Citation: 2008TCC209
Date: 20080422
Docket: 2007-3516(IT)I
BETWEEN:
ARTHUR ST-PIERRE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an
appeal from an assessment that was based on a T5 form, issued in the
Appellant's name attesting that $12,500.93 in interest was calculated in the
Appellant's file with the Régie des rentes du Québec.
[2]
The facts are
well described at paragraph 7 of the Reply to Notice of Appeal, and were
admitted by the accountant who represented the Appellant. They are reproduced
here:
[translation]
(a)
According to the Minister's
records, the Appellant received and declared social assistance benefits during
the 1993 and 2004 taxation years under paragraph 56(u) of the Income
Tax Act, R.S.C. (1985), c. 1 (5th suppl.) amended (hereinafter the
"Act") and claimed a deduction under paragraph 110(1)(f) of
the Act as follows:
|
Year
|
Benefit
|
Deduction
|
|
2004
|
$9,384
|
$9,384
|
|
2003
|
$9,207
|
$9,207
|
|
2002
|
$9,060
|
$9,060
|
|
2001
|
$8,828
|
$8,828
|
|
2000
|
$8,610
|
$8,610
|
|
1999
|
$8,471
|
$8,471
|
|
1998
|
$8,394
|
$8,394
|
|
1997
|
$8,245
|
$8,245
|
|
1996
|
$8,122
|
$8,122
|
|
1995
|
$7,932
|
$7,932
|
|
1994
|
$8,040
|
$8,040
|
|
1993
|
$5,590
|
$5,590
|
|
TOTAL
|
$99,883
|
$99,883
|
(b)
By letter dated September 29, 2005, the Régie des rentes du Québec (hereinafter
the "RRQ") advised the Appellant that it recognized he had been
disabled since July 1994 and could pay him a disability benefit of around $518
a month as of November 1994;
(c)
For the 2005 taxation year, the RRQ issued the Appellant T4A forms,
"Statement of Benefits from the régime de rentes du Québec"
(hereinafter the "T4A") indicating "taxable RRQ benefits"
for $75,094.56 and $1,237.28 respectively;
(d) The T4A indicating the total amount of
$75,094.56 in disability benefits owed to the Appellant between 1994 and
2005, provided the following details:
|
Year
|
Amount
|
|
2005
|
$7,596.00
|
|
2004
|
$7,469.04
|
|
2003
|
$7,237.44
|
|
2002
|
$7,123.44
|
|
2001
|
$6,915.96
|
|
Other
|
$38,752.68
|
|
TOTAL
|
$75,094.56
|
(e)
For the 2005 taxation year, the RRQ calculated interest on the benefits owing
for a total of $12,500.93;
(f)
As a result, the RRQ issued a T5 form to the Appellant, a "Statement of
investment income" (hereinafter the "T5") indicating interest
from a Canadian source in the amount of $12,500.93 for the 2005 taxation
year;
(g)
For the 2005 taxation year, the Ministère de l’Emploi, de la Solidarité sociale
et de la Famille (hereinafter the "MESSF") issued a T5007 form,
"Statement of Benefits" to the Appellant (hereinafter the
"T5007") indicating an amount of $7,064.72 as social assistance
benefits;
(h)
Considering that as of November 29, 2005, the Appellant had a balance of
$86,966.76 owing with the MESSF, the RRQ sent it $86,962.49 (see
detail in Annex), as a partial reimbursement of the amount owing;
(i)
The Minister calculated the Appellant's total income, net income and taxable
income for the 2005 taxation year as follows:
|
DESCRIPTION
|
Amount
|
|
RRQ benefits
|
$8,896
|
|
Investment interest income
|
$12,500
|
|
Social assistance benefits
|
$7,604
|
|
Total income
|
$29,000
|
|
Net income
|
$29,000
|
|
Deduction for other payments
|
$7,604
|
|
Taxable income
|
$21,396
|
(j)
Considering the Appellant had included a T1198 form (Statement of Qualifying Retroactive Lump Sum Payments)
with his 2005 income tax report, the Minister preceded
with a retrospective calculation that was most beneficial for a lump sum
payment, for the Appellant's 2005 taxation year, for the amount of $75,094.56;
(k)
In his income tax return for the 2005 taxation year, the Appellant claimed
$12,500 as other deductions;
(l)
The Minister denied the $12,500 as other deductions for the Appellant's 2005
taxation year.
[3]
Only the agent
for the Appellant testified. He explained that he had been in charge of the
Appellant's case for quite a while. He stated he did everything he could to
avoid the assessment, in particular by trying to obtain the right to amortize
the interest that appeared on the T5 over all the years of the period in
question, from 1993 to 2004.
