Citation: 2011 TCC 295
Date: 20110609
Docket: 2007-2261(IT)I
BETWEEN:
MICHELE BAPTISTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre J.
[1]
These are appeals from assessments
or reassessments made by the Minister of National Revenue (Minister)
under the Income Tax Act (ITA) for the appellant’s 1995, 1998,
1999, 2000, 2001, 2002, 2003, 2004 and 2005 taxation years.
Issue and preliminary remarks of the parties
[2]
The issue is whether during those
years the employment income received by the appellant was taxable pursuant to
sections 2, 3 and 5 of the ITA, or whether it was exempt income pursuant
to paragraph 81(1)(a) of the ITA. The appellant is of the view that
her employment income should be considered as personal property of an Indian
situated on a reserve within the meaning of section 87 of the Indian
Act (IA) and therefore should be exempt from taxation. The
appellant relies principally on the Supreme Court of Canada’s decision in Nowegijick v. the
Queen, [1983] 1 S.C.R. 29, to argue that the situs of her
employment income was a reserve because the employer’s residence was on a
reserve.
[3]
The respondent on the other hand, argues
that these appeals are related to over 1,000 other appeals before the Tax Court
of Canada involving workers from the same placement agency, Native Leasing
Services (NLS) or its sister company O.I. Employment Leasing Inc. (OI).
The issue raised here has been considered by this Court, the Federal Court of
Appeal and the Supreme Court of Canada and the law with respect thereto is well
settled. In considering whether employment income is situated on a reserve,
various connecting factors have to be taken into account, of which the location
or residence of the employer is one. Among the others are the nature, location
and surrounding circumstances of the work performed by the employee (including
the nature of any benefit that accrued to the reserve from that work) and the
residence of the employee. The respondent argues that it was held in Horn v.
The Queen, 2008 FCA 352, and Rachel Shilling v. M.N.R., 2001
FCA 178, that the interposition of NLS as the employer does not
significantly connect the employment income to a reserve in a manner relevant
to section 87 of the IA. The respondent submits that the appellant carried
out her income-earning activities in the “commercial mainstream”, and did not
receive employment income that was situated on a reserve as contemplated by
section 87 of the IA.
Facts admitted by consent through the production of the Statement of
Agreed Facts (Exhibit A-3).
[4]
The appellant was employed by NLS,
a corporation owned and operated by Roger Obonsawin, who is a status Indian for
the purposes of the IA. NLS’s head office is on the Six Nations of the Grand
River Reserve (Six Nations) and is part of a group of companies all
owned by Mr. Obonsawin (OI Group). Mr. Obonsawin is a member of the
Odanak First Nation on the Odanak reserve, but he has never lived on that
reserve. The OI Group provides consulting services and employment
placement services to employers and employees in Canada’s Native communities. NLS
was created in 1991 to lease employees, whether status or non-status, to Native
organizations. The NLS concept of leasing employees is that they rent out an
employee and provide all administration and human resources support services as
the employer. The employees get their instructions and direction from the
placement organization for which they work and to which they report. NLS is
responsible for the payroll, and invoices the placement organization on the basis
of employees’ time sheets approved by the on-site supervisor. As regards
banking, the operating accounts of NLS were off-reserve up until 1996. Thereafter,
it had some on-reserve bank accounts. The key functions of the employee-leasing
operations were performed on the Six Nations Reserve by an administrative staff
numbering from 8 to 15 people, depending on the year. All NLS files were kept
at the Six Nations Reserve office. The rent paid to the Six Nations Band
Council and the salary and benefits paid to on-reserve staff, which constituted
the direct benefits to the reserve, were approximately $230,000 to $240,000 for
the years 1995 and 1996. There were other direct benefits resulting from the
training of personnel who lived on the reserve, but those benefits are
difficult to quantify. The entire gross revenue of NLS is generated
off-reserve. It is estimated that the OI Group had approximately 800 employees
by 1997, 1,000 in 1999 and as many as 1,400 in the years between 1999 and 2006.
The only functions carried out on-reserve were administrative functions. In
1995 and 1996 respectively, NLS had gross revenue of $15,692,945 and
$13,344,801, all of which was derived from the work of NLS employees
off-reserve. 95% of NLS’s costs were the wages and benefits paid to its
employees who were contracted to off-reserve organizations. These costs of
employees’ pay and benefits are funded by the clients in what is essentially a
flow‑through whereby the employees’ pay and benefits are deposited by the
client in NLS’s bank account to be drawn down (less the service fee) to fund
NLS’s payroll for the employees leased to the client. Roger Obonsawin has no
financial statements for NLS after 1997 although the business continues to
operate.
Relevant legislative provisions
Income Tax Act
81. (1)
Amounts not included in income – There shall not be included in computing
the income of a taxpayer for a taxation year,
(a) Statutory
exemptions [including Indians] – an amount that is declared to be exempt
from income tax by any other enactment of Parliament, other than an amount
received or receivable by an individual that is exempt by virtue of a provision
contained in a tax convention or agreement with another country that has the
force of law in Canada;
Indian Act
87. (1)
Property exempt from taxation – Notwithstanding any other Act of Parliament
or any Act of the legislature of a province, but subject to section 83 and
section 5 of the First Nations Fiscal and Statistical Management Act, the
following property is exempt from taxation:
(a) the
interest of an Indian or a band in reserve lands or surrendered lands; and
(b) the
personal property of an Indian or a band situated on a reserve.
[Emphasis
added.]
Facts
[5]
Ms. Baptiste is a status
Indian who is a member of the Pikwakanagan Algonquin First Nation in Golden Lake,
Ontario. She was born in Toronto, and her parents moved back to the reserve for a
while when she was young. She grew up "a little bit" on the reserve,
but her father, an iron worker, had to move around a lot on account of his
work. They lived in Ottawa, Toronto, Cleveland and Port Perry. She herself now lives in Toronto
(Transcript, p. 13). She still has family living on the reserve and goes
there at least twice a year. She votes in band council elections but has very
little command of her Native language. She owns with her brother a piece of
land on the reserve. She completed studies in marketing management at Centennial College in 1989.
