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Citation: 2004TCC293
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Date: 20040505
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Docket: 2003-2521(IT)I
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BETWEEN:
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PIERRE FRÉGEAU,
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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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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGEMENT
BédardJ.
[1] This is an appeal, under the
informal procedure, from an assessment made with regard to the
Appellant by the Minister of National Revenue (the "Minister")
under the Income Tax Act (the "Act") for the 2001 taxation
year.
[2] On his 2001 income tax return, the
Appellant claimed a credit for a wholly dependent person of
$1,006.88 ($6,293 x 16%). In a reassessment dated
December 2, 2002, the Minister denied the Appellant the
credit for a wholly dependent person.
[3] In order to issue and confirm the
reassessment in question, the Minister relied on the following
assumptions of fact, which are set out in paragraph 5 of the
amended Response to Notice of Appeal:
[translation]
(a) pursuant to a
request for information from the Minister concerning the claim
for a credit for a wholly dependent person, with regard to the
2001 taxation year, the Appellant indicated that the person
affected was his son Yannick, born on May 30, 1989, and that
he made child support payments to his former spouse;
(b) the Appellant
and Carole Foisy were married on September 24, 1983;
(c) the marriage of
the Appellant and Carole Foisy was dissolved on June 29, 1995,
through a divorce decree rendered by the Honourable Justice
André Forget;
(d) the Appellant
and Carole Foisy have two children together, Yannick and
Andrée;
(e) during the year
in question, the Appellant lived separate and apart from Carole
Foisy throughout the year;
(f) according
to the Consent to Judgment dated April 13, 1999, which was
homologated and given effect on April 14, 1999, through a
judgment of the Quebec Court of Appeal, the Appellant and Carole
Foisy agreed on, among other things, the following measures:
(i) the Appellant and Carole Foisy will have
joint legal custody, based on a 7-day rotation, of their minor
children, Yannick and Andrée;
(ii) the Appellant will pay Carole Foisy, for
their two minor children, Yannick and Andrée, annual
support of $3,000 payable in two equal bi-monthly instalments of
$125, on the 1st and 15th day of each month, as of April 15,
1999;
(g) the Minister
refused to grant the Appellant a tax credit for a wholly
dependent person, with regard to his son Yannick, for the 2001
taxation year because the Income Tax Act stipulates that
an individual cannot claim a personal tax credit if that
individual lives separate and apart from his or her former
spouse and is required to pay that former spouse child support,
whether that support is paid or not, but no deduction is
claimed.
[4] Only the Appellant testified at
the hearing. His testimony essentially confirmed the assumptions
of fact on which the Minister relied to make the
reassessment.
[5] The Agents for the Appellant
submit that subsection 118(5) of the Act is unconstitutional in
that it violates section 15 of the Canadian Charter of Rights
and Freedoms (the "Charter") by discriminating between
taxpayers based on their family status. The Appellant claims that
he is being discriminated against because he is not receiving the
same benefits from the Act as taxpayers with a different family
status.
[6] In support of their claim that
family status is a personal characteristic that can be
discriminated against, the Appellant's Agents rely on
Thibaudeau v. M.N.R., [1994] 2 F.C. 189
(Trial Division), where Hugessen J. stated that "... family
status or some similar expression figures as a prohibited ground
of discrimination ..."[1]
[7] Furthermore, the Appellant's
Agents believe that subsection 118(5) of the Act was justified
before the change in tax treatment for child support:[2]
[trnaslation]
Under this inclusion/deduction system, it was somewhat
understandable and acceptable that support payers are not
entitled to tax credits given that they could deduct the amounts
paid as support. However, following the legislative changes,
those support payers are no longer entitled to the tax credits.
That situation is not only prejudicial to them, but it also
creates a disadvantage for their dependent children who cannot
benefit from the advantages that would provide them with the
amounts of those tax credits.
In summary, they believe that since the change in tax
treatment for child support, subsection 118(5) of the Act imposes
unequal treatment on separated parents who share custody of the
children with their former spouse while paying child support.
