Simmonds v. The Queen, docket 98-9378-IT-I (Informal Procedure)

Date: 19990923

Docket: 98-9378-IT-I

BETWEEN:

DARRELL S. SIMMONDS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Bowman J.T.C.C.

[1] This appeal is from an assessment for the appellant's 1991 taxation year. The appellant is an RCMP officer. In 1991, he received a relocation allowance equivalent to one month's salary ($4,474.67) to assist him in connection with his move to a new location. In computing his income the appellant claimed this amount as a deduction.

[2] The question of the taxability of relocation allowances has been considered by the courts before and it may now be taken as conclusively determined that they are taxable: A.G. Canada v. R.M. MacDonald, [1994] 2 C.T.C. 48; McGuire v. R., April 7, 1999, 98-1004(IT)I, TCC, Hamlyn J. The appellant does not dispute this. Rather, he puts his opposition to the assessment on two bases:

(a) that it is statute-barred i.e. made beyond the normal three-year reassessment period. This is simply not so. The initial assessment for the appellant's 1991 taxation year was made on July 21, 1992 and the reassessment in issue here was made on April 24, 1995, well within the three year period. Nor do I see any merit in the contention that the assessment was not made with all due dispatch;

(b) that the furnishing of information to the Department of National Revenue by the RCMP in response to a request by the former constituted a violation of the appellant's rights under the Privacy Act.

[3] Subsection 8(1) of the Privacy Act reads:

Personal information under the control of a government institution shall not, without the consent of the individual to whom it relates, be disclosed by the institution except in accordance with this section.

[4] Paragraphs 8(2)(b) and (e) read:

(2) Subject to any other Act of Parliament, personal information under the control of a government institution may be disclosed.

...

(b) for any purpose in accordance with any Act of Parliament or any regulation made thereunder that authorizes its disclosure;

...

(e) to an investigative body specified in the regulations, on the written request of the body, for the purpose of enforcing any law of Canada or a province or carrying out a lawful investigation, if the request specifies the purpose and describes the information to be disclosed.

[5] The Audit Directorate, Department of National Revenue (Taxation) is an investigative body specified in the Regulations.

[6] The matter was considered at some length in the 1996-1997 Annual Report of the Privacy Commissioner. At page 63 of the report the following appears:

Tax reassessment of travel allowances no "fishing expedition". Several RCMP members complained to the Commissioner that by giving Revenue Canada a list of those receiving transfer allowances from 1991 to 1993, the RCMP had improperly disclosed personal information. (They also complained about Revenue Canada's collection of the information.) The complainants argued that the request was akin to a "fishing expedition" and that Revenue Canada was obligated by the Income Tax Act to obtain a judge's order to obtain information about unnamed individuals, and the RCMP should not have relinquished the list without one.

At issue is the allowance paid to RCMP members when transferred to a new location. The allowance, equal to 1/12 the annual salary, is to be taxed at source by the RCMP and reported by members as a taxable benefit on that year's income tax return. Members are told this when paid the allowance. In contrast, actual moving expenses are fully deductible with receipts.

A Revenue Canada audit of Regina District RCMP members revealed that many were simply deducting the full amount of the allowance as a moving expense. Auditors also discovered that the RCMP had not properly reported the taxable allowance on members' T4 slips. If it had, Revenue Canada could have found any discrepancies from its own computer system and not needed the RCMP's list. Once Revenue Canada discovered the omission, it asked the RCMP for the lists to conduct a random sampling to determine the extent of the problem. Following a telephone conversation between the RCMP Commissioner and the Revenue Canada Deputy Minister, the RCMP agreed to turn over the necessary records to ensure that transfer allowances were being properly reported.

Revenue Canada reviewed the computer tape and examined the returns of all members who received the transfer allowance during the three years at issue. Of the 1400 returns, 633 were reassessed and $1,227,000 in unpaid taxes was recovered. The remaining returns were processed with no changes, either because the member did not claim the allowance or the return had already been re-assessed by a field office in the post-review process.

It was clear to the Commissioner that both departments were cognizant of the restrictions in both the Privacy Act and the Income Tax Act, had sought legal advice and proceeded carefully. The RCMP is required to report properly to Revenue Canada any benefits paid its employees. Rather than ask the RCMP to re-issue T4 slips to all its members for the relevant years (which would have triggered a review of every member's file) Revenue Canada focused its request on a list of only those who had received the transfer allowance. The Commissioner concluded that Revenue Canada is entitled to collect the information under the Income Tax Act and therefore there was no violation of the Privacy Act.

[7] The report is not binding on the court, but it is of persuasive value. I agree with the conclusion expressed in the report.

[8] I do not think that the appellant's rights under the Privacy Act have been violated. This view is consistent with that expressed by Teskey J. in Dreilich v. R., [1999] 2 C.T.C. 2588. Paragraph 8(2)(e) contemplates the disclosure of information to the Department of National Revenue for the purposes of enforcing the Income Tax Act.

[9] If I had concluded that the appellant's rights under the Privacy Act had been violated it would have been necessary to consider whether this would have justified vacating this assessment. It is not necessary for this decision that I do so and I shall leave that question for another day. It was stated in O'Neill Motors Limited v. The Queen, 96 DTC 1486, aff'd F.C.A. 98 DTC 6424, that not every violation of the Charter would necessarily justify the vacating of an assessment. I should think that similar considerations would apply to a violation of a person's rights under the Privacy Act. In The Promex Group Inc. v. The Queen, 98 DTC 1588, I discussed at some length the effect of the Minister of National Revenue basing an assessment on information obtained in breach of a court order. That case has been appealed to the Federal Court of Appeal and I make no further comment on it.

[10] The appeal is dismissed.

Signed at Ottawa, Canada, this 23rd day of September 1999.

"D.G.H. Bowman"

J.T.C.C.