[6]
In 1993, the Canadian Council for
Aboriginal Business gave her a referral for a position at Miziwe Biik, which is
an organization providing training and employment services for the Greater
Toronto Area’s Aboriginal community, helping urban Native people to secure
employment and to benefit from federal and provincial training programs (see
Fresh as Amended Notice of Appeal, par. 10). Ms. Baptiste applied for
the position at Miziwe Biik, was interviewed and was offered a job directly by that
organization (formerly known as the Greater Toronto Aboriginal Management
Board). She was hired as a marketing officer and signed a contract of
employment agreement with NLS on June 21, 1993. She was an employee of NLS
but received direction from Miziwe Biik. Her salary was paid by NLS from its
office located on the Six Nations of the Grand River Reserve (see the contract
of employment agreement, Exhibit R‑1, Tab 2). Ms. Baptiste
explained that NLS (referred to as OI) was administering the payroll and
employee benefits for Miziwe Biik, and that all the employees (all Aboriginal)
were “leased employees through the organization [NLS/OI]” (Transcript, pp. 17‑20). As a
marketing officer, she helped First Nation clients to find jobs within the
Greater Toronto Area. She was working with potential employers to develop
training programs and collaborated with Native organizations from the
surrounding area with respect to the placement of job candidates. The location
of her work was in Toronto but she had a fair number of joint
meetings away from the office with other organizations. Miziwe Biik’s clients
were Aboriginal people, which include status and non-status Indians (see
Transcript, p. 23).
[7]
In March 1996, she
was offered a position as Assistant Manager – Employment Equity in a pilot
project at the Bank of Nova Scotia. Her mandate was to recruit primarily Aboriginal
people, but also persons with disabilities, to work at branches of the Bank of
Nova Scotia located in Toronto. The bank hired her on a one-year
contract. On her own initiative, she approached the bank and asked to be
employed through OI. This proposal was accepted and there was signed between OI
and the bank on July 8, 1996, a placement agreement whereby OI was to be responsible
for paying Ms. Baptiste’s salary, using the fees remitted to it by the bank
(Exhibit R‑1, Tab 5, par. 1 to 4)). The same day, Ms. Baptiste
signed a contract of employment agreement with OI (Exhibit R‑1, Tab 6).
Ms. Baptiste explained that she filled out time sheets, which were then
approved by her superior at the bank (examples of such time sheets were filed
as Exhibit R‑1, Tab 57) and that she regularly faxed to OI, which
then invoiced the bank (Transcript, p. 33). OI deposited her salary
directly in her bank account located on the reserve. During her first year, she
travelled around to various organizations (including some First Nations
communities), universities and colleges to advertise the recruitment of Aboriginals
by the bank in Toronto and to search for candidates (Transcript,
pp. 29‑30).
[8]
Her contract was
extended year after year. In 1997, the bank had created a National Diversity
Program to develop relationships with First Nation communities across the
country. She started working in the Diversity division as National Manager - Aboriginal
Employment. Her duties were to create an Aboriginal employee retention strategy
for the bank and then to travel across Canada,
with regional Diversity Managers, to First Nations communities to present that
strategy. She would hold information sessions on careers at the bank. She also
participated in various career fairs, especially those aimed specifically at Aboriginal
students. She said in examination in chef that she travelled on an as-needed
basis, probably a week and a half per month, mainly in northern Ontario, but also in the western provinces. Her work was done
on-and off-reserve (Transcript, pp. 34‑39). In 1998, although still
working on internal programs aimed at hiring Aboriginal employees, she started
working closer with the bank’s Aboriginal Banking Unit on business
opportunities for the bank with First Nations communities, opportunities such
as providing banking services or commercial loans to Aboriginals. She was asked
to participate, from a human resources perspective, in the discussion of the
bank’s strategy for doing business with those communities (Transcript, pp. 39‑41
and p. 47). In her performance appraisal report for 1999, she said in her
own comments that the feedback received from Aboriginal community members was
that the bank was seen as investing in the overall well-being of Aboriginal
people and looking at the long-term benefits. In that same report, the assessor’s
comments were that Ms. Baptiste made a strong contribution by raising the
profile of the bank in the Aboriginal community, that she created beneficial
partnerships between that community and the bank, although she did not always
have the full agreement of internal partners at the bank (see Exhibit R‑1,
Tab 20, page 2, Key Accountability # 2). In her examination in
chief, she said that the community referred to above included the on-and off-reserve
First Nations community as well as the urban Aboriginal community (Transcript,
p. 46).
[9]
In 2000, she was
transferred to a new service line – Shared Services-HR –created by the bank,
and became the National Manager - Aboriginal Employment (Transcript, pp. 50‑54,
and Exhibit R‑1, Tab 21). She worked on different Aboriginal initiatives
programs sponsored by the bank for students (such as career options symposia, mentoring,
junior achievement, and a scholarship program) and also on supporting Aboriginal
cultural activities such as elders’ gatherings. This entailed more travelling in
the field. In addition the bank was approached with respect to financing
on-reserve casinos in Alberta, one of the reasons for this being the
fact that its largest First Nation customer was the casino located on the Rama
First Nation, where the bank had a branch (Transcript, p. 57, and
Performance Appraisal Report for 2001, Exhibit R‑1, Tab 22, Key
Accountability # 2). Ms. Baptiste also mentioned that she played the
lead role in 2003 in securing over $82 million of business for the bank with
the Siksika First Nation in Alberta. She stated that because of her
relationship with key people on the Siksika reserve, the bank was asked to make
a presentation with respect to obtaining the land claim settlement trust
account (see the Measurements of Success Report for Ms. Baptiste for 2003,
Exhibit R‑1, Tab 23, Objective/Accountability # 3). In
cross‑examination, she explained that her role was to assist the bank in
preparing for the bid and that she would travel out to the communities to give
the First Nations an overall view of how the bank operated within First Nations
communities (Transcript, pp. 109‑110). As a general finding in her
appraisal reports, Ms. Baptiste was considered by her superior as playing
an important role in bridging some of the cultural gaps and in lending
credibility to the bank’s message that it was committed to the objective of
building strong relationships with Aboriginal communities (see Measurements of
Success Report for Ms. Baptiste for 2004 and 2005, Exhibit R‑1,
Tabs 24 and 25).
[10]
In 2005, the bank created
a designated budget for Ms. Baptiste’s travel, so that she could travel
without submitting a prior request to the bank. Before 2005, she had needed
approval from Human Resources (Transcript, pp. 64‑66). Over the
years that she was with the bank, she stated, she visited approximately 40‑45
reserves, as per Exhibit A‑2, a document created for the purposes of
the trial from her own recollection. She was let go by the bank in 2009
(Exhibit R-1, Tabs 54-55).
[11]
In cross-examination,
Ms. Baptiste acknowledged that the postings for internship opportunities
at the bank were distributed in universities and different organizations
located in urban areas (Exhibit R‑1, Tab 30). With respect to
travel to reserves, she did not keep any record (Transcript, p. 77). She
said that in number of cases, she travelled with other people to visit
communities and did not claim mileage expenses. She acknowledged that her
business-related travel expenses were debited to her bank’s commercial credit
card (Transcript, p. 79). In her Fresh as Amended Notice of Appeal, at
paragraph 16, she stated that she visited reserves 70 per cent of the
time. However, from the commercial card monthly statements filed as Exhibit R‑1,
Tabs 26 to 29, it can be seen that she was staying in hotels in urban
areas and that she did not travel away from Toronto
more than one week per month (Transcript, p. 96). In her report on “frequent
activities/meetings” in the Aboriginal community found in Exhibit R‑1,
Tab 21, most of the activities listed were held in Toronto and very few on reserves (Transcript, pp. 99‑102).
