account at the Caisse populaire Les
Estacades. She stated she had savings of some $7,000 from her family allowance
and child tax benefits. She also explained that the amounts her husband
deposited in the bank accounts barely covered the family expenses and, at the
end of the year, there was nothing left in those accounts.
[23]
According to her, the
transactions on the bank accounts in which her husband deposited money were
carried out according to her husband’s instructions.
[24]
The third and last
witness to be heard at the hearing was Stéphane Georgeff from the CRA. He
explained that Mr. Gagnon did not file an income tax return for the 2000 and
2001 taxation years but did file one for 2004. Arbitrary assessments for
$33,000 were made against him for 2000, 2001 and 2004. During the collection
procedures, he realized that Mr. Gagnon had transferred money to the appellant,
hence the assessment under section 160 of the Act.
[25]
Mr.
Georgeff indicated that the deposits made by the appellant’s husband to the
appellant’s bank accounts during the 2003, 2004 and 2005 taxation years, $106,776.58
in total, exceeded the net income the appellant reported (after deduction of
the federal tax that was withheld), that is, $26,505 in total for that
same period, for a difference in the neighbourhood of $80,000. According to the
witness, this shows that the appellant’s husband transferred amounts to the
appellant’s bank accounts that were greater than the $61,094.02 the CRA used for the purposes of the assessment
issued to the appellant.
Analysis
[26]
The relevant parts of
subsection 160(1) of the Act state:
160(1) Tax liability re property transferred not at arm’s length.
Where a person has . . . transferred property . . .
directly . . . by means of a trust or by any other means whatever, to
(a) the person’s spouse . . .
. . .
the following rules apply:
. . .
(e) the
transferee and transferor are jointly and severally liable to pay under this
Act an amount equal to the lesser of
(i) the
amount, if any, by which the fair market value of the property at the time it
was transferred exceeds the fair market value at that time of the consideration
given for the property, and
(ii) the
total of all amounts each of which is an amount that the transferor is liable
to pay under this Act in or in respect of the taxation year in which the
property was transferred or any preceding taxation year,
but nothing in this subsection shall be deemed to limit the
liability of the transferor under any other provision of this Act.
[27]
In Livingston v. R.,
[2008] 3 C.T.C. 203 (F.C.A.), the Federal Court of Appeal stated four necessary
conditions for the application of subsection 160(1):
17. In light of the clear meaning of
the words of subsection 160(1), the criteria to apply when considering
subsection 160(1) are self-evident:
(1) The
transferor must be liable to pay tax under the Act at the time of transfer;
(2) There
must be a transfer of property, either directly or indirectly, by means of a
trust or by any other means whatever;
(3) The
transferee must either be:
i. The
transferor’s spouse or common-law partner at the time of transfer or a person
who has since become the person’s spouse or common-law partner;
ii. A
person who was under 18 years of age at the time of transfer; or
iii. A
person with whom the transferor was not dealing at arm’s length.
(4) The fair
market value of the property transferred must exceed the fair market value of
the consideration given by the transferee.
[28]
In the case at bar, Mr.
Gagnon’s liability to pay tax under the Act at the time of the transfers of
money was admitted, and the assessments against him were not challenged and
were acknowledged to be valid.
[29]
The second condition is
there must be a transfer of property. The total amount of the transfers, namely
$61,094.02, was admitted, and it was clearly established in Livingston,
supra, that “[t]he deposit of funds into another person’s bank account
constitutes a transfer of property” (para. 21).
[30]
In Medland v. Canada,
98 DTC 6358, the Federal Court of Appeal held that the object and spirit of
subsection 160(1) “is to prevent a taxpayer from transferring his property to
his spouse in order to thwart the Minister’s efforts to collect the money which
is owned [sic] to him.” In this regard, what must be taken from the
evidence is the following:
(a) the
total amount (around $80,000) of the deposits the appellant’s husband made to
the appellant’s account was greater than the $61,094.02 admitted by the
appellant;
(b) the
appellant’s spouse’s assets were diminished in the months preceding his
bankruptcy by the removal of the only seizable asset following the taking of
the residence in payment on account of a late payment of an amount of $410.77 out
of a total debt of $17,691.91, and the acquisition of that residence by
the appellant for a sum of $58,625.04 with no outlay of funds, when the
residence was worth at least $126,600;
(c) the
admission, in the appellant’s and her husband’s testimony, that the bank
accounts had been opened in 2003 because Mr. Gagnon’s bank accounts had been
seized by the federal and Quebec tax authorities and that, consequently, they
had been opened to the detriment of the creditors;
(d) according
to the appellant’s and her husband’s testimony, all of the funds transferred
were used to meet family obligations and to pay the hypothec on the residence.