Henceforth, those parents can no longer deduct the amounts paid
as child support, in addition to being denied the tax credit for
a wholly dependent person because they are paying child support
(subsection 118(5) of the Act). According to the Appellant's
Agents, [translation] "the provision in question completely and
undeniably ignores the fact that the Appellant needs those tax
credits not only for his benefit, but for the good of his son."[3]
[8] The Appellant's Agents also state
that the case law indicating that subsection 118(5) of the Act
does not violate section 15 of the Charter predates the change in
tax treatment for child support. Since the change in tax
treatment is one of the factors causing the unequal treatment
mentioned, they submit that this Court should not limit itself to
those decisions and should instead expand the reasoning.
[9] Furthermore, the Appellant's
Agents believe that Quebec's Regulation respecting the
determination of child support payments,[4] like the Federal Child Support
Guidelines,[5] does
not take into account the credit for a wholly dependent person in
the determination of support. Therefore, the taxpayer is denied
the credit for a wholly dependent person on the ground
that he or she pays child support. However, that support is
determined without taking into account the fact that the paying
parent cannot receive the credit in subsection 118(1) of the Act
because he or she pays support. The Appellant's Agents state:[6]
[translation]
In most cases, the provincial rules are applied and
accordingly, in the instant case, those of Quebec. Under the
Quebec rules, the tax credit for a wholly dependent person is not
taken into account in the determination of support. It is not
justified to state, as the Respondent did at page 15 of her
explanatory notes, that the federal guidelines for determining
child support payments take into account the tax credit for a
wholly dependent person provided for in paragraph
118(1)(b) of the Act in the determination of that support
because they are not applicable in the case at bar any way. Also,
the Respondent did not show in her explanatory notes that the
federal legislator did indeed take the credit in question into
account. In fact, nothing seems to indicate that the legislator
actually took it into consideration. ...
Analysis
[10] In order to determine whether
subsection 118(5) violates section 15 of the Charter, I must
consider the following three issues:
- whether a law imposes differential treatment between the
applicant and others, in purpose or effect;
- whether one or more enumerated or analogous grounds of
discrimination are the basis for the differential treatment;
and
- whether the law in question has a purpose or effect that is
discriminatory within the meaning of the equality guarantee.
Differential treatment
[11] In my opinion, it is clear that the
application of subsection 118(5) of the Act results in
differential treatment: the taxpayer who is separated and has
joint custody of his or her children but who does not pay child
support will be entitled to the credit for a wholly dependent
person whereas this will not be the case for the taxpayer in the
same situation but who does not pay [sic] child
support.
Personal characteristics
[12] The Appellant's Agents maintain that
the Appellant is being discriminated against based on his family
status and that it is a personal characteristic contemplated in
section 15 of the Charter. In support of their claim that family
status is a personal characteristic, they refer to the reasons of
Hugessen J. in Thibaudeau[7] where he states "the qualities of
being separated and a parent are 'personal characteristics.'"[8]
They therefore state [translation] "that the necessity of
having to pay child support must also be considered a personal
characteristic." [9]
[13] First, it is important to note that the
judgment in Thibaudeau was set aside by the Supreme Court
of Canada.[10] In
that case, the Supreme Court of Canada had to determine whether
paragraph 56(1)(b) of the Act violated section 15 of the
Charter. It should be noted that this case predated the change in
tax treatment. The Supreme Court of Canada decision in
Thibaudeau, supra, was far from unanimous. La
Forest and Sopinka JJ. concurred in Gonthier J.'s reasons and
conclusions; Cory and Iacobucci JJ. agreed with the Gonthier J.'s
conclusions but made a point of adding some clarifications; also,
L'Heureux-Dubé and McLachlin JJ. both rendered
dissenting reasons. Given those divergent opinions, it is
appropriate to review the Supreme Court of Canada's decision in
detail.