In re-examination, she mentioned that the records filed before this Court were
not a complete record of expense reports (Transcript, p. 104). She also
said that mileage claims did not appear on the commercial card statements
because she did not use the card for that purpose (Transcript, pp. 105‑106).
[12]
Ms. Gertrude
Saulnier, Director of Human Resources at the Bank of Nova Scotia, testified.
She said that up to 2001, Ms. Baptiste reported to Diversity Managers who
in turn reported to her. They worked together on initiatives specific to the Aboriginal
community or on diversity in general. The bank worked on employment equity with
a view to diversifying its workforce and thereby ultimately benefiting its
business. In Ms. Saulnier’s own terms, “it wasn’t just about people; it
was about the business as well” (Transcript, p. 117). In 2001, Ms. Baptiste’s
role was split into different components. She worked on retention of Aboriginal
employees and on programs sponsored by the bank for Aboriginal people. She was
also involved as a consultant for the business partners at the bank, helping
them understand the Aboriginal community in general (Transcript, pp. 118‑119).
Starting in 2001, Ms. Baptiste reported directly to Ms. Saulnier. Ms. Saulnier
recommended any salary increase or any incentive pay, which was determined on
the basis of her performance rating. Once the pay amount was determined, Ms. Saulnier
would advise OI to invoice the bank (see as an example Exhibit R‑1,
Tabs 43 and 44 and Transcript, p. 120). OI did not have any input into
determining Ms. Baptiste’s salary. Ms. Saulnier estimated from
looking at all the parking charges incurred by Ms. Baptiste in Toronto,
that Ms. Baptiste spent 40 per cent of her time in her office in Toronto (Transcript, pp. 122 and 127). According to
Ms. Saulnier, there were no business records for travel other than the
commercial credit card statements (Transcript, p. 129). The bank paid all
travel expenses. OI did not pay such expenses. Ms. Baptiste’s mandate was
to develop Aboriginal relationships and to recognize business opportunities for
the bank (Transcript, pp. 122-123). She would accompany bankers onto
reserves to introduce them, but it was not her mandate to go onto reserves to
get business (Transcript, p. 123). For example, she was not the one who
negotiated the $82 million worth of business with the Siksita First Nation in Alberta. Ms. Baptiste was the expert on the bank’s
commitment to the Aboriginal community, but not on the trust business deal. The
bankers themselves did the negotiating. The work done by Ms. Baptiste on
that project was mostly over the phone. She went out to the reserve for that project
maybe two or three times in the course of the year (Transcript, pp. 132‑133).
Appellant’s arguments
[13]
The appellant argued
that the intention of Parliament in implementing section 87 of the IA was to
protect Indians from the erosion of their property on a reserve and that a
liberal interpretive approach applies to any statute relating to Indians
(reference was made to Mitchell v. Peguis Indian Band, [1990] 2 S.C.R.
85 (QL) at paragraphs 15 and 87). Acknowledging that a connecting factors
approach has been adopted by the courts to determine the location of employment
income for tax purposes, the appellant, submitted, however, that this approach
is a very fact‑specific exercise (reference was made to Horn v. The
Queen., 2008 FCA 352, at paragraph 8). In her view, the facts of her
case are unique and distinguishable from those in the cases relied on by the
respondent. She argued that she has demonstrated that she was working on
reserves for status Indians.
[14]
With respect to the
connecting factors, the appellant stated that the residence of the debtor is an
important factor, and could even be the exclusive one. Relying on Williams
v. Canada, [1992] 1 S.C.R. 877 (QL), at paragraph 18, the appellant argued
that the guiding principle is that a status Indian should be able to exercise a
choice to situate his or her property within or outside the protection of the
IA. In her case, she deliberately made the choice to situate her employment
income on a reserve as she chose to work for OI or NLS, those employers being
located on a reserve. The respondent has admitted that Ms. Baptiste’s
employer was OI or NLS and that can no longer be challenged in any way
(Transcript, pp. 149-150, 153-154).
[15]
With respect to the
other connecting factors, the appellant submitted that her employer conferred
significant benefits on the First Nations community generally. It is not
disputed by the respondent that the NLS and OI group of companies employ
approximately 8 to 15 Six Nations band members at any given time to administrate
the employee leasing operations from the reserve (Transcript, p. 161, and
Statement of Agreed Facts, Exhibit A-3, paragraph 6). According to the most
recent statistics, the salaries and benefits for the office staff located on
the Six Nations Reserve totalled almost $250,000. The OI and NLS group of
companies also leased their premises from the Six Nations Band Council, and
contributed significant indirect benefits to First Nations communities
generally. One of the NLS and OI group of companies’ goals was to assist in the
development of a self‑supporting network of client organizations and
potential Aboriginal employees in Canada. This approach
allowed the improvement of skills in Aboriginal organizations through the
provision of training, governance and skills development services, and Ms. Baptiste
was working in precisely that field (Transcript, pp. 161-163).
[16]
With respect to the
location and surrounding circumstances of the work performed, Ms. Baptiste’s
duties were directly tied to the recruitment of Aboriginal people and helping
them acquire management skills and access to equity and loan financing, which
is one concern expressed in the Report of the Royal Commission on Aboriginal
Peoples (Transcript, pp. 163-167, and Exhibit A-1). In her view, there is
little doubt that her work contributed to the Aboriginal community in Canada,
both on-and off-reserve (reference was made by counsel to Canada v. Folster,
[1997] 3 F.C. 269, where the Federal Court of Appeal suggested that it is the
benefit to the community from the duties performed which should be considered
and not the strict location of their performance, see Transcript, p. 169). Even
if Ms. Baptiste was not working directly on a reserve, she was working on the
development of a relationship to benefit First Nations (Transcript, p. 169).
In her view, the fact that the work was done off-reserve did not in itself
disqualify her income from attracting the protection of section 87 of the
IA.
