Citation: 2007TCC414
Date: 20070713
Docket: 2006-3243(IT)I
BETWEEN:
ROY FLETCHER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
O'Connor, J.
[1] The issue in this
appeal is whether the Appellant was properly assessed Canada Pension Plan (“CPP”)
contributions on self-employed earnings in the amount of $2,481.63 for the 2005
taxation year.
[2] The assumptions of
the Minister in confirming the assessment are set out in paragraph 11 of the
Reply to the Notice of Appeal and it was confirmed at the hearing of this appeal
that the Appellant agreed with the assumptions. Paragraph 11 reads as follows:
11. In confirming the Assessment, the Minister
assumed the following facts:
(a) at all material times, the Appellant was a
resident of Canada;
(b) the Appellant received employment income
from Petro-Canada in the amount of $306.12 in 2005;
(c) during the 2005 taxation year, the
Appellant operated, as a proprietorship, a project consulting business (the
“Consulting Business”);
(d) the fiscal period of the Consulting Business
was from January 1, 2005 to December 31, 2005;
(e) the Appellant earned net income from the
Consulting Business in the amount of $47,414.55 in the 2005 taxation year;
(f) during the 2005 taxation year, the
Appellant operated, as a proprietorship, a woodlot business (the “Woodlot
Business’);
(g) the fiscal period of the Woodlot Business
was from January 1, 2005 to December 31, 2005;
(h) the Appellant earned net income from the
Woodlot Business in the amount of $1,100.87 in the 2005 taxation year;
(i) the Appellant was born on April 15, 1943;
(j) on April 5, 2005,the Appellant made
application for a retirement pension under the Canada Pension Plan; and
(k) the Appellant began receiving a retirement
pension under the Canada Pension Plan in September, 2005.
[3] The actual
calculation of the assessment is set forth in paragraph 7 of the Reply as
follows:
|
Net Professional Income
|
$47,414.55
|
|
Net Farming Income
|
1,100.87
|
|
Total Pensionable Earnings
|
$48,515.42
|
|
Less: Basic Exemption
|
3,500.00
|
|
Earnings Subject to Contributions
(Maximum $37,600.00)
|
$37,600.00
|
|
Months in the Year Subject to
Contributions
|
x 8/12
|
|
Maximum Pensionable Earnings
|
$25,067.00
|
|
Contribution Rate for 2005
|
x 9.9%
|
|
Canada Pension Plan
Contributions Payable
|
$
2,481.63
|
[4] There does not
appear to be any dispute as to the calculations as these have been made in
accordance with section 13 of the CPP which, in rather complicated language, sets
forth the factors which determine the CPP contribution required on self-employed
earnings.
[5] I have reviewed the
calculations set forth in the Reply and they are correct.
APPELLANT’S SUBMISSIONS:
[6] The Appellant’s
appeal and objection relate essentially to two problems. Firstly, he feels he
is being charged with both an employee and an employer contribution amount
after he had received from the CPP authorities a document which he furnished to
Petro-Canada and on the basis of which that company made no employer
contribution with respect to the Appellant’s contract work. The difficulty with
this is that the Appellant declared the net amount in question, namely
$47,414.55, on his income tax return as self-employment income as opposed to
employment income. The facts support the conclusion that it was self-employment
income. Under the provisions of the CPP, the self-employed person is
responsible for both the employer and the employee portions of the
contributions. One must remember, however, that for income tax purposes a
self-employed person is entitled to more deductions than an employee. For
example, in the present case, the Appellant’s gross total
self-employment income was $68,607 whereas his net income was $47,414.
[7] The thrust of the
Appellant’s second problem is that he received false information from the CPP
authorities after he had specifically advised them of his intentions and of his
desire not to be liable for any further CPP contributions. More specifically,
his Notice of Appeal reads, in part, as follows:
Clearly, if I had not received false
information from CPP I would have received CPP benefits before returning to
work and therefore would not have been assessed the CPP contributions in
dispute. Unfortunately I chose to delay receiving benefits until September
because the CPP agent asked me when I wanted benefits to start. She assured me
that I was already exempt from further contributions and that the start date
would not impact contributions. She was absolutely clear on that point,
otherwise I would have asked for benefits to start at once. If she had not
asked me to choose a start date I would have achieved the desired outcome
automatically because I didn’t return to work until early July long after
applying for CPP benefits on April 5th.
[8] Regrettably, the
Appellant can not succeed in his appeal simply because he relied on false
information from CPP representatives. The calculations must be made in
accordance with the CPP and not on the basis of the false information given by those
representatives.
