Citation: 2010 TCC 202
Date: 20100415
Docket: 2007-436(IT)I
BETWEEN:
DAVID E. CHIASSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
McArthur J.
[1]
These appeals are from assessments
by the Minister of National Revenue (Minister) for the taxation years 2003,
2004 and 2005. The Appellant is a veteran of the Canadian Armed Forces who
compulsorily retired due to disability after serving 19 years and 19 days. He
received pension payments that were included in his taxable income. He submits
that the payments should be exempt from taxation.
Issues
[2]
Are the pension payments exempt
from taxation under the Income Tax Act (ITA)? If they are not
exempt should they be tax exempt, pursuant to subsection 15(1) of the Canadian
Charter of Rights and Freedoms (Charter)?
[3]
The Appellant is an
engaging intelligent man who I commend for his well researched and spirited
presentation. He obviously spent weeks, if not months in preparation.
[4]
He suffers from severe
post-traumatic stress disorder and was diagnosed with the condition in April
2004. He receives drug therapy and his Veterans Affairs Counsellor is working
on a comprehensive rehabilitation plan involving many specialities. Stress and
anxiety can have a significant impact on him.
[5]
In computing income for
2003, 2004, and 2005 taxation years the he did not include pension benefits received
pursuant to paragraph 16(1)(d) of the Canadian Forces
Superannuation Act (CFSA) in the amount of $25,842.00, $26,617.00,
$27,070.00, respectively. In addition, he received, a tax free disability
pension under section 21 of the Pension Act which was tax free
pursuant to paragraph 81(1)(d) of the ITA.
Legislation
[6]
Pension payments received must be
included in the taxpayer’s taxable income, pursuant to subparagraph 56(1)(a)(i)
of the ITA, which reads:
Without
restricting the generality of section 3, there shall be included in computing
the income of a taxpayer for a taxation year,
(a)–
any amount received by the taxpayer in the year as, on account or in lieu of
payment of, or in satisfaction of,
(i) a
superannuation or pension benefit including, without limiting the generality of
the foregoing,
[7]
Subsection 248(1)
of the ITA defines superannuation or pension benefits as:
... any amount
received out of or under a superannuation or pension fund or plan and, without
restricting the generality of the foregoing, includes any payment made to a
beneficiary under the fund or plan or to an employer or former employer of the
beneficiary thereunder
(a) in
accordance with the terms of the fund or plan,
(b) resulting
from an amendment to or modification of the fund or plan, or
(c) resulting
from the termination of the fund or plan.
[8]
Subsection 81(1) of the ITA lists amounts that are
exempt from income inclusion. These include provisions related to pension
payments made to Canadian Forces members.
81(1) There
shall not be included in computing the income of a taxpayer for a taxation
year,
81(1)(d)
a pension payment, an allowance or compensation that is received under or is
subject to the Pension Act, the Civilian War-related Benefits Act or
the War Veterans Allowance Act, an amount received under the Gallantry
Awards Order or compensation received under the regulations made under section
9 of the Aeronautics Act;
81(1)(d.1)
the total of all amounts received by the taxpayer in the year on account of a
Canadian Forces income support benefit payable to the taxpayer under Part 2 of
the Canadian Forces Members and Veterans Re-establishment and Compensation
Act or on account of a disability award, death benefit, clothing allowance
or detention benefit payable to the taxpayer under Part 3 of that Act;
81(1)(e) a
pension payment received by the taxpayer on account of disability or death
arising out of a war from a country that was an ally of Canada at the time of
the war, if that country grants substantially similar relief for the year to a
person receiving a pension referred to in paragraph (d);
Analysis
[9]
The Appellant receives two
pensions. The first is received under section 21 of the Pension Act.
It is agreed that it is exempt from taxation, pursuant to paragraph
81(1)(d) of the ITA. This pension payment is not at issue in these
appeals. He receives the second pension under paragraph 16(1)(d) of the CFSA. None of the exempting
provisions under section 81 of the ITA include pension payments
made under the CFSA, and these pension payments are not exempt from taxation.
