Date:
20020710
Docket:
2001-1890-IT-I
BETWEEN:
GARY
RENZ,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Judgment
Little,
J.
FACTS
[1]
The relevant facts are summarized in the Agreed Statement of
Facts as follows:
1. The
Appellant was a resident of Canada for the period January 1, 1998
to July 30, 1998, inclusive.
2. The
Appellant, during his period of residency in Canada, was employed
by the University of Regina in Regina, Saskatchewan.
3. On July
30, 1998 the Appellant emigrated from Canada, and became a
non-resident of Canada.
4. The
Appellant during the 1998 taxation year paid interest on student
loans (the "Loans").
5. The Loans
were made by two American student loan organizations. The Student
Loan Corp. and EFG Technologies.
6. The
interest paid on the Loans during the 1998 taxation year was
$4,567.96 in American dollars.
7. The
Appellant paid $4,517.48 in American dollars in interest to The
Student Loan Corp. in 1998.
8. The
Appellant paid $50.48 in American dollars in interest to EFG
Technologies in 1998.
9. The Loans
funded the Appellant's attendance at the University of
California at Los Angeles.
10. The Appellant
claimed $3,810.43 in Canadian dollars as a non-refundable tax
credit on his 1998 personal income tax return.
11. By Notice of
Assessment dated June 17, 1999, the Minister of National Revenue
(the "Minister") assessed the Appellant's income
tax return for the 1998 taxation year as filed.
12. By Notice of
Reassessment dated December 29, 1999, the Minister reassessed the
Appellant's income tax return for the 1998 taxation year and
disallowed the interest paid on student loans as claimed by the
Appellant.
13. The interest paid
during the 1998 taxation year did not relate to a loan made to
the Appellant under the Canada Student Loans Act, the
Canada Student Financial Assistance Act or a law of a
Canadian Province.
14. The interest paid
during the 1998 taxation year did not relate to an amount owing
under the Canada Student Loans Act, the Canada Student
Financial Assistance Act or a law of a Canadian
Province.
ISSUE
[2]
The issue is whether the Appellant is entitled to claim a tax
credit pursuant to section 118.62 of the Income Tax Act
(the "Act") relating to the interest paid by him
on his student loans during the 1998 taxation year. The interest
was paid to two organizations in the United States namely the
Student Loan Corp. and EFG Technologies.
ANALYSIS
[3]
As noted in the Agreed Statement of Facts the Appellant agrees
that the interest that he paid on the student loans during the
1998 taxation year did not relate to student loans made to him
under the Canada Student Loans Act, the Canada Student
Financial Assistance Act or a law of a Canadian
Province.
[4]
The legal authority that provides for a tax credit for interest
paid on a student loan is contained in section 118.62 of the
Act. Section 118.62 of the Act reads as
follows:
118.62.
Credit for interest on student loan
For the
purpose of computing an individual's tax payable under this
Part for a taxation year, there may be deducted the amount
determined by the formula
A
× B
where
A
is the appropriate percentage for the year;
and
B is the total of all amounts (other
than any amount paid on account of or in satisfaction of a
judgement) each of which is an amount of interest paid in the
year (or in any of the five preceding taxation years that are
after 1997, to the extent that it was not included in computing a
deduction under this section for any other taxation year) by the
individual or a person related to the individual on a loan made
to, or other amount owing by, the individual under the Canada
Student Loans Act, the Canada Student Financial Assistance
Act or a law of a province governing the granting of
financial assistance to students at the post-secondary school
level.
[5]
In order to quality for a tax credit, section 118.62 specifies
that the interest that is paid must relate to student loans made
under the Canada Student Loans Act, the Canada Student
Financial Assistance Act or a law of a Canadian Province
governing the granting of financial assistance to students at the
post-secondary school level. In my opinion the words of
section 118.62 are clear and unambiguous on this issue and the
Appellant does not come within the wording of the section.
Furthermore, since the words contained in section 118.62 are
clear it is not necessary to resort to any aids to construction
in order to interpret the words of the Act.
[6]
The Appellant has stated in his written submission that enforcing
the provisions of the Act against the Appellant violates
section 346 of the North America Free Trade Agreement
("NAFTA") because it discriminates against foreigners
by limiting the tax deductibility of interest paid on students to
the type of loans specified in the Act.
[7]
I do not agree with the Appellant's statement. In my opinion
the words contained in section 118.62 of the Act apply
equally to citizens of Canada and non-citizens of
Canada.
[8]
I also wish to note that NAFTA contains provisions designed to
resolve disputes under NAFTA. I agree with the comments of
counsel for the Respondent where he referred to NAFTA and said in
paragraph 25 of his written submission:
The
Respondent submits that these provisions for dispute resolutions
are exhaustive for the purpose of dealing with disputes arising
from NAFTA.
[9]
The Appellant also argues that enforcing the provisions of the
Act against him violates the non-discrimination provision
found in article XXV of the Canada-United States Tax
Convention.
[10] I do not
agree. In my opinion there is no distinction created by
section 118.62 between Canadian citizens and United States
citizens. A Canadian citizen is subject to the same restrictions
found in section 118.62 as a citizen of the United
States.
[11] The
Appellant also argues that a strict application of the provisions
of section 118.62 of the Act is logically inconsistent
with the underlining intent of the Canadian tax
legislation.
[12] I do not
agree. As I have noted above the words contained in
section 118.62 of the Act are clear and unambiguous
and the intent of Parliament in enacting those words is obvious.
I also wish to note that the Technical Notes released by the
Minister of Finance in October 1998 support the statement that I
have made concerning the intent of Parliament in enacting section
118.62 (In this connection see Tab 4 of the Respondent's
Record).
[13] The appeal
is dismissed.
Signed at
Vancouver, British Columbia, this 10th day of July
2002.
J.T.C.C.
COURT FILE
NO.:
2001-1890(IT)I
STYLE OF
CAUSE:
Gary Renz and
Her Majesty the Queen
PLACE OF
HEARING:
by way of written submissions
DATE OF
HEARING:
REASONS FOR
JUDGMENT BY: The Honourable Judge L.M.
Little
DATE OF
JUDGMENT:
July 10, 2002
APPEARANCES:
Agent for
the
Appellant:
Counsel
for the
Respondent:
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-1890(IT)I
BETWEEN:
GARY
RENZ,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
the
Honourable Judge L.M. Little
JUDGMENT
This decision is based upon the Agreed Statement of Facts and the
written submissions provided by the Appellant and the
Respondent.
The appeal from the assessment made under the Income Tax
Act for the 1998 taxation year is dismissed in
accordance with the attached Reasons for Judgment.
Signed at
Vancouver, British Columbia, this 10th day of July
2002.
J.T.C.C.
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