[1] This is an appeal from a judgment of the Tax Court of Canada dated September 25, 2000 concerning a tax assessment by Revenue Canada of Ontario Income Tax on the basis the applicant was an Ontario resident during the 1993 and 1994 taxation years.

[2] The applicant was an employee of Revenue Canada who accepted a three-year assignment to work at the Canadian embassy in Tokyo, Japan. She lived in Tokyo between August 1992 and August 1995. She resided in Ontario prior to her work in Tokyo.

[3] By the assessments dated May 30, 1997, the applicant was considered as being ordinarily resident in Canada in the province of Ontario and was therefore charged $13,198.63 in net federal tax and $7,750.84 in net provincial tax for 1993 and $10,195.09 in net federal tax and $5,789.10 in net provincial tax for 1994. The applicant submits that she was not a resident of Ontario and that she was only a deemed resident of Canada by virtue of subsection 250(1) of the Federal Income Tax Act. If she were not a resident in Ontario, she would not be liable for Ontario income tax but would pay a federal surtax pursuant to section 120 of the Federal Income Tax Act. The result for the applicant would be a net federal tax liability of $19,855.30 for 1993 and $15,343 for 1994 and no Ontario tax. The applicant would save $1,735.36 if she were determined not to be an Ontario resident.

Trial Court

[4] The Tax Court Judge dismissed the applicant's appeal on two grounds. First, the Tax Court Judge held that to allow the appeal would result in an increase of the federal tax on the assessments under appeal. The Judge found that she had no jurisdiction to increase a federal tax assessment.

[5] Second, the Tax Court Judge held that the Tax Court only has jurisdiction to determine the amount of tax payable at the federal level and that the question of residence in Ontario or of the amount of tax payable in Ontario must be determined by the Ontario Court pursuant to the Ontario Income Tax Act.

[6] The Tax Court Judge wrote:

I cannot accede to the appellant's request for two reasons. First, ... the application of section 120, if it is in fact applicable in the present case, would necessarily result in an increase in the Appellant's net federal tax, and it is not in my power to effect such an increase.

Secondly, the only jurisdiction I have is to determine the amount of tax payable at the federal level. The Ontario provincial income tax assessed comes under the jurisdiction of the Ontario Court, as per paragraph 23(2)(c) of the Ontario Income Tax Act. I cannot therefore determine the amount of income earned in Ontario for the purposes of determining the amount of tax payable in the province of Ontario as I do not have jurisdiction to entertain an appeal from an assessment of provincial income tax.

Issue

[7] The primary issue to be resolved here is what court has jurisdiction to hear an appeal from an assessment of Ontario income tax where the argument is that the taxpayer is not a resident of Ontario in the taxation years in question.

Legislation

Federal Income Tax Act, R.S.C. 1985 (5^th Supp.), c. 1

120(1) There shall be added to the tax otherwise payable under this Part by an individual for a taxation year an amount that bears the same relation to 52% of the tax otherwise payable under this Part by the individual for the year that

120(1) Est ajoutée à l'impôt qu'un particulier est par ailleurs tenu de payer en vertu de la présente partie pour une année d'imposition une somme qui est par rapport à 52% de cet impôt, ce que :

(a) the individual's income for the year, other than income earned in the year in a province,

a) son revenu pour l'année, autre qu'un revenu gagné dans une province pour l'année,

bears to

est par rapport :

(b) the individual's income for the year

b) à son revenu pour l'année.

120(4) In this section,

...

120(4) Les définitions qui suivent s'appliquent au présent article.

...

"income earned in the year in a province" means amounts determined under rules prescribed for the purpose of regulations made on the recommendation of the Minister of Finance;

< < revenu gagné au cours de l'année dans une province > > Les montants déterminés conformément aux règles établies à cette fin par règlement pris sur recommandation du ministre des Finances.

250(1) For the purposes of this Act, a person shall, subject to subsection (2), be deemed to have been resident in Canada throughout a taxation year if the person ...