[14] In Thibaudeau, supra,
Gonthier J. explained that the group affected by the distinction
resulting from the application of paragraph 56(1)(b) of
the Act consisted of separated or divorced couples in which one
parent is paying support to the other under a judgment or
agreement:[11]
As I noted earlier, in order to decide whether the system is prejudicial it must be placed in context by comparing the treatment of parents covered by the special inclusion/deduction system with that which they would receive in the absence of such a system, namely that of parents to whom ss. 56(1)(b) and 60(b) ITA do not apply but who nevertheless have a support obligation.
Since the group affected by the distinction was the couple,
Gonthier J. concluded that it was a personal characteristic
similar to those referred to in section 15 of the Charter.
[15] In his reasons, Gonthier J. stated that
the Act is distinctive in that it creates, by its very nature,
differential treatment:[12]
It is of the very essence of the ITA to make distinctions, so
as to generate revenue for the government while equitably
reconciling a range of necessarily divergent interests. In view
of this, the right to the equal benefit of the law cannot mean
that each taxpayer has an equal right to receive the same
amounts, deductions or benefits, but merely a right to be
equally governed by the law. The basic purpose of s. 15 of
the Charter was explained by McIntyre J. in Andrews,
supra, at p. 171:
It is clear that the purpose of
s. 15 is to ensure equality in the formulation and application of
the law. The promotion of equality entails the promotion of a
society in which all are secure in the knowledge that they are
recognized at law as human beings equally deserving of concern,
respect and consideration.
That being the case, one should
not confuse the concept of fiscal equity, which is concerned with
the best distribution of the tax burden in light of the need for
revenue, the taxpayers' ability to pay and the economic and
social policies of the government, with the concept of the right
to equality, which as I shall explain in detail later means that
a member of a group shall not be disadvantaged on account of an
irrelevant personal characteristic shared by that group.
[16] According to Gonthier J., family law
must determine child support by taking into account the tax
consequences. Consequently, if this task is not properly
performed because of the family law provisions, this does not
cause paragraph 56(1)(b) of the Act to violate section 15
of the Charter:[13]
The fact that the tax saving resulting from the
inclusion/deduction system does not benefit both parents in
equal proportion therefore does not infringe the equality
rights protected by the Charter. Additionally, I would
note that there is no evidence in this connection to show that
the recipient parent or the children would benefit by taxation in
the hands of the payer of the alimony, as the ordinary rules of
taxation under the general system would postulate. In fact, in
that case it appears that the latter's ability to pay would
be reduced in total (he would be unable to deduct the amounts
paid in computing his income) and over time (he would be unable
to benefit from the special arrangements allowing the payer of
support to reduce the amount of his source deductions).
In short, the fact that the support may not be increased by an
amount equal to the payer's tax relief or the recipient's
tax increase does not as such place the latter at a disadvantage
since in principle the distribution takes place in accordance
with family law, which is incorporated into the tax system by
reference and the aims of which are promoted by contributing to
an alleviation of the tax burden. Additionally, such results, if
any, depend primarily on the individual case. They do not
establish a disadvantage for the group.
Reference has been made to the fact that family law does not
achieve an equal distribution and leaves the custodial parent,
usually the mother, relatively deprived, or at least leaves her
saddled with a larger and disproportionate share of the burden.
It is said that the deduction/inclusion system exacerbates the
problem. It is thus incorrect, even accepting the argument as
stated, to say that this system is the source of the problem even
though, on that view of the matter, it may make the situation
worse. The system thus cannot be blamed for the problem of the
limited resources of custodial parents, which the system aims to
relieve and does in fact relieve in general by reducing the
amount collected in tax and leaving a larger part of the
parents' income at their disposal to meet their requirements
for maintaining their children. This is a benefit not enjoyed by
other parents. Accordingly, the complaint is not in effect aimed
at this benefit but rather bears upon the failure of certain
non-custodial parents to fulfil their obligations to their
children adequately, in view of the tax relief which they
receive. This situation it is said should bar the government from
allowing the non-custodial parent who supports the family a
larger amount of disposable income in order to fulfil his
obligations to his children, as defined by the law itself and the
amount of which is set by a formal agreement or fixed by a
decree. All parents would thus be deprived of this greater
latitude and freedom to discharge their responsibilities.
