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Citation:2005TCC95
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Date: 20050218
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Docket: 2004-2978(IT)I
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BETWEEN:
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AURORA MARTHA ARRIOJA,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
O'Connor, J.
[1] This appeal was heard at Ottawa,
Ontario on January 24, 2005. The Appellant represented herself.
The Appellant called no witnesses other than herself. Counsel for
the Respondent called David Young, a litigation officer with the
Canada Revenue Agency and Maxwell Hollins, Manager of the
National Examining Board.
[2] The issue is whether in the 2002
taxation year the Appellant is entitled under section 118.5 of
the Income Tax Act ("Act") to a non-refundable
tuition tax credit in respect of fees totalling $9,095.00 paid to
the National Examining Board, ("NEB") a constituted
board of the Canada Veterinary Medical Association
("CVMA") in respect of certain examinations, the
passing of which is a prerequisite to obtaining a license from a
licensing authority of a province of Canada to practice
veterinary medicine in that province. If the Appellant is so
entitled she would be able to reduce her 2002 federal taxes by an
amount, based on a formula, which for that year was 16% of the
fees paid ($9,095.00), therefore $1,455.20.
[3] The basic facts are as follows.
The Appellant works as a veterinarian at Health Canada.
...
5. She
completed her studies in Mexico during the years 1979 to 1983 and
obtained the degree of Doctorate in Veterinary Medicine.
6. In 1989,
she moved to England to further her studies and obtained the
degree of Masters of Science in 1990.
7. She later
on moved to Canada to live and find employment.
...
She became a Canadian citizen. To practice veterinary medicine
she had to pass the examinations referred to above. To take these
examinations she paid a total of $9,095. This amount related to
what may be referred to as the practical part of the
examinations, referred to as the Clinical Proficiency
Examination. Although not critical to a determination of the
issue in question, but for purposes of completion, the
examination process is described in Respondent's
Counsel's Written Submissions as follows:
...
7. In order to
obtain a licence in any province in Canada, a candidate must pass
an examination to ensure that he or she has the requisite
knowledge and skills of veterinary medicine in a North American
context. This examination is administered by the National
Examining Board, which is a duly constituted board of the CVMA.
The CVMA is the national body responsible for the veterinary
profession in Canada.
8. The NEB
Examination is a two-part process measuring entry-level
competence in the theory and practice of veterinary medicine:
a. Part I is
the NAVLE, a computer-administered written examination of 360
questions that tests the candidate's knowledge of veterinary
medicine;
b. Part II is
the Clinical Proficiency Examination (CPE), which is a practical
'hands-on' examination of the candidate's medical and
surgical skills consisting of seven sections of study.
9. The purpose
of the Examination is to determine the competency of a candidate
who intends to pursue a license in any province of Canada.
10. The CVMA, through the
NEB, and the American Veterinary Medical Association review
colleges of veterinary medicine for the purpose of accrediting
these institutions where they satisfy North American Standards.
There are 4 accredited colleges in Canada, 28 in the United
States, and 6 outside North America.
11. Students from
accredited colleges are required to write the NAVLE. Should any
student from an accredited college fail the examination twice, he
or she must also pass the CPE. Candidates from non-accredited
veterinary programs are required to pass both the NAVLE and the
CPE in order to ensure that they possess both the knowledge and
skills required by the CVMA.
12. Fees for the
examination are paid directly by each candidate to the NEB. The
NEB does not issue an Education Amount Certification (T2202) or a
Tuition and Education Amount Certificate (T2202A) because it does
not provide post-secondary level courses and therefore does not
consider itself to be an educational institution.
13. ... NEB offer courses
at the post-secondary school level. ....
14. In 2002, the fees for
the CPE examination were $5885.00, including GST. Candidates who
failed a section of the examination could retake that section for
an additional fee of $1070 per section, including GST.
[4] The Appellant was required to
retake three sections of the examination for an additional amount
of $3,210, which added to the $5,885 totals $9,095.
Appellant's Submissions
[5] The Appellant submits the
following in her Notice of Appeal as Amended by Appellant's
Answer and by an Appendix 1 entitled "Amendments to Notice
of Appeal".
...
E.
STATUTORY PROVISIONS ...
13. The Appellant relies,
inter alia, upon section 118.5(1) of the ITA.
F.
REASONS UPON WHICH THE APPELLANT INTENDS TO RELY
14. According to section
118.5 of the ITA, individuals are allowed to claim the
initiation, entrance, or examination fees paid to a professional
association in the following circumstances:
a) when the
individual was enrolled in an educational institution in Canada,
or
b) when the
individual was, during the year, a student in full-time
attendance at a university outside Canada, in a course leading to
a degree, or
...