[4]
After this
option was denied, he stated he did not understand because the procedure had
been accepted for the capital with no problems.
[5]
The testimony
of the agent for the Appellant is well summarized in his Notice of Appeal. The relevant passages in
paragraphs 2 and 3 are reproduced here:
[translation]
In 2005, the régie des rentes reimbursed
the local employment center of the Ministère de l'Emploi, de la Solidarité
sociale et de la famille (MESSF) $86,942.49 including $12,500.93 in interest,
following an administrative procedure that allowed the MESS to claim amounts
from the RRQ that I could receive as of 1994, when I had the choice between
either part of the RRQ or 100% welfare.
The $12,500 in interest was paid directly
to the MESSF. Mr. St-Pierre did not receive any of this interest. Revenue
Canada refused the deduction claimed for this interest for amounts payable to
the MESSF since 1994.
[6]
The auditor
explained that he essentially handled the case in accordance with the
provisions of the Income Tax Act (the "Act"), namely that the
amount of interest (T5 form) was calculated as income for the Appellant,
in whose name the form had been prepared. He also added that interest was taxable
for the year in question on the T5.
[7]
This is a
completely anomalous situation, where it is clear that certain stakeholders set
up one or many procedures likely to bolster the image of their administration
and management without being concerned for the consequences for the Appellant.
[8]
The situation
can be simply summarized as follows. The Appellant, deprived of income,
collected social assistance benefits for a number of years. At 60, he should
apply for a disability pension rather than social assistance benefits. Thus,
the authorities realized he could have obtained a disability pension instead of
social assistance benefits.
[9]
The relevant
Minister prepares a claim and initiates legal proceedings against the
Appellant, to be reimbursed for all the amounts paid to him as social
assistance benefits.
[10]
The régie des
rentes du Québec ("RRQ") recognizes that the disability pension was
payable to the Appellant and reimburses the welfare benefits to the Payor. Upon
request by the agent for the Appellant, the amount of the reimbursement is
distributed over the number of years in question, namely from 1993 to 2004,
therefore avoiding any income tax payable by the Appellant.
[11]
However, a T5
form was issued to the Appellant regarding interest that was paid to the MESSF,
for the many years in question that had passed. The Minister still treated the
T5 as taxable interest income for the Appellant in the year it was issued. These
operations between the two ministries did nothing positive for the Appellant. The
Appellant did not benefit or profit from the interest amount in question as the
entire amount was directed to the ministère des affaires sociales that had paid
social assistance benefits during the period of 1993 to 2004.
[12]
In terms of the
provisions of the Act, the auditor explained that the agency had to treat it
this way even if the capital subject to the calculation was, in his opinion,
distributed over the many years in question thus having no impact; as for the
capital, it was a significant amount of $75,094.56.
[13]
This is clearly
a very particular case not only because it is obvious the Appellant is unable
to pay the amount no matter how small it is, but he also had to face many
administrative hurdles (legal claim, multiple correspondences, tension). Luckily
for him, his accountant Mr. St-Pierre protected him to a certain extent. Moreover, he represented
him well before the Court.
[14]
Regarding the
particular circumstances, I strongly suggest that the authorities take into
consideration the various elements that characterize this case and forego
collecting this assessment. Moreover, Parliament allowed for the state to be
able to cancel such a claim (Financial Administration Act, R.S.C.
(1985), c. F-11, subs. 23(2)).
[15]
As for the T5
at the basis of the assessment, it seems to me that the situation should be
revised so as to avoid that disadvantaged persons, already overwhelmed by life
are not required to fight to get out of situations where they are innocent
victims with no contribution by them. Administrative transparency should not
take place at the expense of disadvantaged persons with no resources.
[16]
In terms of the
assessment under appeal, it seems it was established in accordance with the
provisions of the Act, which clearly means that it must be confirmed and the
appeal must be dismissed.
[17]
However, it is
clearly a case that Parliament had in mind when it stated at section 23(2) of
the Financial Administration Act, R.S.C. (1985) C. F-11, s.23 –
Definitions:
23.(2) Remission of taxes and
penalties– The Governor in Council
may, on the recommendation of the appropriate Minister, remit any tax or
penalty payable thereon, where the Governor in Council considers that the
collection of the tax or the enforcement of the penalty is unreasonable or
unjust or that it is otherwise in the public interest to remit the tax or
penalty.
Signed
at Ottawa, Canada, this 22nd day of April 2008.
"Alain Tardif"
Translation certified true
on this 29th day of May 2008.
Elizabeth Tan, Translator
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