The impugned system provides an overall benefit to couples
supporting children. The defects, not in the legislation, which
provides for a sharing according to the children's best
interests, but in its application in certain cases for reasons
quite unrelated to the system, may lead one to conclude that the
remedy chosen by Parliament is inadequate to solve fully a
profound and complex social problem, but not that it causes
prejudice to those it benefits. There is absolutely nothing to
show that parents, even custodial parents, would be in a better
position as a group if the system did not exist. In the first
place, legislation must be assessed in terms of the majority of
cases to which it applies. The fact that it may create a
disadvantage in certain exceptional cases while benefiting a
legitimate group as a whole does not justify the conclusion that
it is prejudicial. Secondly, the fact that the benefits sought
are not fully achieved on account of problems not with the
legislation but arising out of the circumstances or the nature of
the subject matter, in particular in the area of the family, does
not turn those benefits into disadvantages. Any inequalities are
peculiar to specific cases, though there may be many of them;
they relate to economic interests and are most likely to affect
parents who are better off, at income levels where the dignity of
the person is not at stake.
[17] Cory and Iacobucci JJ. concurred in the
conclusion of Gonthier J. stating that the family unit was
the group contemplated. Although they arrived at the same result,
Cory and Iacobucci JJ. made a point of adding the following
comments:[14]
We would stress that courts should be sensitive to the fact
that intrinsic to taxation policy is the creation of distinctions
which operate, as noted by Gonthier J., to generate fiscal
revenue while equitably reconciling what are often divergent, if
not competing, interests. As must any other legislation, the
Income Tax Act is subject to Charter scrutiny. The
scope of the s. 15 right is not dependent upon the nature
of the legislation which is being challenged. See Symes
v. Canada, [1993] 4 S.C.R. 695. In the present case,
however, in determining whether the distinction has the
effect of creating a burden, it is necessary to examine
the interaction between ss. 56(1)(b) and 60(b) of
the Income Tax Act and the family law regime. Unlike the
situations presented in Symes and in Egan, the
impugned provisions in this appeal explicitly incorporate and are
dependent upon both federal and provincial legislative enactments
and do not, by themselves, constitute a complete self-contained
code. Therefore the Income Tax Act provisions must be
looked at in conjunction with the federal and provincial statutes
under which child support orders are issued in order to assess
the effect upon the claimant.
In the present appeal, ss. 56(1)(b) and 60(b) of
the Income Tax Act are triggered by the issuance of a
support order pursuant to the Divorce Act, R.S.C. 1970, c.
D-8. Accordingly, the taxation provisions operate in close
conjunction with family law. The amount of income taxable under
ss. 56(1)(b) and 60(b) is determined by the divorce
or separation decree and, unless the family law system operates
in a defective manner, the amount of child support will include
grossing-up calculations to account for the tax liability that
the recipient ex-spouse shall incur on the income. If there is
any disproportionate displacement of the tax liability between
the former spouses (as appears to be the situation befalling Ms.
Thibaudeau), the responsibility for this lies not in the
Income Tax Act, but in the family law system and the
procedures from which the support orders originally flow. This
system provides avenues to revisit support orders that may
erroneously have failed to take into account the tax consequences
of the payments. Therefore, in light of the interaction between
the Income Tax Act and the family law statutes, it cannot
be said that s. 56(1)(b) of the Income Tax Act
imposes a burden upon the respondent within the meaning of s. 15
jurisprudence.
...
In sum, this is not a case in which this Court is called upon
to determine whether the distinction that has been created is
actually discriminatory. Simply put, there is no burden.
Accordingly, this appeal can thus be disposed of at this stage of
the s. 15 analysis. It follows that there is no need to enter the
next stage, that of finding discrimination, the level at which
the opinions of our colleagues appear to diverge conceptually. In
so far as we disagree with McLachlin J.'s conclusion that ss.