250(1) Pour l'application de la présente loi, une personne est réputée, sous réserve du paragraphe (2), avoir résidé au Canada tout au long d'une année d'imposition si :

(i) an ambassador, minister, high commissioner,

officer or servant of Canada, or

(ii) an agent-general, officer or servant of a

province,

(i) un ambassadeur, un ministre, un haut-commissaur,

un fonctionnaire ou un représentant du Canada,

(ii) un agent générale, un fonctionnaire ou un

représantant d'une province,

and was resident in Canada immediately prior to appointment or employment by Canada or the province or received representation allowances in respect or the year;

et résidait au Canada immédiatement avant sa nomination ou son emploi par le Canada ou la province ou recevait des frais de représentation pour cette année,;

(3) In this Act, a reference to a person resident in Canada includes a person who was at the relevant time ordinarily resident in Canada

(3) Dans la présente loi, la mention d'une personne résidant au Canada vise aussi une personne qui, au moment considéré, résidait habituellement au Canada.

Ontario Income Tax Act, R.S.O. 1990, c. I-2

4. (1) in this section,

4 (1) Les définitions qui suivent s'appliquent au présent article.

"income earned in the taxation year in Ontario" means the amount of income that would be determined to be earned in the year in Ontario for the purposes of determining the amount of income earned in the year in a province under section 120 of the Federal Act; ...

< < revenu gagné en Ontario dans l'année d'imposition > > Revenu gagné en Ontario dans l'année d'imposition, déterminé conformément aux règlements pris en application de l'alinéa 124 (4) a) de la loi fédérale.

"tax payable under the Federal Act" means the amount that, but for section 120 of the Federal Act, would be the tax payable by an individual under Part I of that Act for the taxation year in respect of which th e expression is being applied, computed as if the individual were not entitled to a deduction under section 126, 127, 127.2, 127.4 or 127.41 of that Act.

< < impôt payable aux termes de la loi fédérale > > Montant qui, si ce n'était de l'article 120 de la loi fédérale, serait l'impôt payable par un particulier en vertu de la partie I de cette loi pour l'année d'imposition à l'égard de alquelle l'expression s'applique, calculé comme si le particulier n'avait droit à aucune déduction aux termes de l'article 126, 127, 127.2 ou 127.4 de cette loi.

23. (1) A taxpayer who has served a notice of objection to an assessment under subsection 165(1) of the Federal Act, as it applies for the purposes of this Act, may appeal to the Ontario Court (General Division) to have the assessment vacated of varied after either,

23 (1) Le contribuable qui a signifié un avis d'opposition à une cotisation aux termes du paragraphe 165 (1) de la loi fédérale, tel qu'il s'applique aux fins de la présente loi peut interjeter appel devant la Cour de l'Ontario (Division générale) pour faire annuler ou modifier la cotisation;

(a) the Provincial Minister has confirmed the assessment or reassessed; or

a) soit après que le ministre provincial a ratifié la cotisation ou établi une nouvelle cotisation :

(b) ninety days have elapsed after service of the notice of objection and the Provincial Minister has not notified the taxpayer that the Provincial Minister has vacated or confirmed the assessment or reassessed,

b) soit après que quatre-vingt-dix jours se sont écoulés depuis la signification de l'avis d'opposition sans que le ministre provincial ait avisé le contribuable qu'il a annulé ou ratifié la cotisation ou établi une nouvelle cotisation.

but no appeal under this section may be instituted after the expiration of ninety days fro the day notice has been mailed to the taxpayer in accordance with subsection 165(3) of the Federal Act, as it applies for the purposes of this Act, that the Provincial Minister has confirmed the assessment or reassessed.

Toutefois, l'appel prévu au présent article ne peut être interjeté plus de quatre-vingt-dix jours après la date à laquelle l'avis a été envoyé par la poste au contribuable, conformément au paragraphe 165 (3) de la loi fédérale, tel qu'il s'applique aux fins de la présente loi, pour l'informer que le ministre provincial a ratifié la cotisation ou établi une nouvelle cotisation.