The appellant used the three bank accounts and had access to them through two
ATM cards, and she even occasionally made deposits into the accounts. The bank
accounts were used by both spouses, except for the Bank of Montreal account,
from which the appellant’s husband could not make withdrawals.
[31]
The third condition for
subsection 160(1) to apply is met in this case, since the transferee was
Mr. Gagnon’s spouse. The appellant and her husband had been married under the
regime of the partnership of acquests since 1990.
[32]
The fourth and last
condition involves determining whether the transferee provided sufficient
consideration to the transferor. In Yates v. Canada, 2009 FCA 50, the
Federal Court of Appeal reversed in the following terms the line of cases
regarding the obligation to support one’s family :
16 A reading of section 160 makes it clear that the only
exception provided under the Act is that of subsection 160(4) of the Act.
17 The line of cases illustrated by Michaud v. Canada,
[1998] T.C.J. No. 908 (QL); Ferracuti v. Canada, [1998] T.C.J. No. 883
(QL), Laframboise v. Canada, [2002] T.C.J. No. 628 (QL), which takes the
position that payments made by one spouse to another in satisfaction of a legal
obligation to support his or her family are beyond the reach of section 160,
is not supported by the legislation.
[33]
Family obligations do
exist but cannot constitute a legal basis for avoiding the application of
section 160.
[34]
In Waugh v. Canada,
[2008] F.C.J. No. 669 (QL), the Federal Court of Appeal reiterated what it
stated in Machtinger v. Canada, 2001 DTC 5054, regarding the burden of
establishing the fair market value of any consideration provided in exchange
for transferred property:
. . . this Court held that in the face of an
assumption by the Minister that no consideration has been provided for a
transfer of property, as contemplated by subsection 160(1) of the ITA,
the transferee has the burden of establishing the fair market value of any
consideration that has allegedly been provided in exchange for the transferred
property.
[35]
In the present case,
there is no evidence from which it can be concluded that a clear and explicit
mandate existed whereby the amounts Mr. Gagnon transferred would have been held
by the appellant as her husband’s mandatary, or that, when the transfers of
property took place, Mr. Gagnon received consideration the fair market value of
which was equivalent to the value of the transferred property.
[36]
There is no evidence in
the record establishing a correlation between the value of the appellant’s
contribution and the fair market value of the amounts deposited in the bank
accounts.
[37]
The issue of whether
the appellant was enriched or obtained some benefit as a consequence of the
transfers of property is, according to the Federal Court of Appeal, irrelevant
for the purpose of the application of subsection 160(1) of the Act (see Livingston,
supra, at paragraph 24).
[38]
In any case, it seems
clear to me that the amounts used to repay the hypothecary loan on the family
residence passed from Mr. Gagnon’s assets to the appellant’s without any
consideration being given therefor.
Does section 160 violate section 15 of the Canadian
Charter of Rights and Freedoms?
Facts specifically related to this question
[39]
The facts specifically
related to this question, as stated in the Notice of Constitutional Question
(form 69) dated August 30, 2010, are the following:
[translation]
1. The
appellant presents the facts without recognizing the MNR’s rights, certain
statements being made without any admission of the correctness of the
assessments;
2. The appellant is the spouse of a
taxpayer assessed by the Minister of National Revenue;
3. The appellant was assessed
pursuant to section 160 of the Income Tax Act and section 325 of
the Excise Tax Act;
4. The appellant had previously been
assessed by the Ministère du Revenu du Québec under section 14.4 of the Act
respecting the Ministère du Revenu;
5. Essentially, section 14.4 of the
Act respecting the Ministère du Revenu, section 325 of the Excise
Tax Act and section 160 of the Income Tax Act are practically
identical in terms of wording and the legislator’s intent, that intent being
joint and several liability with respect to the payment of the tax liabilities
of the principal debtor, called the “transferor”, by the “transferee”, in this
case the taxpayer assessed under these sections;
6. Josée Ouellet, the appellant,
was in fact assessed under section 14.4 of the Act respecting the Ministère
du Revenu for the amount of $59,394.02 in respect of hypothec payments made
by her husband, Mario Gagnon;
7. Josée Ouellet was then assessed
under section 325 of the Excise Tax Act on the basis that the
amount of $59,394.02 had been transferred by her husband to her account for no
consideration; this assessment was for $11,152.32, represented in docket 2007‑4954(GST)I;
8. Josée Ouellet was then assessed
under section 160 of the Income Tax Act, on the basis that the
amount of $59,394.02 had been transferred by her husband without consideration