15. The above
circumstances include the vast majority of Canadian students and
graduates, either citizens or residents. Such individuals are
allowed to compute as "Tuition fees", the entrance or
initiation fees paid to professional associations as
"ancillary fees and charges", because these fees are
deemed or are interpreted by the CRA as being paid in respect of
the individual's enrolment at the foresaid educational
institution.
16. [DELETED]
17. (From Appendix I) The
CRA publication IT - 158R2 advises that:
"Dues paid by students before becoming members of a
professional organization, may qualify as tuition fees ... or in
computing a tuition tax credit under section 118.5"
18. As things are at the
present, the conditional "may" above becomes applicable
to all Canadian students or graduates, either citizens or
residents, who enrolled full or part time in post-secondary
programs in Canada or abroad after the citizenship or residence
status had been established, either by birth or
naturalization.
19. In contract, Section
8.1(i)(i) of the ITA prevents an individual from deducting
fees necessary to acquire a professional status recognized by
statute. That is the case of fees paid to obtain the Certificate
of Qualification required by the provincial Regulations 1093, or
Veterinarian's Act to obtain a general practitioner
licence.
20. The deduction of such
expenses incurred as examination fees paid to professional boards
is excluded by this section by limiting the dues and expenses
allowed to annual professional membership dues necessary
to maintain a professional status.
21. From the above it is
clear that:
f)
Canadian students can claim the initiation fees to enter
the profession (e.g. the National Board Examination fees for
Veterinarians), under the Tuition Fee credit provision of section
118.5, whereas, individuals who graduated prior to acquiring
citizenship or resident status are not being allowed to claim the
initiation fees to enter the profession. Neither under section
118.5, section 8.1.(I) nor under any provision of the ITA.
g) Also,
students who enrolled in post-secondary studies prior to
acquiring citizenship or resident status, are mostly immigrants,
or foreign trained professionals.
h)
[DELETED]
22. In my view, this
interpretation of the ITA creates a double-standard [.....]
nationality or ethnical origin.
IN CONCLUSION
23. It is my perception
that the Canadian Revenue Agency's interpretation policy of
Section 118.5, in conjunction with Section 8(i)(i) were
conceived with the deliberate intention to deprive foreign
trained professionals of the benefit of a tax credit or
deduction.
[6] The Appellant refers to
Interpretation Bulletin IT-516R2 and IT-158R2 and as part of her
"Answer" submits financial calculations related to
government costs of education, savings to taxpayers resulting
from the tax credit claimed and the excellent contributions of
veterinarians and the need for same and other issues related to
the constitutional issue.
Respondent's Submissions
PART III - SUBMISSIONS
SCHEME OF THE ACT
18. In order to qualify
for a tuition credit pursuant to s. 118.5, the Appellant must
satisfy the following criteria:
a. she must be a
student enrolled at an educational institution;
b. the
educational institution must be a university, college or other
educational institution providing courses at a
post-secondary level;
c. the fees
must be paid for tuition to the institution.
19. Subsection 118.5(3)
includes in fees for an individual's tuition any ancillary
fees and charges that are paid to the educational
institution and that are in respect of the
individual's enrolment in a program at a post-secondary
school level.
A.
Examination Fees Paid to a Professional Board are not Tuition
Paid to an Educational Institution
20. Nothing in s. 118.5
entitled an individual to a tuition credit for fees paid in
respect of a certification examination to an entity other than a
university, college or other educational institution within the
meaning of the Act.
21. The term
"educational institution" is not defined within the
Act. However, this Court has previously considered the
following definitions in defining this term:
A school, seminary, college, university, or other educational
establishment, not necessarily a chartered institution. As used
in zoning ordinance, the term may include not only buildings, but
also all grounds necessary for the accomplishment of the full
scope of educational instruction, including those things
essential to mental, moral, and physical development.
Black's Law Dictionary
1. An institution of learning that offers courses at a
post-secondary level. 2. A technical or vocational school, a
university, college or other school of higher education.
The Dictionary of Canadian Law.
22. The Oxford English
Dictionary defines "tuition" as the "the action or
business of teaching a pupil or pupils; the function of a tutor
or instructor; teaching, instruction". Consequently, tuition
fees are those paid in relation to tuition.
23. The fees paid by the
Appellant were not tuition fees paid to an educational
institution for teaching or instruction. Neither the NEB nor the
CVMA is an educational institution that offers courses at the
post-secondary level. Rather, the NEB is a Board that offers an
accreditation program that is a prerequisite for any person
seeking to obtain a licence to practice veterinary medicine in
any province of Canada.
