Date: 20000927
Docket: 1999-2921-IT-I
BETWEEN:
PERCY R. SMITH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
McArthur J.T.C.C.
[1] This appeal is from a child tax benefit notice in which
the Minister of National Revenue determined that the Appellant
was not entitled to the child tax benefit for the base taxation
years 1994, 1995 and 1996 in the amounts of $1,745, $6,633 and
$1,105, respectively, on the basis that he was not an
"eligible individual" within the meaning of section
122.6 of the Income Tax Act. The issue is whether he was a
resident of Canada during the relevant period.
[2] The Appellant immigrated to Canada from Guyana about 1973
and became a Canadian citizen in 1978. He is highly intelligent
and well educated. He had a son Christopher out of wedlock about
1980. From his first marriage, he has six children born between
May 1982 and December 1991. His first wife died of lupus in 1992.
He remarried in 1994 and had four children from this union. In
August 1993, he purchased a property in Guyana from his uncle for
$9,000[1] which he
believed then had a value of $40,000. On May 31, 1994, he moved
to Guyana with his wife and six children.
[3] The property he had purchased contained four or five
residential dwellings that were obviously a liability rather than
an asset. He received no rents and had great difficulty evicting
the occupants in order to convey vacant land. He eventually
succeeded and sold the land for $90,000 in July 1998. He had to
be a resident of Guyana for at least two years in compliance with
the laws of that country in order to buy the land, evict the
tenants and eventually sell it.
[4] In the fall of 1994, he purchased a taxi business in
Guyana with four operating cars, which he operated at a loss for
three years. He explained that he acquired the business so that
his six children enrolled in several different schools, would
ride safely while they travelled back and forth.
[5] Prior to moving to Guyana, he had been living in Oakville,
Ontario from the proceeds of an insurance policy payable on the
death of his wife in 1992. During this period he was publishing a
Christian newspaper called "Inner City".
[6] While the evidence was somewhat confusing, it would appear
that the Appellant returned to Canada four or five times during
the period from June 1994 to June 1998 for a total period of at
best, three weeks in each of the four years. His wife came back
to Canada in July 1995 for three months to have a baby. He
returned to Canada (i) for two weeks in November 1994; (ii) less
than two weeks in March or April 1995; (iii) less than two weeks
in March 1996; and (iv) did not come back until September 1998.
While living in Guyana his son Christopher stayed in Canada,
presumably with his mother. The Appellant's mother and father
also remained in Canada. Upon his return with his wife and
children in September 1998, he purchased a home in Winnipeg. His
children are outstanding students and athletes. Two of his
daughters attended this hearing with their father.
[7] The Appellant's objections taken from his Notice of
Appeal include:
1. ... I sojourned in Canada over 190 days during the
base taxation year 1994, therefore that year should be
excluded.
2. ... My objections were granted by Appeals Office Mr.
Andrew Ng on the 17th December 1998 at 10:02 a.m. This decision
was confirmed by two witnesses, (i) Mrs. Patricia Smith (204
783-6728) my wife (ii) Mrs. Della Hurley (204 984-2843) an
employee of Revenue Canada, Child Tax Benefit Division Winnipeg.
Mrs. Hurley called Mr. Andrew Ng at my request within 10 mins. of
Ng's communication to me of his decision. Mr. Ng confirmed
his decision that I was according to his words "a factual
resident for income tax purposes"; that my objections were
upheld (successful); and Mrs. Hurley therefore called me back,
speaking to both my wife and I indicating she had also received
confirmation that I was a "factual resident" for base
taxation years 1994, 1995 and 1996 and my objections were upheld.
Since I did not in any way pressure Mr. Ng nor was there any
additional evidence cited which resulted in the reversal of that
decision on Friday December 21st, 1998 – I ask that the
court uphold the initial decision and find the reversal
egregious.
3. ... The notification of confirmation by the Minister
seems to indicate one of two suppositions:
(a) that $9,484.25 was paid to me between March 7, 1996 and
September 1, 1998 for the base years 1994, 1995 and 1996
or
(b) that the monies were paid during their respective base
taxation years 1994, 1995 and 1996,
but since I was out of the country between March 7/96 and
Sept. 1/98, section 122.6 would allow for punitive retroactive
measures. I object to both premises since child tax benefits were
paid during the base taxation years and section 122.6 does not
allow for punitive retroactive measures from Sept./98 (including
the amendment of 122.6 in June/98) back to base years 1994, 1995
and 1996.
4. The fourth reasons for my appeal is based on my dependence
on Revenue Canada's rules and regulations as printed in their
forms for the base taxation years 1994, 1995 and 1996 which sets
out the criteria for "Factual Residency" based on
residential ties which I met namely personal property and social
ties as follows:
(i) supporting a child back in Canada
(ii) active credit card
(iii) active driver's license
(iv) active bank account
I was also able to provide documentation of insurance and
monthly receipts of rental of a large storage facility in
Oakville, Ontario including taxes paid.
5. ... The section of the Act cited by the
Minister's Notice of Confirmation should be limited to the
Income Tax Act for those base years.
6. ... Section 122.6 is not a retrospective law or
statute therefore cannot be applied retroactively.
7. ... I cite this statement in the General Income Tax
Guide for base years 1994, 1995 & 1996. "If on December
31, 1996 you lived outside Canada but you maintained residential
ties (as defined on page 5) with Canada, you may be considered a
factual resident of a province or territory. Use the package for
the province or territory where you kept your residential
ties". I not only met the requirements as stated on page 5
for 1996 and other base years being appealed, but also followed
the instructions and used the Ontario package where my
residential ties were.
8. ... In order to qualify as a "Factual
Resident" according to Revenue Canada's established
guidelines for the base years of my appeal, residency outside of
Canada is essential. Therefore to cite my living outside of
Canada as the reason for dismissing my objection is both
contradictory and discriminatory.