to her account, this assessment being for $11,152.32, all of which is set out
in docket 2007‑4954(GST)I;
9. It can readily be seen that if Josée
Ouellet had paid all the assessments received, she would have paid twice the
amount allegedly received through her husband;
10. Josée Ouellet paid Revenue Québec
$39,858.34 pursuant to section 14.4 of the AMR in a settlement that took
place on or around December 22, 2008;
11. At the case management hearing on
October 28, 2009, counsel for Her Majesty, Vlad Zolia, gave the Tax Court of
Canada to understand that Her Majesty considered that the amount Josée Ouellet
had paid to the provincial government, that is, $39,858.34, would be subtracted
from the amounts Her Majesty was attempting to recover from Josée Ouellet in
the above-noted case;
12. In this context, despite clear
wording in section 160 and allegations that the amount of the assessment
being objected to and appealed is owing, Her Majesty’s representative admits
that, from an administrative standpoint, he will not apply the Act;
13. Her Majesty’s behaviour runs
counter to the objective of the Income Tax Act, which is the collection
of funds for the public treasury;
14. The Act must apply equally to
all; if Her Majesty waives its application, it is because she recognizes that
the effect of the Act is unfair to Quebec residents, in particular the
appellant, and thus implicitly recognizes that section 160 of the ITA has a
significant deficiency.
Legal basis of the constitutional question
[40]
The legal basis of the
constitutional question, as stated in the Notice of Constitutional Question, is
the following:
[translation]
(A) Section 160 of the ITA is unconstitutional in that it
violates section 15 of the Canadian Charter of Rights and Freedoms and
section 10 of the Charter of Human Rights and Freedoms;
(B) Moreover, the combined effect of section 14.4 of the Act
respecting the Ministère du Revenu, section 325 of the Excise Tax Act
and section 160 of the Income Tax Act is contrary to the principles of
the rule of law in that the Act does not apply equally to all, since for the
same transfer of property, a person being assessed elsewhere in Canada is only
liable to pay the amount transferred, but a person residing in Quebec is liable
to pay twice as much;
(C) Indeed, section 160 of the ITA creates a double
taxation of amounts transferred between related persons through its combined
effect with section 14.4 of the AMR as well as section 325 of the ETA;
(D) Thus, it creates inequality between residents of Quebec
and those of other provinces with regard to tax payable on a transfer (through joint
and several liability for payment);
(E) To the extent that the amount of tax owed by the transferor
exceeds the amount transferred within the meaning of section 160 of the ITA,
all residents of Quebec assessed under section 160 of the ITA or section 14.4
of the AMR or section 325 of the ETA are liable to pay more by virtue of joint liability
for payment of tax than the amount of the transfer that gave rise to the
assessment;
(F) Given the possibility that the legislator has of creating
a provincial-federal tax credit specifically for residents of Quebec, or even of
providing for a proportional application of taxation percentage points, the
potential problem of double taxation could be resolved simply and quickly.
Issue of double taxation
[41]
The appellant questions
the validity of section 160 of the Act, arguing that the combined effect
of section 160 of the Act and section 14.4 of the TAA results in “double
taxation” that only Quebec taxpayers have the burden of paying. The problem of “double
taxation” is very real and arises when the federal and Quebec tax authorities
both assess the transferee for the full amount of the same transfer in a case where
the tax liabilities of the transferor toward the CRA and the Ministère du Revenu
du Québec are both greater than the value of the property transferred.
[42]
Despite the lack of
clear legislative measures to eliminate the problem, the competent tax
authorities tend to be empathetic towards taxpayers who are subject to “double
taxation” in such circumstances. Indeed, this is what happened in the appellant’s
case. The Minister agreed, on grounds of fairness, to reduce the amount
assessed under section 160 to $20,622.53, which corresponds to the difference
between the value of the transferred property ($60,480.87) and the amount paid
to Quebec tax authorities pursuant to the assessments made against the appellant
under section 14.4 of the TAA ($39,858.34).
[43]
The same problem also
exists at the federal level through the combined effect of section 160 of
the Act and section 325 of the ETA. Section 325 and section 160 are
alike in all respects except that the amounts already assessed with respect to a
transfer under section 160 must be deducted from amounts that may be claimed
from the transferee pursuant to section 325 of the ETA. This is a partial
solution because the amounts first assessed under section 325 of the ETA cannot
defeat a subsequent assessment made under section 160 of the Act.