24. Further, the
examination fees are not ancillary fees as they do not meet the
following requirements of paras. 118.5(3)(a) and (b):
a. the
examination fees are not paid to an educational institution as
described in subpara. 118.5(1)(a)(i); and further
b. the
examination fees are not in respect of the individual's
enrolment at the institution in a program at a post-secondary
school level.
25. In a similar
situation, this Court concluded that fees paid to an entity whose
mandate was to certify that a candidate's legal knowledge and
training met Canadian standards were not eligible for the tuition
credit. In so concluding, the Court adopted the Canada Custom and
Revenue Agency's interpretation of s. 118.5 as it relates to
fees paid for accreditation (as expressed in a Technical
Interpretation):
It is Revenue Canada's view that examination fees would
qualify as tuition fees only where the fees were incurred as part
of a course of study. ...
26. The Appellant's
claim in respect of the fees paid to the NEB for her
certification examination must fail for each of the following
three reasons:
a. during the
2002 taxation year, the Appellant was not a student enrolled at a
university, college or other educational institution that
provided courses at a post-secondary school level;
b. the fees
were not paid in respect of tuition; and
c. the fees
were not paid to an educational institution.
B. No
Jurisdiction to Vacate a Valid Assessment of Tax
27. In the event that this
Court finds that the examination fees paid to the NEB do not fall
within the scope of section 118.5 of the Act, the appeal
must be dismissed. This Court does not have the authority to
vacate an assessment that is otherwise found to be correct in law
simply on the basis of an allegation that others are treated
differently.
28. This is an appeal from
an assessment of tax established pursuant to subsection 152(1) of
the Act. The issue under appeal is the Minister's
assessment of tax. In determining whether the assessment is
correct in law, this Court is bound to examine the question in
light of the relevant provisions of the Act.
29. The Appellant seeks to
have her assessment vacated on the ground that it was improperly
arrived at by the CCRA, not on the basis that it was inconsistent
with the provisions of the Act, but rather on the basis of
fairness. In support of her submission she alleges that the
CCRA's interpretation of the provision entitled Canadian
students to the tuition credit in respect of the examination fee
paid to NEB.
30. The Federal Court of
Appeal has found that it was plain and obvious that the Tax Court
of Canada did not have jurisdiction to set aside a valid
assessment of tax on the basis of a challenge to the process by
which it was established, or on the basis of how other taxpayers
are treated.
31. In the case at bar,
the Appellant is proposing to extend the jurisdiction of this
Court by seeking an order varying her assessment of tax
notwithstanding that it is correct in fact and in law. The right
of appeal is a substantive right which must not be extended
beyond the purpose for which it was conferred. Parliament has
given this Court specific jurisdiction to deal with the
correctness of a tax assessment and its remedial powers are as
set out in subsection 171(1) of the Act. It cannot take
into account how other taxpayers were treated.
C.S. 15 Threshold is Not Met
32. That Parliament has
not created a non-refundable credit for examination fees paid to
an accreditation board in pursuit of entry into a profession does
not infringe the Appellant's equality rights as guaranteed by
the Charter.
33. Subsection 15(1) of
the Charter reads as follows:
(1) 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.
34. Section 15(1) is
limited to claims to benefits and burdens imposed by the law. The
legislature does not have an obligation to create a particular
benefit but may "target the social programs it wishes to
fund as a matter of public policy, provided the benefit itself is
not conferred in a discriminatory manner".
35. The Act does
not purport to provide non-refundable tax credits for every
expense incurred by a taxpayer. The purpose of s. 118.5 is to
allow students to reduce their tax payable by taking into account
tuition fees for certain types of education. Parliament has no
obligation to create a similar credit in respect of examination
fees paid as part of an accreditation program for entry into a
profession.
No Violation of the Appellant's Equality
Rights
36. In the event that the
Court determines that the Appellant can advance a s. 15 claim,
such claim cannot succeed as s. 118.5 of the Act does
not impose a differential treatment between the Appellant and
others based on an enumerated or analogous ground.
37. Section 15 of the
Charter is not intended to protect individuals from all
types of differential treatment, only from those that are
discriminatory. Before this Court can find discrimination, the
Appellant must prove the following three conditions exist:
(i) that the
law imposes a differential treatment between her and others, in
purpose or effect;
(ii) that one or
more enumerated or analogous grounds of discrimination are the
basis for the differential treatment; and
(iii) that the treatment
constitutes discrimination in a substantive sense, having the
effect of treating the claimant as less worthy of concern,
respect and consideration in a manner that offends her human
dignity.