[17]
The appellant also
referred to the decision of this Court in Robertson v. The Queen, 2010
TCC 552 (under appeal to the Federal Court of Appeal), in which Hershfield J.
expressed his thoughts on the concept of the “commercial mainstream” in
determining whether property is situated on a reserve. He wrote as follows at
paragraphs 117 et seq.:
iii) the commercial mainstream
117 As a preliminary
comment, I share the discomfort expressed by counsel for the Appellants and for
the Crown that all businesses run by aboriginal people should be found to be
outside Canada's "commercial mainstream" simply because of some
attachments to a reserve. On the other hand, in seeking clarification of the
proper interpretation of this term, I am guided by the words of Linden, J.A. in
Recalma v. R. where he confirmed that the section 87 analysis should not
overemphasize the "commercial mainstream" test. At paragraph 9 he
noted:
... We should indicate that the concept of
"commercial mainstream" is not a test for determining whether
property is situated on a reserve; it is merely an aid to be used in evaluating
the various factors being considered. It is by no means determinative. The
primary reasoning exercise is to decide, looking at all the connecting factors
and keeping in mind the purpose of the section, where the property is situated,
that is, whether the income earned was "integral to the life of the
Reserve", whether it was "intimately connected" to that life,
and whether it should be protected to prevent the erosion of the property held
by Natives qua Natives.
118 In another part of
the judgment he expressed the same view slightly differently:
9 ... It
is also important in assessing the different factors to consider whether the
activity generating the income was "intimately connected to" the
Reserve, that is, an "integral part" of Reserve life, or
whether it was more appropriate to consider it a part of "commercial
mainstream" activity.
[Emphasis
added.]
119 The first passage
looks at the connection of the activity to the life on the reserve as if that
could prevail as a governing factor even if the activity is in the commercial
mainstream. The second passage introduces an "or" which suggests that
an activity cannot be both an integral part of life on the reserve and be in
the commercial mainstream. I cannot accept that these two aspects were meant to
be mutually exclusive in all cases. The test is to find whether the activity
being part of the commercial mainstream is the dominant aspect of its being
undertaken with its contribution to community life being incidental or
contrived. Viewing the test in this way permits the historical significance of
the activity to life on the reserve to weigh-in as a relevant factor in helping
to assess the dominant aspect of the activity.
[18]
The appellant is of the
view that there is evidence that her work was integral to the Indian community.
She gave as an example the $82 million land grant trust on which she worked for
the bank. In her view, it helped the First Nation concerned develop and grow
its economy, as recommended in the Report of the Royal Commission on
Aboriginal Peoples (Transcript, pp. 176-177).
[19]
Finally, the appellant
submitted that her work greatly benefited Aboriginal communities, specifically
in providing financing and business acumen and by charitable contributions that
were provided to First Nations through different organizations.
[20]
In summary, Ms. Baptiste
is of the view that steps taken by her through her work to maintain and foster
the connection with reserve communities, coupled with the fact that her
employer was located on a reserve and the fact that she travelled to reserves
for her work, are important factors that should weigh in favour of exempting
her employment income from taxation.
Respondent’s arguments
[21]
The respondent is of
the view that taxing Ms. Baptiste’s employment income does not erode the property
of those living on a reserve. In Monias v. The Queen, 2001 FCA 239,
Evans J.A. stated:
22 However, before I
turn to the application of the connecting factors test, I would make three
preliminary observations. First, as La Forest J. said in Mitchell v. Sandy
Bay Indian Band, [1990] 2 S.C.R. 85 (S.C.C.), at 131, the policy underlying
section 87 is not to redress generally the economic disadvantages suffered by
Indians "by ensuring that Indians may acquire, hold and deal with property
in the commercial mainstream on different terms than their fellow
citizens."
23 Rather, like the
companion provision in section 89, the more limited and specific purpose of
section 87 is to protect reserve lands, and Indians' personal property on a
reserve, from erosion, so that the Bands are able to sustain themselves on the
reserves as economic and social units. Hence, it is fully consistent
with legislative policy to apply section 87 to income that is earned by Indians
who reside on a reserve from work that is performed on a reserve.
. . .
66 That the work from
which employment income is earned benefits Indians on reserves, and indeed may
be integral to maintaining the reserves as viable social units, is not in itself
sufficient to situate the employment income there. It is not the policy of
paragraph 87(1)(b) to provide a tax subsidy for services provided to and
for the benefit of reserves. Rather, it is to protect from erosion by taxation
the property of individual Indians that they acquire, hold and use on a
reserve, although in the case of an intangible, such as employment income, it
is the situs of its acquisition that is particularly important.
67 By enacting
paragraph 87(1)(b) Parliament made an important exception to the
principle that those similarly situated should be treated in the same way for
tax purposes. However, the paragraph cannot be read as exempting from income
tax Indians' employment income that was not clearly earned in circumstances
that link its acquisition to a reserve as an economic base.
[22]
The respondent submitted that Ms. Baptiste’s
case does not depart significantly from that of the appellant in Rachel Shilling,
supra. In that case, Rachel Shilling was placed in a non-profit
organization in Toronto to help other Aboriginal people in the Greater Toronto
Area. In 1995 and 1996, Ms. Baptiste worked at Miziwe Biik, an organization
that assisted Aboriginal people in the Greater Toronto Area in finding work and
improving their skills, and that assisted them in general. The respondent
referred to the Miziwe Biik 2003/2004 annual report (Exhibit R-2). With
respect to that organization’s vision, it is stated that Aboriginal people in
Toronto face many barriers when attempting to join the workforce and that the
organization is committed to breaking down those barriers by providing Native
people with access to training programs and employment services, and by
entering into partnerships within the Aboriginal community and non-Aboriginal
community. Its mission is to assist all persons of Aboriginal ancestry in the
Greater Toronto Area to attain a better quality of life (Exhibit R-2, Tab 1,
page 1). Miziwe Biik has its office in downtown Toronto and the
people working for that organization work in Toronto.
[23]
Subsequently, and for the majority
of the years at issue, Ms. Baptiste worked for a commercial, for-profit
bank. Her superior testified
that when Ms. Baptiste worked for the bank she spent approximately 40 per
cent of her time at the office in Toronto. The fact
that Ms. Baptiste was travelling outside the office and visiting reserves
is not in itself determinative of the situs of the income (reference was
made to Monias, supra, at par. 37, and Akiwenzie v. The Queen,
2003 FCA 469, at par. 3). Finally, with respect to the necessity argument made
by the appellant regarding the $82 million land claim settlement trust account,
namely, that Ms. Baptiste could not work from the reserve the entire time, the
respondent referred to the decision of the Federal Court of Appeal in Desnomie
v. Canada, [2000] F.C.J. No. 528 (QL). In that case Rothstein J.A., as he
then was, said the following:
(2) The location of the employer, the
employee and the employment is dictated by factors beyond the control of the
employer or employee.
15 The
appellant says that the off-reserve location of the employer should be given
little weight in the connecting factors analysis. All directors of the MIEA
reside on reserves. All are members of Indian bands. Meetings of the board are held
in Winnipeg out of necessity. A related argument is
that the place where the appellant works and where the services are performed
-- off-reserve -- also should not be given significant weight. Education
opportunities beyond grades 9 or 10 are not available on reserves. Students
must leave the reserve and move to Winnipeg to pursue
their education. The services provided by the appellant in these circumstances
are provided in Winnipeg because there is no realistic way for
them to be provided on a reserve. Therefore, the employer, the employee and the
employment are intensively connected to various Indian reserves in Manitoba.