The Canadian Charter of Rights and
Freedoms
[44]
According to the
appellant, section 160 is unconstitutional because it violates the equality
rights enunciated in section 15 of the Charter, which reads as follows:
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.
(2) Subsection (1) does not preclude any
law, program or activity that has as its object the amelioration of conditions
of disadvantaged individuals or groups including those that are disadvantaged
because of race, national or ethnic origin, colour, religion, sex, age or
mental or physical disability.
[45]
Subsection 15(1) of the
Charter ensures the right to equality before and under the law and to equal
protection and benefit of the law (Delisle v. Canada (Deputy Attorney
General), [1999] 2 S.C.R. 989, paragraphs 25 to 27). Subsection 15(1) of
the Charter meets this objective by protecting against discrimination based on
one of the grounds listed in section 15 or on analogous grounds.
[46]
In R. v. Kapp,
[2008] 2 S.C.R. 483, 2008 SCC 41, the Supreme Court of Canada explains at
paragraph 16 that “[s]ection 15(1) is aimed at preventing discriminatory
distinctions that impact adversely on members of groups identified by the
grounds enumerated in s. 15 and analogous
grounds.”
[47]
In R. v. Turpin,
[1989] 1 S.C.R. 1296, Wilson J. commented as follows on behalf of the Supreme
Court of Canada:
The internal qualification in s. 15 that the
differential treatment be “without discrimination” is determinative of whether
or not there has been a violation of the section. It is only when one of
the four equality rights has been denied with discrimination that the values
protected by s. 15 are threatened
and the court’s legitimate role as the protector of such values comes into
play.
[48]
In Law v. Canada,
[1999] 1 S.C.R. 497, the Supreme Court of Canada explains that there is
discrimination within the meaning of subsection 15(1) when differential
treatment, if it exists, violates the human dignity or freedom of a person or
group. In this decision, Iacobucci J. stated the following at paragraph 51:
. . . It may be said that the purpose of s. 15(1) is to prevent
the violation of essential human dignity and freedom through the imposition of
disadvantage, stereotyping, or political or social prejudice, and to promote a
society in which all persons enjoy equal recognition at law as human beings or
as members of Canadian society, equally capable and equally deserving of
concern, respect and consideration. Legislation which effects
differential treatment between individuals or groups will violate this
fundamental purpose where those who are subject to differential treatment fall
within one or more enumerated or analogous grounds, and where the differential
treatment reflects the stereotypical application of presumed group or personal
characteristics, or otherwise has the effect of perpetuating or promoting the
view that the individual is less capable, or less worthy of recognition or
value as a human being or as a member of Canadian society. Alternatively,
differential treatment will not likely constitute discrimination within the
purpose of s. 15(1) where it does
not violate the human dignity or freedom of a person or
group in this way, and in particular where the differential treatment also
assists in ameliorating the position of the disadvantaged within Canadian
society.
[49]
As written, section 160
of the Act does not create a distinction between Canadian taxpayers and it
applies equally to all. Section 160 of the Act contains nothing that smacks of discrimination
nor does it refer to any personal characteristic that would lead one to believe
that residents of Quebec are treated differently than those of other provinces
or that they can be identified with a group that is discriminated against.
[50]
The differential
treatment of residents of Quebec results from a Quebec legislative provision,
namely section 14.4 of the TAA, and not from section 160 of the Act, which is
not discriminatory in itself.
[51]
In this context, it is appropriate
to consider whether the province of residence can constitute an analogous
ground of discrimination under subsection 15(1) of the Charter. The Supreme
Court of Canada has had to deal with this issue on several occasions and has
rarely conceded or recognized that the province of residence constituted an analogous
ground of discrimination.
[52]
In R. v. S. (S.),
[1990] 2 S.C.R. 254, the Supreme Court of Canada dismissed the argument that
the province of Ontario’s failure to authorize “alternative measures programs”
for the purposes of section 4 of the Young Offenders Act violated the
right to equality protected by section 15 of the Charter because there were such
programs for young offenders in all the other Canadian provinces. Dickson C.J. stated
the following at page 285 of the decision:
. . . Once it is determined that there is no duty on the Attorney
General for Ontario to implement a program of alternative measures, the non‑exercise
of discretion cannot be constitutionally attacked simply because it creates
differences as between provinces. To find otherwise would potentially
open to Charter scrutiny every
jurisdictionally permissible exercise of power by a province, solely on the
basis that it creates a distinction in how individuals are treated in different
provinces. . . .