56(1)(b) and 60(b) of the Income Tax Act
occasion a burden, our disagreement is limited to an application
of her approach to the facts of this case, not with her
methodology per se, which we endorse. By corollary, our
concurrence with Gonthier J. in the disposition of this appeal is
one of result, not of method. This conclusion emerges because, in
the instant case, we find that there is no denial of any benefit
of the law within the context of s. 15.
[18] On the contrary,
L'Heureux-Dubé and McLachlin JJ., for different but
not contradictory reasons, were of the opinion that paragraph
56(1)(b) of the Act violated section 15 of the Charter.
Essentially, they maintained that the comparison group was not
the family or the couple but rather divorced parents who have
custody of the children. McLachlin J. added that the family law
regime did not prevent inequalities such that using those rules
would serve no purpose:[15]
... In short, the family law regime failed to rectify the
inequality which the tax law imposed on Ms. Thibaudeau. Even if
she were to seek a variation in child support, there is no
assurance that the result would be full indemnity. Ms.
Thibaudeau's case, far from isolated, negates the notion that
the family law regime neutralizes the discriminatory impact of
the tax law.
I conclude that the requirement of s. 56(1)(b) ITA that
separated or divorced custodial parents include child support in
their taxable income imposes obligations on separated or divorced
custodial parents that do not apply to others in similar
situations and denies benefits which the law accords to others.
It denies the right of custodial parents to equal protection and
benefit of the law. Unequal treatment under s. 15 is
established.
[19] In summary, the Supreme Court of Canada
concluded that paragraph 56(1)(b) of the Act did not
violate the Charter. Relying heavily on Thibaudeau,
supra, Hershfield J. recently decided that a taxpayer's
obligation to include in his or her income the amounts received
as spousal support (not to be confused with child support) did
not violate section 15 of the Charter.[16]
[20] Is the Appellant, because of subsection
118(5) of the Act, being treated differently based on a personal
characteristic? I must respond to that question in the negative.
Although the Appellant's Agents maintain that the differential
treatment endured by the Appellant results from his family
status, the differential treatment is, in my opinion, caused by
his obligation to pay child support. Therefore, it is not a
personal characteristic analogous to those listed in section 15
of the Charter. The obligation results from family status,
whether it is a personal characteristic or not. However, the fact
of being a separated or divorced parent is not the reason why the
Appellant is not entitled to the credit in paragraph
118(1)(b) of the Act. The Appellant was denied the credit
in paragraph 118(1)(b) of the Act because he pays child
support to his former spouse. Thus, the Appellant was treated
differently than other separated or divorced parents who do not
pay child support. The distinction depends on the pecuniary
obligation resulting from an obligation to pay child support.
Section 15 of the Charter seeks to prohibit differential
treatment based on personal characteristics, i.e. characteristics
tied to the dignity of a person such as race, national or ethnic
origin, colour, religion, sex, age, physical or mental disability
and all analogous grounds. Since a pecuniary obligation is not a
personal characteristic analogous to those set out in section 15
of the Charter, the Appellant is not, in my opinion, being
treated differently under that section of the Charter.
[21] I believe that the Respondent is
correct in stating that Nelson v. Canada, 2000 DTC 6556,
[2000] F.C.J. No. 1613 is relevant even though this decision
predates the change in tax treatment. In that case, Mr. Nelson
and his former spouse shared custody of their children and Mr.
Nelson paid a certain amount as child support. Like the
Appellant, Mr. Nelson maintained that subsection 118(5) of the
Act violated section 15 of the Charter. The Federal Court of
Appeal, per Sharlow J.A., concluded:[17]
In my view, the differential treatment created by
subsection 118(5) of the Income Tax Act is not based on one of
the grounds enumerated in subsection 15(1) of the Charter or an
analogous ground. Subsection 118(5) does not draw
a distinction between Mr. Nelson and the comparator group based
on personal characteristics, or the stereotypical application of
presumed group or personal characteristics, and does not bring
into play the purpose of subsection 15(1) of the Charter in
remedying such ills as prejudice, stereotyping, and historical
disadvantage. Nor does the operation of subsection
118(5) of the Income Tax Act offend Mr. Nelson's dignity,
intrinsic worthiness or self-respect. Therefore, the
differential treatment resulting from subsection 118(5) is not
discriminatory in the Charter sense.