16 In Union
of New Brunswick Indians v. New Brunswick (Minister of
Finance), a similar
argument was made in respect of sales tax paid by New Brunswick Indians on
purchases of goods made off-reserve to be used on the reserve. It was said that
the Indians were obligated to make such purchases off the reserve and therefore
the protection afforded by section 87 was eroded. McLachlin J. (as she then
was), for the majority, rejected this argument. After noting that in the event
of ambiguity, an interpretation that most favours the Indians is to be
preferred (paragraph 6), she stated at paragraphs 37 and 38:
37. The respondents argue that s. 87
is intended to protect Indians from taxation in respect of their use of
property on-reserve. Where Indians are obliged to purchase most of their goods
off reserve, as most are in New
Brunswick, this protection
is eroded. Therefore, they submit that s. 87 should be read as applying to
sales tax levied off reserve on goods purchased by Indians for use on the
reserve. This was the view of the majority of the New Brunswick Court of
Appeal.
38. The first difficulty with this
argument is that it takes the purpose of s. 87 far beyond that articulated
by this Court in Williams -- to prevent Indian property on Indian
reserves from being eroded by taxation or claimed by creditors. No support has
been offered for the proposed extension, except this would economically benefit
Indians. But that, this Court has stated, is not the purpose of s. 87: see Mitchell
and Williams. La Forest J. in Mitchell (at p. 133),
specifically cautioned against attributing an expansive scope to the s. 87
exemption:
...one must guard against describing an
overly broad purpose to ss. 87 and 89. These provisions are not intended to
confer privileges on Indians in respect of any property that they may acquire
and possess, wherever situated. Rather, their purpose is simply to insulate the
property interest of Indians in their reserve lands from the intrusion and
interference of the larger society so as to ensure that Indians are not
dispossessed of their entitlements.
17 The
necessity argument in New Brunswick Indians is, if anything, more
compelling than in the appeal at bar. There, the goods being purchased, of
necessity off the reserve, were for use on the reserve. Nonetheless, the
argument failed as taking the purpose of section 87 far beyond what was
articulated in Williams -- to protect Indian property on Indian reserves
from being eroded by taxation.
18 In this
case what is at issue is the appellant's employment income. The appellant is a
member of the Peepeekisis Band, located twenty miles east of Fort Qu'Appelle in Saskatchewan. In 1989,
he had lived off his reserve, in Winnipeg, for nine or
ten years. As the learned Tax Court Judge stressed, it is the appellant's
personal property that has to be "situated on a reserve ...". There
is no connection here between the appellant's employment income and the
Peepeekisis Reserve in Saskatchewan.
19 The
necessity argument is based on the connection between the MIEA and the services
performed by the appellant on the one hand, and students from various reserves
in Manitoba on the other. It explains why it makes
sense for the MIEA and the appellant to be located in Winnipeg, even as they are providing services to Indian students from reserves.
20 However,
the object of the connecting factors test is to determine the situs of intangible
property for purposes of section 87, having regard to whether the Indian holds
the property as part of an entitlement of an Indian qua Indian on the
reserve. In Union of New Brunswick Indians McLachlin J. reaffirmed this
purpose at paragraph 8:
The purpose of the s. 87 exemption was to
"preserve the entitlements of Indians to the reserve lands and to ensure
that the use of their property on the reserve lands was not eroded by the
ability of governments to tax, or creditors to seize". It "was not to
confer a general economic benefit upon the Indians": see Williams,
supra, at p. 885.
Having regard to intangible property she
continued at paragraph 12:
Again, in Williams, supra,
the Court, per Gonthier J. confirmed the approach in Mitchell
in determining whether the situs of unemployment insurance
benefits was on or off the reserve for the purposes of taxation. As the
benefits, intangible personal property, were effectively on the reserve at the
time of taxation, they were exempt from taxation pursuant to s. 87.
21 The
necessity argument in effect says that the employer, employee and place of
employment would be on a reserve if that were possible and therefore the
employment income should be treated as if it were located on a reserve. The
difficulty with this argument is that in the circumstances of this case, it
does not deal with the issue at hand, namely, whether the appellant's
employment income is his property on a reserve. This is a locational, or situs
determination, based upon the location of the relevant transactions. The
implication of the appellant's argument is that as long as an Indian is
performing work for an Indian employer and for Indians from reserves, his
employment income should be tax exempt, irrespective of where he, his employer,
or the place of the employment is located, or where he is paid. There is no
doubt the nature of the appellant's work is related to assisting reserve
Indians when they move off the reserve. There is also no doubt that his
employer is an Indian organization. The problem is that these considerations do
not connect the appellant's employment income to any particular reserve. Even
if it could be argued that the section 87 exemption applies when the property
of an Indian is located on a reserve other than his own, in this case the
nature of the employer and the employment alone do not identify a specific
reserve to which the appellant's property can be connected. Therefore, these
considerations do not help to locate his employment income.
22 To accept the necessity argument as
justifying a section 87 exemption from tax on the appellant's employment income
would, as found by McLachlin J. in Union of New Brunswick Indians, extend
the purpose of section 87 far beyond that articulated in Williams. While
not having to pay income tax would undoubtedly benefit the appellant, that is
not the purpose of section 87. In the circumstances of this case, the necessity
argument does not assist the appellant.
[24]
The respondent is of
the view that Ms. Baptiste’s work was more beneficial to the bank than to
the Aboriginal community. An example of this is the $82 million worth of
deposits in 2003. The present case invloves a commercial bank doing commercial
business on a reserve. There is no immediate and discernable nexus between
Ms. Baptiste’s work and the occupancy of reserve land. In summary, the
location of the work, the nature of the work and the circumstances surrounding
it point towards an off-reserve source of the income.
[25]
With respect to the
benefits to reserves and the location of the employer, the case law with
respect to the same employer has already determined the issue in a way which is
not favourable to the appellant. Finally, Ms. Baptiste did not reside on a
reserve.
[26]
In conclusion, the
respondent submitted that the connecting factors in fact, support the
assessments.
Analysis
[27]
The matter of the
exemption from taxation of personal property of an Indian situated on a reserve
has been addressed frequently by our courts in Canada.