[53]
Dickson C.J. further
stated at page 288:
Obviously, the federal system of
government itself demands that the values underlying s. 15(1) cannot
be given unlimited scope. The division of powers not only permits
differential treatment based upon province of residence, it mandates and
encourages geographical distinction. There can be no question, then, that
unequal treatment which stems solely from the exercise, by provincial
legislators, of their legitimate jurisdictional powers cannot be the subject of
a s. 15(1)
challenge on the basis only that it creates distinctions based upon province of
residence.
[54]
In Haig v. Canada,
[1993] 2 S.C.R. 995, the Supreme Court of Canada had to determine whether
restricting the right to vote during a Quebec referendum to individuals who had
resided in Quebec for more than six months constituted a form of discrimination
based on a ground analogous to those listed in subsection 15(1) of the Charter.
The Court held as follows at page 1044:
Against this background, the appellants submit that a person’s place
of residence may be a personal characteristic which is analogous to those
prohibited grounds listed in s. 15(1).
Though this may well be true in a proper case, this case is not such a
case. It would require a serious stretch of the imagination to find that
persons moving to Quebec less than six months before a referendum date are
analogous to persons suffering discrimination on the basis of race, religion or
gender. People moving to Quebec less than six months before a referendum
date do not suffer from stereotyping, or social prejudice. Though its
members were unable to cast a ballot in the Quebec referendum, the group is not
one which has suffered historical disadvantage, or political prejudice.
Nor does the group appear to be “discrete and insular”. Membership
in the group is highly fluid, with people constantly flowing in or out once
they meet Quebec’s residency requirements. As they do not exhibit any of
the traditional indicia of discrimination, I cannot find that new residents of
a province constitute a group which merits the creation of a new s. 15(1)
category.
[55]
The Supreme Court of
Canada also made the following comment regarding the differential treatment
that could arise in a federal political system such as ours (Haig, supra,
pages 1046 and 1047).
Clearly, in a federal system, province-based distinctions do not
automatically give rise to a presumption of discrimination. Section 15(1) of the Charter, while
prohibiting discrimination, does not alter the division of powers between
governments, nor does it require that all federal legislation must always have
uniform application to all provinces. It is worth emphasizing that, as
Dickson C.J. commented in R. v. S. (S.), supra, at
pp. 289-92, differential application of federal law in different provinces
can be a legitimate means of promoting and advancing the values of a federal
system. Differences between provinces are a rational part of the
political reality in the federal process. Difference and discrimination
are two different concepts and the presence of a difference will not
automatically entail discrimination.
[56]
In light of the above-cited
Supreme Court of Canada decisions, it is not clear that taxpayers’ province of
residence can be an analogous ground of discrimination within the meaning of
subsection 15(1) of the Charter. Each case, of course, turns on its own facts.
[57]
In the present appeal,
the appellant did not establish:
(a) that she belonged to a discrete and
insular minority;
(b) that this minority was defined by characteristics
analogous to the grounds of discrimination listed in subsection 15(1) of the
Charter; and
(c) that the Act is prejudicial to this
minority.
[58]
In fact, the appellant’s
constitutional question is purely hypothetical because she is not subject to “double
taxation” as a consequence of the combined application of section 160 of the
Act and section 14.4 of the TAA. The concession made by counsel for the
respondent at the start of the hearing was for the very purpose of avoiding the
“double taxation” resulting from the combined application of section 160 of the
Act and section 14.4 of the TAA. Moreover, it should be noted that the “double
taxation” that might affect residents of Quebec is not automatic, but exists only
potentially, in cases where the tax liability of the transferor toward both the
CRA and the Ministère de Revenu du Québec is greater than the value of the
property transferred.
[59]
At the hearing, counsel
for the appellant did not argue either the rule of law or section 10 of the
Charter.
[60]
For these reasons, the
appeal from the assessment made pursuant to section 160 of the Act, dated
December 20, 2005, is allowed and the assessment is referred back to the
Minister of National Revenue for reconsideration and reassessment taking into
account the concession made by the Minister on grounds of fairness, which was to
reduce the amount assessed to $20,622.53. Section 160 does not violate
subsection 15(1) of the Charter. Costs are awarded to the respondent.
Signed at Ottawa, Canada, this 23rd day of March 2012.
“Réal Favreau”
Translation certified
true
on this 28th day
of February 2014.
Erich Klein,
Revisor
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