The premise underlying Mr. Nelson's argument is that
Parliament should provide equal tax relief to all single parents
who support their children in a shared custody
arrangement. While that may be a laudable public
policy objective, it is not one that can be advanced through a
claim under subsection 15(1) of the Charter. Mr.
Nelson's remedy lies with Parliament alone.
(Emphasis added)
[22] That conclusion must, in my opinion,
apply to this case. It is true that the effect of the change in
tax treatment plays a significant role in the current problem.
However, this element comes into consideration at the third stage
of the analysis where it is necessary to determine whether
subsection 118(5) of the Act is discriminatory, in purpose or
effect, within the meaning of the equality guarantee.
Accordingly, an argument based on the change in tax treatment is
not appropriate at this stage. Consequently, subsection 118(5) of
the Act does not create, in my opinion, differential treatment
based on one of the grounds listed in subsection 15(1) of the
Charter or an analogous ground and the appeal can be dismissed on
that basis alone.
Discriminatory purpose or effect
[23] Notwithstanding the foregoing and
assuming that the Appellant was treated differently based on a
personal characteristic (his family status), I am of the opinion
that the differential treatment is not discriminatory in purpose
or effect.
[24] The Appellant's Agents essentially
raise two arguments. First, they believe that subsection 118(5)
of the Act is discriminatory because of the change in tax
treatment. Second, they believe that subsection 118(5) of the Act
is discriminatory because Quebec's Regulation respecting the
determination of child support payments, like the Federal
Child Support Guidelines, does not take into account the impact
of that support on the right to the credit for a wholly dependent
person.
[25] In Law v. Canada
(Minister of Employment and Immigration), [1999] 1 S.C.R.
497, the Supreme Court of Canada, per Iacobucci J., stated
that one of the questions to ask when analyzing section 15 of the
Charter is the following:[18]
Does the differential treatment discriminate, by imposing a
burden upon or withholding a benefit from the claimant in a
manner which reflects the stereotypical application of presumed
group or personal characteristics, or which otherwise has the
effect of perpetuating or promoting the view that the individual
is less capable or worthy of recognition or value as a human
being or as a member of Canadian society, equally deserving of
concern, respect, and consideration?
[26] I cannot say that the differential
treatment caused by the application of subsection 118(5) of the
Act is discriminatory due to the change in tax treatment because
the result of the application of subsection 118(5) of the Act is
identical before and after the change in tax treatment. Before
the change in tax treatment, the Appellant could deduct the child
support he paid when computing his income, while his former
spouse had to include that amount when computing her income. With
respect to the credit for a wholly dependent person, the
Appellant was not entitled to it because he paid child support.
After the change in tax treatment, the Appellant can no longer
deduct the child support he pays when computing his income and
his former spouse is not required to include the amount received
when computing her income. As for the credit for a wholly
dependent person, the Appellant is still not entitled to it
because he pays child support. The fact of the matter is that the
differential treatment resulting from the application of
subsection 118(5) of the Act is the same before and after the
change in tax treatment.