[28]
In Williams, supra,
Gonthier J. summarized the view expressed by La Forest J. in Mitchell,
supra, and made his own analysis, as follows:
A -- The Nature and Purpose of the Exemption
from Taxation
16 The question of
the purpose of sections 87, 89 and 90 has been thoroughly addressed by La
Forest, J. in the case of Mitchell v. Peguis Indian Band (sub nom. Mitchell
v. Sandy Bay Indian Band), [1990] 2 S.C.R. 85, 71 D.L.R. (4th) 193. La
Forest, J. expressed the view that the purpose of these sections was to
preserve the entitlements of Indians to their reserve lands and to ensure that
the use of their property on their reserve lands was not eroded by the ability
of governments to tax, or creditors to seize. The corollary of this conclusion
was that the purpose of the sections was not to confer a general economic
benefit upon the Indians (S.C.R. at pages 130-31):
The exemptions from taxation and distraint have
historically protected the ability of Indians to benefit from this property in
two ways. First, they guard against the possibility that one branch of
government, through the imposition of taxes, could erode the full measure of
the benefits given by that branch of government entrusted with the supervision
of Indian affairs. Secondly, the protection against attachment ensures that the
enforcement of civil judgments by non-natives will not be allowed to hinder
Indians in the untrammelled enjoyment of such advantages as they had retained
or might acquire pursuant to the fulfillment by the Crown of its treaty
obligations. In effect, these sections shield Indians from the imposition of
the civil liabilities that could lead, albeit through an indirect route, to the
alienation of the Indian land base through the medium of foreclosure sales and
the like; see Brennan J.'s discussion of the purpose served by Indian tax
immunities in the American context in Bryan v. Itasca County, 426 U.S.
373 (1976), at page 391.
In summary, the historical record makes it clear
that sections 87 and 89 of the Indian Act, the sections to which
the deeming provision of section 90 applies, constitute part of a legislative
"package" which bears the impress of an obligation to native peoples
which the Crown has recognized at least since the signing of the Royal
Proclamation of 1763. From that time on, the Crown has always acknowledged that
it is honour-bound to shield Indians from any efforts by non-natives to
dispossess Indians of the property which they hold qua Indians, i.e.,
their land base and the chattels on that land base.
It is also important to underscore the corollary
to the conclusion I have just drawn. The fact that the modern-day
legislation, like its historical counterparts, is so careful to
underline that exemptions from taxation and distraint apply only in respect of
personal property situated on reserves demonstrates that the purpose of the
legislation is not to remedy the economically disadvantaged position of Indians
by ensuring that Indians may acquire, hold, and deal with property in the
commercial mainstream on different terms than their fellow citizens. An
examination of the decisions bearing on these sections confirms that Indians
who acquire and deal in property outside lands reserved for their use, deal
with it on the same basis as all other Canadians.
17 La Forest, J. also noted that the protection from seizure
is a mixed blessing, in that it removes the assets of an Indian on a reserve
from the ordinary stream of commercial dealings (S.C.R. at pages 146-47).
18 Therefore, under
the Indian Act, an Indian has a choice with regard to his personal
property. The Indian may situate this property on the reserve, in which case it
is within the protected area and free from seizure and taxation, or the Indian
may situate this property off the reserve, in which case it is outside the
protected area, and more fully available for ordinary commercial purposes in
society. Whether the Indian wishes to remain within the protected reserve
system or integrate more fully into the larger commercial world is a choice
left to the Indian.
19 The purpose
of the situs test in section 87 is to determine whether the Indian holds
the property in question as part of the entitlement of an Indian qua
Indian on the reserve. Where it is necessary to decide amongst various
methods of fixing the location of the relevant property, such a method must be
selected having regard to this purpose.
B -- Nature of Benefit and the Incidence of Taxation
. . .
21 This Court’s decision in Nowegijick
v. The Queen, [1983] 1 S.C.R. 29, [1983] C.T.C. 20, 83 D.T.C. 5041, stands
for the proposition that the receipt of salary income is personal property for
the purpose of the exemption from taxation provided by the Indian Act. .
. .
22 Nowegijick also stands for
the proposition that the inclusion of personal property in the calculation of a
taxpayer's income gives rise to a tax in respect of that personal property
within the meaning of the Indian Act, despite the fact that the tax is
on the person rather than on the property directly.
23 Therefore, most of the requirements
of section 87 of the Indian Act have clearly been met in this case. . .
. The remaining question is whether the property in question is situated on a
reserve.
. . .
C -- Comments on the "Residence of the
Debtor" Test
25 The factor
identified in previous cases as being of primary importance to determine the situs
of this kind of property is the residence of the debtor, that is, the person
paying the income. This was clearly stated by Thurlow, A.C.J. in The Queen
v. National Indian Brotherhood, [1978] C.T.C. 680, 78 D.T.C. 6488 (T.D.),
at page 684 (D.T.C. 6491):
A
chose in action such as the right to a salary in fact has no situs. But
where for some purpose the law has found it necessary to attribute a situs,
in the absence of anything in the contract or elsewhere to indicate the
contrary, the situs of a simple contract debt has been held to be the
residence or place where the debtor is found. See Cheshire, Private International Law, seventh
edition, pp. 420 et seq.
26 This conclusion
was cited with approval by this Court in Nowegijick v. The Queen, supra,
at page 22 (D.T.C. 5043, S.C.R. 34):
The Crown conceded in argument, correctly in my
view, that the situs of the salary which Mr. Nowegijick received was
sited on the reserve because it was there that the residence or place of the
debtor, the Gull Bay Development Corporation, was to be found and it was there
that the wages were payable. See Cheshire and North, Private International
Law (10th ed., 1979) at 536 et seq. and also the judgment of Thurlow
A.C.J. in R. v. National Indian Brotherhood, [1979] 1 F.C. 103 particularly
at 109 et seq.
27 The only
justification given in these cases for locating the situs of a debt at
the residence of the debtor is that this is the rule applied in the conflict of
laws. The rationale for this rule in the conflict of laws is that it is at the
residence of the debtor that the debt may normally be enforced. Cheshire and North, Private International Law
(11th ed. 1987), quote Atkin, L.J. to this effect in New York Life Insurance
Co. v. Public Trustee, [1924] 2 Ch. 101 (C.A.), at page 119:
... the reason why the residence of the debtor
was adopted as that which determined where the debt was situate was because it
was in that place where the debtor was that the creditor could, in fact,
enforce payment of the debt.
28 Dicey and Morris
adopt the same explanation in The Conflict of Laws (11th ed. 1987), vol.
2, at page 908, as does Castel in Canadian Conflict of Laws (2nd ed.
1986), at page 401. This may be reasonable for the general purposes of
conflicts of laws. However, one must inquire as to its utility for the purposes
underlying the exemption from taxation in the Indian Act. . . .
. . .
32 In resolving
this question, it is readily apparent that to simply adopt general conflicts
principles in the present context would be entirely out of keeping with the
scheme and purposes of the Indian Act and Income Tax Act. The
purposes of the conflict of laws have little or nothing in common with the
purposes underlying the Indian Act. It is simply not apparent how the
place where a debt may normally be enforced has any relevance to the question
whether to tax the receipt of the payment of that debt would amount to the
erosion of the entitlements of an Indian qua Indian on a reserve.