[9] In Boynton v. R.
[2001] 3 C.T.C. 2320, Hamlyn T.C.J. stated:
11 The statements by the CCRA official
relied upon by the Appellant to his detriment does not constitute a bar to the
reassessment. The law is clear that if an employee of Revenue Canada imparts erroneous information to a
taxpayer who acts on it to his or her detriment, that of itself does not bar
the Minister from assessing the taxpayer's liability to tax, interest and
penalties in accordance with the applicable statutory provisions.
[10] This dicta referred
to erroneous information by a Canada Revenue Agency official, but the same
applies to erroneous information by a CPP official.
[11] The Appellant also
produced at the hearing a copy of a Canada Revenue Agency news release which
reads as follows:
CANADA’S NEW GOVERNMENT ANNOUNCES TAXPAYER
BILL OF RIGHTS AND TAXPAYERS' OMBUDSMAN
Toronto, Ontario, May 28, 2007… The
Honourable Carol Skelton, Minister of National Revenue, joined by the
Honourable Jim Flaherty, Minister of Finance and Regional Minister for the
Greater Toronto area, today announced two new initiatives, a Taxpayer Bill of Rights
and a Taxpayers' Ombudsman,
to ensure Canada Revenue Agency (CRA) is more accountable to Canadians.
This news release mentions that the
government believes in strong accountability but fairness, and that taxpayers
would have the right to complete accurate, clear and timely information. More
particularly, paragraphs 6, 11 and 12 of the news release read as follows:
6. You have the right to complete, accurate, clear, and timely
information.
You can expect us to provide you with complete, accurate and timely
information that will explain in plain language the laws and policies that
apply to your situation, to help you get your entitlements and meet your
obligations.
11. You have the right to expect us to be accountable.
You have the right to expect us to be accountable for what we do.
When we make a decision about your tax or benefit affairs, we will explain that
decision and inform you about your rights and obligations in respect of that
decision. We are also accountable to Parliament, and through Parliament to
Canadians, for what we do. We report to Parliament on our performance with
respect to tax services and benefit programs and the results we achieve against
our published service standards.
12. You have the right to relief from penalties and
interest under tax legislation because of extraordinary circumstances.
You can expect us to consider your request to waive or cancel in
whole or in part any penalty and interest charges if you were prevented from
complying with your tax obligations because of circumstances beyond your
control, e.g. a disaster such as a flood or fire, or if penalty or interest
arose primarily because of erroneous actions of the CRA, e.g. material
available to the public contained errors which led you to file incorrect returns
or make incorrect payments based on incorrect information.
[12] It remains to be
seen how this news release can benefit taxpayers or persons such as the
Appellant for periods of time after the Taxpayer Bill of Rights is fully
effective, but it cannot benefit the Appellant in respect of his CPP
contribution assessment for the 2005 taxation year.
[13] The Appellant also
raised the issue that his pension benefits did not increase, notwithstanding
the additional contribution he was obliged to make. That may or may not be
grounds for an appeal to the Minister and possibly further to the Review
Tribunal under sections 81 and 82 of the of the CPP and any other applicable
sections, but that issue is not at present before the Court. (See CCH –
Canadian Employment Benefits and Pension Guide Vol. 1 – No. 856 and following.)
RESPONDENT’S SUBMISSIONS
[14] The Respondent
submits that the Appellant was properly assessed a contribution payable in
respect of self-employed earnings in the amount of $2,481.63 for the 2005
taxation year under the Canada Pension Plan.
[15] The Respondent
submits further that, in assessing the Appellant for the 2005 taxation year,
the Minister:
(a) properly allowed the
Appellant a deduction in the amount of $1,240.81 for a contribution payable
under the Canada Pension Plan in respect of self-employed earnings
pursuant to paragraph 60(e) of the Act; and
(b) properly allowed the
Appellant a credit in the amount of $186.12 ($1,240.81 x 15%) for a
contribution payable under the Canada Pension Plan in respect of
self-employed earnings pursuant to section 118.7 of the Act.
[16] The Respondent
requests that the appeal be dismissed.
[17] In my opinion, the
calculations of the Minister described and discussed above are correct and are
not affected by the erroneous advice received by the Appellant nor by the other
submissions of the Appellant.
[18] Consequently, for
all of the above reasons the appeal is dismissed.
Signed at Ottawa, Canada this 13th day of July, 2007.
"T. O'Connor"
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