38. In considering a
Charter challenge to the Act, the courts must be
sensitive to the general purpose of the Act which is to
generate revenues and to make distinctions as to reconcile the
divergent interests in society.
Analysis and Conclusion
[7] The relevant sections of the
Act, so far as material, are as follows:
Section 8: Deductions allowed:
(1) In computing a taxpayer's income for a taxation
year from an office or employment, there may be deducted such of
the following amounts as are wholly applicable to that source or
such part of the following amounts as may reasonably be regarded
as applicable thereto:
...
(i) Dues and other expenses of performing duties -
amounts paid by the taxpayer in the year as
(i) annual
professional membership dues the payment of which was necessary
to maintain a professional status recognized by statute,
...
Section 118.5: Tuition credit:
(1) For the purpose of computing the tax payable under this
Part by an individual for a taxation year, there may be
deducted,
(a) where the individual was during the year a student enrolled
at an educational institution in Canada that is
(i) a university, college or other educational institution
providing courses at a post-secondary school level, or
[...]
an amount equal to the product obtained when the appropriate
percentage for the year is multiplied by the amount of any fees
for the individual's tuition paid in respect of the year to
the educational institution if the total of those fees exceeds
$100, except to the extent that those fees (certain exceptions
follow)
[8] The Written Submissions of counsel
for the Respondent are correct both as to the correct
interpretation of section 118.5 and the Charter.
[9] The Appellant has submitted that
she should be allowed to deduct the amount of $9,095 as fees paid
for tuition. She has not submitted that they should be deductible
under subparagraph 8(1)(i)(i) since these are not annual
professional membership fees. Alternatively, she submits that if
she is not allowed to deduct the fees under section 118.5, that
her section 15 Charter right is violated on the basis that
students enrolled in a Canadian university can deduct the said
fees.
[10] The conclusion she has drawn from the
Interpretation Bulletins quoted in her Notice of Appeal, mainly
that students can deduct the fees she has paid as a part of their
tuition, is incorrect. The fees that the Interpretation Bulletin
refers to are annual professional fees, which are normally
deductible under subparagraph 8(1)(i)(i), but which cannot be
deducted by students since they are not yet employed in the
profession. Professional fees that are not annual are never
deductible. Further, those fees are not a part of the tuition
credit under section 118.5 by virtue of the Act, rather they are
treated as a part of the fee by the Canada Revenue Agency when it
assess taxpayers. For this reason the Appellant's appeal must
be dismissed, unless it can be found that the fees were eligible
under section 118.5.
[11] Under section 118.5 the Appellant can
only deduct fees that were paid to "a university, college or
other educational institution providing courses at a post
secondary school level" in Canada. The Respondent has
submitted that neither the NEB nor the CVMA fall within this
category.
[12] In Friedland v. R., [2000] 1
C.T.C. 2938, Rowe D.J. was presented with a similar case. The
Appellant was a lawyer from South Africa who moved to BC in 1993.
To qualify to practice law he had the option of returning to law
school, or taking a series of examinations through the National
Committee on Accreditation. After passing the exams, or
completing a year of law school, he would be allowed to find an
article and enrol in the Bar Admissions Course. The Appellant
chose the first option and claimed related tuition fees. These
fees were disallowed and he appealed to the Tax Court. Upon
appeal Rowe D.J. stated the legal test as:
There are three prerequisites that must be established before
the appellant is entitled to a tuition credit pursuant to
subparagraph 118.5(1)(a)(ii). First, the individual must be a
student enrolled at an educational institution in Canada. Second,
that educational institution must be a university, college or
other educational institution. Third, it must provide courses at
a post-secondary school level.
The first matter to be addressed is whether the National
Committee on Accreditation is an educational institution. There
does not appear to be any standard definition of educational
institution in various federal and provincial acts dealing with
schools, student loans and education.
[13] From here he examined numerous
definitions of "education", "institution" and
"educational institution" before deciding that the
National Committee on Accreditation did not qualify because it
did not consider itself as a teaching institute nor was it a
"designated educational institute". Rowe D.J. continued
in his analysis and found that no post-secondary courses were
being offered. For these reasons he dismissed the appeal finding
that the Appellant only paid for "the process of assessment,
evaluation, recommendation relating to the required courses,
suggested study materials, setting and marking the
examinations."
[14] For the reasons set forth in those
Written Submissions and the other reasons set forth above the
appeal is dismissed.
Signed at Ottawa, Canada this 18th day of February, 2005.
O'Connor, J.
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