The test for situs under the Indian Act must be constructed
according to its purposes, not the purposes of the conflict of laws. Therefore,
the position that the residence of the debtor exclusively determines the situs
of benefits such as those paid in this case must be closely re-examined in
light of the purposes of the Indian Act. It may be that the
residence of the debtor remains an important factor, or even the exclusive one.
However, this conclusion cannot be directly drawn from an analysis of how the
conflict of laws deals with such an issue.
IV -- The Proper Test
. . .
37 The approach
which best reflects these concerns is one which analyzes the matter in terms of
categories of property and types of taxation. For instance, connecting factors
may have different relevance with regard to unemployment insurance benefits
than in respect of employment income, or pension benefits. The first step is to
identify the various connecting factors which are potentially relevant. These
factors should then be analyzed to determine what weight they should be given
in identifying the location of the property, in light of three considerations:
(1) the purpose of the exemption under the Indian Act; (2) the type of
property in question; and (3) the nature of the taxation of that property. The
question with regard to each connecting factor is therefore what weight should
be given that factor in answering the question whether to tax that form of
property in that manner would amount to the erosion of the entitlement of the
Indian qua Indian on a reserve.
38 This approach
preserves the flexibility of the case-by-case approach, but within a framework
which properly identifies the weight which is to be placed on various
connecting factors. Of course, the weight to be given various connecting
factors cannot be determined precisely. However, this approach has the
advantage that it preserves the ability to deal appropriately with future cases
which present considerations not previously apparent.
. . .
61 Determining
the situs of intangible personal property requires a court to evaluate
various connecting factors which tie the property to one location or another.
In the context of the exemption from taxation in the Indian Act,
there are three important considerations: the purpose of the exemption; the
character of the property in question; and the incidence of taxation upon that
property. Given the purpose of the exemption, the ultimate question is
to what extent each factor is relevant in determining whether to tax the
particular kind of property in a particular manner would erode the entitlement
of an Indian qua Indian to personal property on the reserve.
[Emphasis
added.]
[29]
The respondent is
therefore right in the way she addressed the issue in the present case. The
question to be asked is whether taxing Ms. Baptiste’s employment income
would amount to the erosion of the entitlement to property as an Indian qua
Indian on a reserve. The situs of the employer is but one factor to
consider among all the other connecting factors.
[30]
In Folster, supra,
Linden J.A. of the Federal Court of Appeal stated the following at paragraphs 14
et seq.:
14 . . . La Forest J. characterized the purpose of
the tax exemption provision as, in essence, an effort to preserve the
traditional way of life in Indian communities by protecting property held by
Indians qua Indians on a reserve. Section 87, however, was not intended
as a means of remedying the economic disadvantage of Indians. Although a
laudable goal, it is not for the courts to attempt to achieve it by stretching
the boundaries of the tax exemption further than they can be supported on a
purposive reading of the legislation. Where, therefore, an Aboriginal person
chooses to enter Canada's so-called "commercial mainstream",
there is no legislative basis for exempting that person from income tax on his
or her employment income. Hence, the requirement that the personal property be
"situated on a reserve". The situs principle provides an
internal limit to the scope of the tax exemption provision by tying eligibility
for the exemption to Indian property connected with reserve land. Thus, as will
be seen, where an Indian person's employment duties are an integral part of a
reserve, there is a legitimate basis for application of the tax exemption
provision to the income derived from performance of those duties.
. . .
16 . . .
Gonthier J. crafted a new test based on the foundation of La Forest J.'s
purposive analysis in Mitchell. He recognized that, although there are
necessarily many factors which may be of assistance in determining the situs
of intangible property such as unemployment insurance or employment income, the
relevance of these "connecting factors" must be assessed on the basis
of their ability to further the purpose of section 87. Further, the weight to
be given to each factor may change from case to case.
A connecting factor is only relevant in
so much as it identifies the location of the property in question for the
purposes of the Indian Act. In particular categories of cases,
therefore, one connecting factor may have much more weight than another. It
would be easy in balancing connecting factors on a case by case basis to lose
sight of this.
. . .
This new test was not designed to extend
the tax exemption benefit to all Indians. Nor was it aimed at exempting all
Indians living on reserves. Rather, in suggesting reliance on a range of
factors which may be relevant to determining the situs of the property,
Gonthier J. sought to ensure that any tax exemption would serve the purpose it
was meant to achieve, namely, the preservation of property held by Indians qua
Indians on reserves so that their traditional way of life would not be
jeopardized.
. . .
28 . . . In my view, when the personal property
at issue is employment income, it makes sense to consider the
main purpose, duties and functions of the underlying employment; specifically,
with a view to determining whether that employment was aimed at providing
benefits to Indians on reserves.
[Emphasis
added.]
[31]
In Rachel Shilling, supra, the Federal Court of Appeal applied the
connecting factors test formulated in Williams, supra, to
employment income and recapitulated the state of the law in that regard as
follows:
(c) Locating employment
income
29
As we have already noted, the Supreme Court has not yet had occasion to apply
to employment income the connecting factors test formulated in Williams,
supra. Williams itself concerned the location of unemployment insurance
benefits.
30
However, in several cases this Court has been called upon to apply the Supreme
Court's jurisprudence in order to determine whether an Indian's employment
income was situated on a reserve and thus exempt from income tax by virtue of
paragraph 87(1)(b) of the Indian Act.
31
Thus, in Canada v. Folster, [1997] 3 F.C. 269 (F.C.A.); and Bell
v. Canada, [2000] 3 C.N.L.R. 32 (F.C.A.), the following factors were
said to be potentially relevant in determining whether an Indian's employment
income is situated on a reserve: the location or residence of the employer; the
nature, location and surrounding circumstances of the work performed by the
employee, including the nature of any benefit that accrued to the reserve from
it; and the residence of the employee.
32
The place where the employee was paid has also been considered a potentially
relevant connecting factor, although not one that has been given much weight:
Bell v. Canada (1998), 98 DTC. 1857 (T.C.C.), at paragraphs 45-47. The Tax Court Judge's
decision was upheld on appeal and his identification of the connecting factors
approved: [2000] 3 C.N.L.R. 32 (F.C.A.), at paragraph 35.
33
The weight to be assigned to any of these factors may vary according to the
facts of any given case, even when the category of property in question
(employment income) and the nature of the tax (income tax) are the same. Nonetheless,
the case law suggests that particular attention should be given to the nature
of the work performed by the employee, and the circumstances surrounding it.