[27] Since subsection 118(5) of the Act did
not violate section 15 of the Charter before the change in tax
treatment[19] and
since the Supreme Court of Canada stated that the change in tax
treatment does not violate section 15 of the Charter,[20] it is appropriate to
conclude that the effect of the change in tax treatment is not to
make subsection 118(5) of the Act violate section 15 of the
Charter. To conclude otherwise would equal challenging the
validity of the change in tax treatment under the Charter,
whereas the Supreme Court has already ruled in that regard. I
refer to the statements of Gonthier J. in Thibaudeau:[21]
It is of the very essence of the ITA to make distinctions, so
as to generate revenue for the government while equitably
reconciling a range of necessarily divergent interests. In view
of this, the right to the equal benefit of the law cannot mean
that each taxpayer has an equal right to receive the same
amounts, deductions or benefits, but merely a right to be
equally governed by the law. The basic purpose of s. 15 of
the Charter was explained by McIntyre J. in Andrews,
supra, at p. 171:
It is clear that the purpose of
s. 15 is to ensure equality in the formulation and application of
the law. The promotion of equality entails the promotion of a
society in which all are secure in the knowledge that they are
recognized at law as human beings equally deserving of concern,
respect and consideration.
That being the case, one should
not confuse the concept of fiscal equity, which is concerned with
the best distribution of the tax burden in light of the need for
revenue, the taxpayers' ability to pay and the economic and
social policies of the government, with the concept of the right
to equality, which as I shall explain in detail later means that
a member of a group shall not be disadvantaged on account of an
irrelevant personal characteristic shared by that group.
[28] The Appellant's Agents submit that
subsection 118(5) of the Act completely and undeniably ignores
the fact that the Appellant needs those tax credits not only for
his benefit, but for the good of his son.[22] That statement is incorrect given
the fact that the parent who receives child support payments is
entitled to the credit for a wholly dependent person. Thus, the
child benefits from the credit for a wholly dependent person
through the parent receiving the child support payments.
[29] Furthermore, the Appellant's Agents
mention that the Quebec government considered it appropriate to
eliminate that inequality between taxpayers by granting support
payers the opportunity to claim those tax credits.[23] They state that the
purpose of the change was to rebalance the economic strengths
between the parties so as to allow everyone the same benefits
under the Act.[24] It is highly possible that the Quebec legislator made
that legislative choice for precisely that reason. However the
federal legislator and this Court are not bound by that
choice.
[30] The Appellant's Agents also state that
the distinction resulting from the application of subsection
118(5) of the Act is discriminatory because Quebec's
Regulation respecting the determination of child support
payments, like the Federal Child Support Guidelines, does not
take the credit for a wholly dependent person into account.
[31] In my opinion, that claim is also
incorrect because the Federal Child Support Tables seem to have
been designed with a number of elements in mind, including the
credit for a wholly dependent person, as indicated in the Federal
Child Support Guidelines:[25]
6. The formula referred to in note 5 sets support amounts
to reflect average expenditures on children by a spouse with a
particular number of children and level of income. The
calculation is based on the support payer's income. The
formula uses the basic personal amount for non-refundable tax
credits to recognize personal expenses, and takes other
federal and provincial income taxes and credits into account.
Federal Child Tax benefits and Goods and Services Tax credits for
children are excluded from the calculation. At lower income
levels, the formula sets the amounts to take into account the
combined impact of taxes and child support payments on the
support payer's limited disposable income.
(Emphasis added)
[32] Thus, in setting out the child support
amounts, the Federal Guidelines assume that the support payer
will not be entitled to the credit for a wholly dependent person.
Consequently, although the taxpayer paying child support does not
benefit from the credit for a wholly dependent person because he
or she pays support, the support paid by that taxpayer was
established based on the fact that he or she is not entitled to
receive the personal tax credit in question.
[33] Without evidence refuting the
legislator's claim that the formula used to establish the Federal
Guideline Tables takes into account the denial of the tax credit
in subsection 118(1) of the Act for the taxpayer who pays child
support, I cannot reach such a conclusion. The part of the 1996
budget entitled "The New Child Support Package" indicates, at
page 12, that:
The Schedule amounts are fixed by a formula that calculates
the appropriate amount of support in light of economic data on
average expenditures on children across different income levels.
The formula reserves a basic amount of income for the payer's
self-support, and adjusts for the impact of federal and
provincial income taxes. There are separate tables for each
province to take differences in provincial income tax rates into
account. The Schedules for each province and territory are
included in the Annex.