Under paragraph 56(1)(a) and section 3 of the ITA, these
payments received by the Appellant must be included in his taxable income.
[10]
I now turn to the Appellant’s Charter
argument. He states that subsection 15(1) of the Charter supports
his position. It reads:
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.
[11]
The Appellant submits that pension
payments made in respect of a disability under the CFSA should be exempt
from taxation because the ITA under paragraph 81(1)(i) grants
such relief to Royal Canadian Mounted Police veterans under the Royal
Canadian Mounted Police Superannuation Act (RCMPSA) which reads:
81(1) There
shall not be included in computing the income of a taxpayer for a taxation
year,
(i)–
a pension payment or compensation received under section 5, 31 or 45 of the Royal
Canadian Mounted Police Pension Continuation Act, chapter R-10 of the
Revised Statues of Canada, 1970, or section 32 or 33 of the Royal Canadian
Mounted Police Superannuation Act, in respect of an injury, disability or
death;
[12]
The Supreme Court of
Canada’s decision in R. v. Kapp.
Paragraph 17 contains a test for determining the existence of discrimination
under subsection 15(1):
The template
in Andrews, as further developed in a series of cases culminating in Law
v. Canada (Minister of Employment and Immigration), [1999] 1 S.C.R. 497,
established in essence a two-part test for showing discrimination under
s. 15(1): (1) Does the law create a distinction based on an enumerated or
analogous ground? (2) Does the distinction create a disadvantage by
perpetuating prejudice or stereotyping? These were divided, in Law,
into three steps, but in our view the test is, in substance, the same.
[13]
If the answers to both of the
questions are “yes”, then there is a subsection 15(1) Charter infringement.
This infringement, however, may be justified under section 1 of the Charter as a
reasonable limit prescribed by law that can be demonstrably justified in a free
and democratic society.
Does
the law create a distinction based on an enumerated or analogous ground?
[14]
No doubt, the pension in
question is a disability pension. This finding is important because his Charter
argument was premised on the comparison between the treatment of the Canadian
Forces disability pension payments and the RCMP disability pension payments.
[15]
The Appellant submits
that there is a distinction between the two groups because payments under
section 32 or 33 of the RCMPSA receive tax relief under paragraph 81(1)(i)
of the ITA while the payments under paragraph 16(1)(d) of
the CFSA receive no relief.
[16]
I find no such distinction.
Members of the Canadian Forces and members of the RCMP who are forced to retire
due to disability may each receive two types of pensions. The first type of
pension is exempt from taxation. Section 21 of the Pension Act grants a
disability pension to Canadian Forces members and is exempt from taxation,
pursuant to paragraph 81(1)(d) of the ITA. The Appellant is a
recipient of this pension. Similarly, disability pensions under sections 32 and
33 of the RCMPSA are tax exempt pursuant to paragraph 81(1)(i) of
the ITA. Similar taxation treatment is afforded to both parties for a
similar type of pension.
[17]
The second type of
pension is not exempt from taxation. Paragraph 16(1)(d) of the CFSA payments
must be included in income, pursuant to paragraph 56(1)(a) of the ITA.
Similarly, an RCMP member who would receive a similar disability pension under
subsection 11(2) of the RCMPSA must include it in his income, pursuant
to paragraph 56(1)(a) of the ITA.
[18]
In summary, there is no
distinction between how recipients of disability payments from the RCMP and the
Canadian Forces are treated for taxation purposes.
[19]
Furthermore, the
analogous ground upon which the Appellant makes his Charter argument,
occupational status, is in fact not an analogous ground. See Baier v.
Alberta,
at paragraph 65, and Delisle v. Canada at paragraph 44.
[20]
Having found that the
Appellant’s Charter argument fails for lack of distinction and lack of
an analogous ground, there is no need to consider the second stage.
[21]
For these reasons, the
appeals are dismissed.
Signed at Ottawa, Canada, this 15th day of April 2010.
“C.H. McArthur”
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