(2) In the course of disposing of an appeal from an assessment under this Act, the Court may make a determination in respect of any question relating to,

(2) Le contribuable peut interjeter appel d'une cotisation prévue par la présente loi à l'égard de toute question concernant :

(a) the residence of a taxpayer for the purposes of the Act; ...

a) sa résidence pour l'application de la présente loi;

(b) the amount of income of a taxpayer earned in a taxation year is Ontario for the purposes of section 4;

b) son revenu gagné en Ontario dans l'année d'imposition, au sens de la définition de cette expression figurant à l'article 4;

(c) the amount of tax payable by a taxpayer for a taxation year, based on the amount of tax payable under the Federal Act for that year as defined in section 4;

c) le montant de l'impôt payable pour une année d'imposition établi d'après l'impôt payable aux termes de la loi fédérale pour cette année, au sens de la définition de cette expression figurant à l'article 4;

Applicant's Argument

[8] Pursuant to section 120 of the Federal Income Tax Act, a person who has earned taxable income but who has not earned that income in a province, must pay an additional tax of 52% of the federal tax otherwise payable. The applicant argues that the Tax Court had jurisdiction to determine a taxpayer's "income earned in a province" under section 120 of the Federal Income Tax Act because "income earned in a province" is defined in Income Tax Regulations 2600 and 2601 and therefore comes with the jurisdiction of the Tax Court.

[9] The applicant also notes that the Tax Court Judge found that the applicant was a "deemed resident" pursuant to paragraph 250(1)(c) of the Federal Income Tax Act. The applicant argues that one cannot be both a deemed resident and an ordinary resident and therefore the result of the Judge's finding is that the applicant was not an ordinary resident of Canada. If not an ordinary resident of Canada, she could not be an ordinary resident of a province.

[10] The applicant argues that the Court should order the Minister to apply sections 250 and 120 so as to increase federal income tax assessment on the grounds that she was not a resident of Ontario during the 1993 and 1994 tax years.

Analysis

[11] The assessment which the applicant has appealed is the levying of Ontario income tax upon her. The applicant appeals her assessment on the grounds that she was not an Ontario resident during the 1993 and 1994 taxation years.

[12] The applicant argues that the Tax Court has jurisdiction to determine a taxpayer's residence and cites several cases in which the Tax Court has done so. For example, in Fortin v. Canada, [1998] T.C.J. No. 682 (Q.L.), there was a question of whether the taxpayers in question were resident in Ontario or Newfoundland. The Tax Court of Canada upheld the Minister's assessment that the taxpayers were residents of Newfoundland and therefore were to be assessed Newfoundland income tax. However, in Fortin, the issue of jurisdiction of the Tax Court to determine residency in a province does not seem to have been raised, and certainly was not addressed by the Tax Court.

[13] In Crossley v. Canada, [1988] T.C.J. No. 742 (Q.L.), the taxpayer was a Québec resident who taught in a Department of National Defence school in Germany during the taxation year in question. The taxpayer had been assessed as a Québec resident by the Minister. The taxpayer in Crossley appealed the assessment on the grounds that she was not a Québec resident and the Minister challenged this appeal on the grounds that the Tax Court had no jurisdiction. The Tax Court Judge held, at paragraphs 10 and 12:

Counsel for the [Minister] argued that the Court had no jurisdiction because it was a question of provincial jurisdiction. ...

As to whether [the taxpayer] was a resident of Québec, the [Minister] who made this allegation at the hearing had to prove the law of the Province of Québec but he failed to do so.

[14] In the present case, the Minister did establish the law of the province of Ontario. Therefore, Crossley does not assist the applicant.