The Honourable Paul Martin made the following comments
concerning the legislator's decision to change the tax
treatment:[26]
The equivalent-to-married credit is provided to a single
parent of a child under the age of 18. Currently, the Income
Tax Act provides that the recipient of child support, not the
payer, is eligible to claim the credit.
This treatment will continue to apply under the new rules.
This approach is consistent with the new federal child support
guidelines, under which award levels are set based on the
assumption that it is the recipient spouse who claims the
equivalent-to-married credit.
And:[27]
Subsection 118(5) of the Act provides that an individual who
is entitled to a deduction under paragraph 60(b),
(c) or (c.1) of the Act in respect of a support
payment for the maintenance of a spouse or child is not also
entitled to claim a credit under section 118 in respect of that
spouse or child.
Subsection 118(5) is amended as a consequence of the changes
to the treatment of child support. As amended, subsection 118(5)
provides that an individual is not entitled to claim a credit
under subsection 118(1) in respect of a person if the individual
is required to pay a support amount to his or her spouse or
former spouse for that person and the individual either is living
separate and apart from the spouse or former spouse throughout
the year because of marriage breakdown or is claiming a deduction
for support payments.
Under this new wording, where an individual is required to
make child or spousal support payments in years following the
year of marriage breakdown, no credits under subsection 118(1)
will be available to the individual in respect of the spouse or
child, even in cases where such support payments are not made or,
if made, are not deductible. In the year in which a marriage
breakdown occurs, an individual may be able to claim credits
under subsection 118(1) if he or she does not claim a deduction
for support payments.
These amendments apply to the 1997 and subsequent taxation
years.
I must conclude that the Federal Child Support Guidelines do
take the credit for a wholly dependent person into account.
Therefore, the Appellant has not met the burden of proving the
opposite effect and thus that argument must be dismissed.
[34] If I am incorrect in concluding that
the Federal Guidelines take the credit for a wholly dependent
person into account, it still remains that subsection 118(5) of
the Act does not violate section 15 of the Charter. Although not
taking the credit for a wholly dependent person into account when
determining support could seem unfair, even discriminatory, the
differential treatment is not based on a ground contemplated in
section 15 of the Charter.[28] At the very most, and still assuming that the
Federal Guidelines do not take the credit into account, I would
say that it is an unwise legislative decision from a policy
perspective, without being invalid under section 15 of the
Charter.
[35] Also, child support is determined by
taking into account, among other things, the custody arrangement
and the financial capacity of each parent. Therefore, the support
paid by the Appellant is supposed to take into account the fact
that the children are with him every seven days, for a period of
seven days (joint custody), and it is supposed to be determined
by taking into account his income.[29] For those reasons, if the systems
for determining support amounts do not take into account the fact
that the paying parent will not be able to benefit from the
credit for a wholly dependent person, I believe, reiterating the
statements of Cory and Iacobucci JJ., that:[30]
... the responsibility for this lies not in the Income Tax
Act, but in the family law system and the procedures from
which the support orders originally flow. This system
provides avenues to revisit support orders that may erroneously
have failed to take into account the tax consequences of the
payments.
[36] As for the Regulation respecting the
determination of child support payments, it is true that it
does not expressly take the credit for a wholly dependent person
into account.[31]
Although the result is unfortunate, it is beyond the federal
legislator's jurisdiction. We cannot conclude that a federal
provision violates section 15 of the Charter because the
application of that provision with regard to a provincial statute
produces a result that is "possibly" discriminatory.[32] It is up to the
provincial legislators to adapt their statutes accordingly.
[37] In conclusion, the differential
treatment experienced by the Appellant is not based on a personal
characteristic contemplated in section 15 of the Charter. At the
most, if the differential treatment is indeed based on a personal
characteristic, i.e. the Appellant's family status, the
distinction is not discriminatory. Therefore, the appeal must be
dismissed.
Signed at Ottawa, Canada, this 5th day of May 2004.
Bédard J.
Translation certified true
on this 21st day of December 2004
Aveta Graham
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