[8] The Appellant filed income tax returns for at least 1996,
1997 and 1998 reflecting under $1,000 of tax payable. He
explained that he had been mistreated by Revenue Canada officials
and his Mississauga bank account was seized or garnisheed in
December 1999 while this appeal was active. He has sued Revenue
Canada in Federal Court for damages as a result of this seizure.
While it is unfortunate if he has been treated improperly, I have
explained that it is not relevant to this decision.
Analysis
[9] To be eligible for the child tax benefit, the Appellant
had the burden of proving that he was a resident of Canada during
the base taxation years pursuant to the definition of
"eligible individual" contained in section 122.6.
[10] I rely on the decision and analysis of Mogan J. in
Boston v. The Queen,[2] wherein he was faced with determining residency
under somewhat similar facts. In Boston, the taxpayer was
transferred by his employer from Alberta to Malaysia. He worked
in Malaysia from September 1989 to at least 1992. During that
period, he made two 14-day visits to Canada. His wife continued
to live in Canada in their family home and visited him eight
times during the four-year period. Judge Mogan had no difficulty
concluding that Boston was not a resident of Canada but a
resident of Malaysia during the four years. I apply the reasoning
of Mogan J. to the present case and quote extensively from it.
Judge Mogan stated:
When attempting to determine in law the residence of an
individual for income tax purposes, the leading case is the
decision of the Supreme Court of Canada in Thomson v. Minister
of National Revenue, [1946] S.C.R. 209. In that decision,
Rand, J. stated at pages 224-225:
... It is important only to ascertain the spatial bounds
within which he spends his life or to which his ordinary or
customary living is related. ...
... On the lower level, the expressions involving
residence should be distinguished, as I think they are in
ordinary speech, from the field of "stay" or
"visit".
... Applying the specific words of Rand, J. in
Thomson to the Appellant's situation, I find that the
Appellant after 1988 had settled into or maintained or
centralized his ordinary mode of living with its accessories and
social relations, interests and conveniences in Malaysia.
In Griffiths v. The Queen, 78 DTC 6286, a long-time
resident of Canada decided to retire to the British Virgin
Islands where he lived on his yacht which was registered in
Canada. When deciding that Mr. Griffiths had ceased to be
resident in Canada, Collier, J. stated at page 6288:
I see nothing incompatible with a severance of residence, but
the keeping of investments in this country.
... I would distinguish this appeal from the
Ferguson case because the Appellant went to Malaysia for a
minimum period of three years; he had significant employment
responsibilities there; he hoped to stay on after three years if
he became manager of the Port Dickson Refinery; and he became
active in the residential community of Port Dickson.
... The Appellant's presence in Canada during the
four years 1989, 1990, 1991 and 1992 in terms of time was
minuscule. In fact, he was here for only 14 days in 1990 and for
another 14 days in 1992. He was not here at all in 1989 or 1991.
If as Rand, J. observed in Thomson, the word residence is
to be distinguished from "stay" or "visit", I
should think that the time which the Appellant spent in Canada in
1990 and 1992 is more accurately characterized as a visit to
Canada in each of those years. I find that the Appellant was not
resident in Canada in the years 1989 to 1992.
[11] I will now deal with the Appellant's Notice of Appeal
submissions in their numerical order referred to earlier:
1. The base years are as contained in the Minister's Reply
to the Notice of Appeal which were not questioned by the
Appellant, namely, in conformity with section 122.6 of the
Act;
(a) the 1994 base taxation year means the months of July 1995
to June 1996 inclusively;
(b) the 1995 base taxation year means the months of July 1996
to June 1997 inclusively; and
(c) the 1996 base taxation year means the months of July 1997
to June 1998.
2. There was no further evidence of a settlement at trial and
I do not find a binding contract between the Appellant and the
Minister. The Notice of Confirmation is the Minister's
decision.
3. I believe that the child tax benefit notice is equivalent
to the Minister's assessment. Normally under subsection
152(3.1), the Minister has three years after the day of mailing a
notice of original assessment to reassess.
4. For the reasons set out, particularly with reference to the
Boston case, the Appellant was not a "factual
resident" of Canada. It is a common sense conclusion. The
Appellant moved to Guyana with his wife and six children where he
ordinarily resided for four years. He purchased and operated a
taxi business, had a real estate investment that required his
residency in Guyana and enrolled his children in the school
system.
5. Refer to my comments for number 1 above.
6. Refer to my comments for number 3 above.
7. Refer to my comments for number 4 above.
8. Under the child tax benefit definition, section 122.6
"eligible individual" means, amongst other things, a
resident of Canada. The Appellant was not a resident of Canada
and not an "eligible individual" within the meaning of
section 122.6 and therefore not eligible to receive the child tax
benefit within the meaning of paragraph 122.61(1)(a) of
the Act for the 1994, 1995 and 1996 base taxation years. I
do not find this conclusion either contradictory or
discriminatory. It is the clear interpretation of the Income
Tax Act given the facts of this case.
[12] The Appellant submitted further that because he was
called on to file Canadian returns and pay Canadian taxes, then
he has to be an eligible individual. Again, I find it boils down
to whether or not he was a resident in Canada. Having paid tax in
Canada does not make him a resident.
[13] For the above reasons, I find that the Appellant was
resident of Guyana through the years under appeal.
[14] The Minister has correctly calculated the amounts of
child tax benefits to which the Appellant is entitled in
accordance with the provisions of section 122.61 of the
Act with respect to the 1994, 1995 and 1996 base taxation
years and the appeals are dismissed.
Signed at Ottawa, Canada, this 27th day of September,
2000.
"C.H. McArthur"
J.T.C.C.
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