[15] The applicant cites several other cases wherein it has been held that it is permissible for the Tax Court or the Federal Court to find that a person is not a resident of Canada; however, the issue in all of those cases was whether the taxpayer was a resident of Canada or some other country, not whether the taxpayer was resident in a particular province of Canada. There is no question that the Tax Court has jurisdiction to determine whether a person is a resident of Canada under the Federal Income Tax Act and therefore those cases are not relevant.

[16] Both the federal government and provinces have the jurisdiction to enact income tax laws. The Tax Court has jurisdiction with respect to provincial income tax only to the extent that jurisdiction is conferred upon it by the province. It is open to a province to reserve onto itself jurisdiction to decide particular issues with respect to its income tax and Ontario has done this. Section 23 of the Ontario Income Tax Act states:

(2) In the course of disposing of an appeal from an assessment under this Act, the Court may make a determination in respect of any question relating to,

(a) the residence of a taxpayer for the purposes of the Act; ...

[17] Thus, there is no jurisdiction in the Tax Court to hear appeals from an assessment of Ontario income tax where the only issue is that the taxpayer is not a resident of Ontario. That jurisdiction belongs to the Ontario courts.

[18] As noted above, the applicant argues that a taxpayer cannot be both a "deemed" resident and an "ordinary" resident. I do not accept this. Although the activities of a taxpayer might permit her to be deemed to be a resident of Canada for the purposes of para. 250(1)(c), that does not prevent the taxpayer from being found in fact to be or not to be an ordinary resident of a province.

[19] I therefore agree with the Tax Court Judge that the Tax Court had no jurisdiction to entertain the appeal.

Charter Issue

[20] In her factum, the taxpayer submitted that the assessment infringed her section 15 right to equality under the Canadian Charter of Rights and Freedoms. The applicant argued that Revenue Canada targeted her in order to support its tax assessment against her spouse so as to deny him access to provisions of a tax convention. According to the applicant, this targeting took the form of Revenue Canada departing from its normal policy of treating government employees posted abroad as deemed residents for tax purposes and instead assessing her as an Ontario resident. The applicant argued that this violates her Charter rights because it constitutes discrimination based on marital status. The applicant also submitted that Revenue Canada's tax assessment has the effect of infringing her section 6 mobility rights as well as her section 7 liberty rights. These Charter issues, while going to the merits of the applicant's case, also seem to be inextricably linked to the applicant's assertion that she was not an Ontario resident.

[21] The Court declined to hear argument on the Charter issues because it was of the view that if it was decided that the Tax Court had jurisdiction, then the matter would have to be remitted to the Tax Court on all issues including the Charter issues. If this Court concluded that the Ontario Court had jurisdiction, then all matters would fall to be decided by the Ontario Court.

[22] I note that the applicant, after the issuance of the Tax Court judgment, was told by the Ontario Ministry of Finance that she could still appeal to the Ontario Court, but she apparently chose not to do so. The Ontario Court clearly would have jurisdiction to deal with all of the issues raised including the Charter issues.

[23] The appeal will therefore be dismissed.

"J. EDGAR SEXTON"

J.A.

"I agree

A.J. Stone J.A."

"I agree

Marshall Rothstein"

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-663-00

STYLE OF CAUSE:

SHERIDAN GARDNER

AND

HER MAJESTY THE QUEEN

PLACE OF HEARING: OTTAWA, ONTARIO

DATE OF HEARING: DECEMBER 4, 2001

REASONS FOR JUDGMENT : SEXTON J.A.

CONCURRED IN BY: STONE J.A.

ROTHSTEIN J.A.

DATED: DECEMBER 31, 2001

APPEARANCES:

Ms. Sheridan Gardner APPLICANT ON ITS OWN

Mr. Neil McFadeyen BEHALF

Mr. Ernest Wheeler FOR THE RESPONDENT

SOLICITORS OF RECORD:

Morris Rosenberg FOR THE RESPONDENT

Deputy Attorney General of Canada

Ottawa, Ontario

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Gardner v. Canada (Attorney general), 2001 FCA 401

Citations2001 FCA 401

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2001 FCA 401