As Linden J.A. explained in Folster, supra , at paragraphe 27:
In my view, having regard for
the legislative purpose of the tax exemption and the type of personal property
in question, the analysis must focus on the nature of the appellant's employment
and the circumstances surrounding it. The type of personal property at issue,
employment income, is such that its character cannot be appreciated without
reference to the circumstances in which it was earned. Just as the situs of
unemployment insurance benefits must be determined with reference to its
qualifying employment, an inquiry into the location of employment income is
equally dependent upon an examination of all the circumstances giving rise to
that employment.
[Emphasis
added.]
[32]
In Recalma v.Canada,
[1998] F.C.J. No. 433 (QL), Linden J. stated at paragraph 9:
9 In evaluating the various factors the
Court must decide where it "makes the most sense" to locate the
personal property in issue in order to avoid the "erosion of property held
by Indians qua Indians" so as to protect the traditional Native way
of life. It is also important in assessing the different factors to consider
whether the activity generating the income was "intimately connected
to" the Reserve, that is, an "integral part" of Reserve life, or
whether it was more appropriate to consider it a part of "commercial
mainstream" activity. (See Folster v. The Queen (1997), 97 D.T.C.
5315 (F.C.A.)) . . .
[33]
Therefore, to determine
whether Ms. Baptiste’s employment income is exempt from taxation, an
analysis of the connecting factors has to be done and the Court cannot reach a
conclusion based upon the sole fact that the appellant has chosen to work for
an employer that is located on a reserve (this was confirmed by the Federal Court
of Appeal in Horn, supra, at paragraph 5, where Evans J.A. stated that
the connecting factors analysis to determine the location of employment income
for tax purposes is not to be revisited and still stands).
Analysis of the connecting factors
[34]
As was said by Linden
J.A. in Folster, supra, at paragraphs 20 and 22, in
determining the situs of employment income, the test is no more magic
than asking where does it make the most sense to locate the situs of
that income, what factors ought to be relevant to the assessment of employment
income in the circumstances of each particular case and also what relative
weight should be accorded to those factors?
[35]
In the present case,
the location of the employment was in downtown Toronto
in the case of both Miziwe Biik and the Bank of Nova Scotia. When working for
Miziwe Biik, Ms. Baptiste did not travel. She did travel to Indian
communities for the Bank, but according to the evidence, this was one week per
month at the very most. Ms. Baptiste lived in downtown Toronto.
With respect to the nature of her employment and the circumstances surrounding
it, the evidence disclosed that when she worked for Miziwe Biik, she was
employed to help Aboriginal people (status or non-status Indians) to obtain
work in urban areas. Her role was to help these people raise their skills and
integrate with society. While she was working for the bank, her job was at
first to attract Aboriginal people to work for that institution in urban areas
and to retain them. Then her role evolved to become one of taking the bank’s business
into the Indian communities. Ms. Baptiste is of the view that that role was
in keeping with the recommendations of the Report of the Royal Commission on
Aboriginal Peoples.
[36]
The question remains
whether the purpose, duties and functions of her employment were aimed mainly at
providing benefits to Indians on reserves. In my view, they were not. The
report on Aboriginal peoples was intended, from what I have seen of it, to
protect the property of Indians on their reserves and to redress economic disadvantages.
As can be seen in the case law, the policy underlying section 87 of the IA is
not to redress generally the economic disadvantages suffered by Indians. Rather,
the purpose of that provision is simply to insulate the property interest of
Indians in their reserve lands so as to ensure that they are not dispossessed
of their entitlements. As stated in Monias, supra, at paragraph
66, “[t]hat the work from which employment income is earned benefits Indians on
reserves, and indeed may be integral to maintaining the reserves as viable
social units, is not in itself sufficient to situate the employment income
there. It is not the policy of paragraph 87(1)(b) of the IA to provide a
tax subsidy for services provided to and for the benefit of reserves. Rather,
it is to protect from erosion by taxation the property of individual Indians
that they acquire, hold and use on a reserve”. Here, Ms. Baptiste’s employment
income was, in my view, not earned in circumstances that linked its acquisition
to a reserve as an economic base.
[37]
Ms. Baptiste’s
employment was aimed at helping Aboriginal people to integrate with urban
society, specifically a society not located on reserves, and to encourage
reserves to do business with the bank. The bank employed her with a view to making
a profit, and although this was good for Indian communities, it cannot be said
that her work was an integral part of community life on reserves. She was
employed to work for the bank in the commercial mainstream, doing business with
Indian’ communities, but her employment was more intimately connected to the
bank than to a reserve. This is not a case where the employee and the place of
employment (either with Miziwe Biik or with the bank) would be on a reserve if
that were possible. On the contrary, Ms. Baptiste’s employment was aimed at
helping Aboriginal people obtain work outside reserves in urban areas, and in
the case of her employment with the bank, consisted in promoting the bank’s
business with different communities.
[38]
The sole factor, in my
view, connecting Ms. Baptiste’s employment income to a reserve is that the
employer is located on a reserve. However, an employer’s location of
convenience on a reserve does little to connect the employment income to a
reserve (Monias, supra, paragraph 50). Further, as held in Horn v. The
Queen, 2007 FC 1052, at paragraphs 96-97, confirmed by 2008 FCA 352, the
fact that the majority of the administrative staff of NLS were members of the
Six Nations Reserve, and that NLS paid rent to the reserve as well is not a
factor that is particularly weighty. Indeed, the amounts paid by NLS for rent
and staff salaries and benefits represented only a small percentage of NLS’s
gross income. The same conclusion was reached in Robinson v. The Queen, 2010
TCC 649, at paragraphs 102-103, concerning individuals having been employed by
NLS to work for Aboriginal organizations. The Court concluded that the factors
connecting the employment of those individuals employed by NLS to a reserve
were extremely limited. Those individuals were part of the same group as that referred
to by the respondent in her preliminary remarks. The fact that 95% of NLS’s
costs were the wages and benefits paid to its employees who were contracted to
off-reserve organizations which funded NLS’s payroll was a factor relied upon
by the Court to conclude that there was no evidence that connected the
employment income of the individuals in question to any reserve as either a
physical location or an economic base.
[39]
As stated earlier, the
purpose of the exemption from taxation pursuant to section 87 of the IA is to
preserve the entitlements of Indians to their reserve lands and to ensure that
the use of their property on their reserve lands is not eroded by the ability
of governments to tax. It is not to confer a general economic benefit upon
Indians (Williams, supra, par. 16). In the present case, I find that the
taxation of Ms. Baptiste’s employment income does not amount to the
erosion of the entitlement of an Indian qua Indian to property on a reserve. Therefore,
there is no justification or legitimate basis for exempting her employment
income from taxation.
[40]
I conclude that Ms.
Baptiste’s employment income during the taxation years at issue was taxable
under the ITA. The appeals are dismissed
Signed at Ottawa, Canada, this 9th day of June 2011.
“Lucie Lamarre”
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