Armstrong v. R., [1996] 1 CTC 2745 (Informal Procedure)

Mogan J.T.C.C.: —

The issue in this appeal is whether the Appellant is entitled to what is commonly known as the Goods and Services Tax credit granted under section 122.5 of the Income Tax Act with respect to his 1992 and 1993 taxation years. The taxpayer has elected the informal procedure.

The circumstances in which the Appellant applies for the Goods and Services Tax credit are extraordinary. Throughout the calendar years 1992 and 1993 the Appellant was confined to a prison or similar institution in Canada. That is the basic fact which, at first blush, appears to be a barrier to his right to the Goods and Services Tax credit. His background is that he married in 1987 a woman who was not a Canadian citizen but a citizen of the United States. He applied to sponsor her as an immigrant to Canada and he sought legal advice in an attempt to obtain landed immigrant status for his wife. She was denied her application and made a second application and again she was denied landed immigrant status. Notwithstanding that, she took up residence in Canada. When we come to the years under appeal, she maintained an apartment near the penal institution where the Appellant was incarcerated in 1992. When he was moved to the Kingston Penitentiary in the summer of 1993, his wife moved to Kingston and rented an apartment there.

When she came to Canada, she had only the goods she could transport in an automobile. While in Canada, she was required to purchase and otherwise acquire the furnishings necessary to maintain an apartment. Because she was not a citizen and not granted landed immigrant status, she could not obtain a social insurance number in Canada. Because she did not have a SIN, she could not file an income tax return. Because she could not file an income tax return, she could not claim the Goods and Services Tax credit

which might otherwise have been available to someone in her circumstances because she appears to have been a person with very little income in the years under appeal.

If she had been able to file an income tax return and had been eligible for the Goods and Services Tax: credit, it appears to me that this appeal would not have been brought. That is only an inference I draw from the surrounding circumstances and is not a concession made by the Appellant himself.

The Appellant claims the Goods and Services Tax credit on the basis that, although a prisoner in a penal institution, he is required to pay the tax on his purchases. He is paid a wage for the work he performs in the penal system; that wage is based on the minimum wage under the federal labour laws; and from the wages there is a deduction for what one might call room and board. The excess is available to him by way of spending money but any expenditures he makes through the canteen in the penitentiary, or through the catalogue which is provided to prisoners, bear Goods and Services Tax, and the relevant provincial sales tax as they would to any other citizen. Therefore, the Appellant states that not only are his purchases subject to tax but his wife’s purchases in furnishing and maintaining her apartment were subject to tax and, as a family unit, there are sales taxes being paid in respect to which a tax credit should be available to them as a family unit.

It is a persuasive point and there is a certain poignancy to it. The Appellant launched his appeal in respect of all sales taxes, provincial and federal, but this Court has jurisdiction to grant relief from only Goods and Services Tax. I will not attempt to make any determination as to whether the Appellant may have some rights to a credit under The Retail Sales Tax Act of Ontario because the Appellant was clearly a resident of Ontario at all relevant times.

The Goods and Services Tax credit is granted, as I stated earlier, under section 122.5 of the Income Tax Act which defines an “eligible individual” as a person who is married, a person who is the parent of a child or a person who is 19 years of age or over. In subsection (2) there is a limitation on what an eligible individual may be, and I will state the relevant portions:

122.5(2) Notwithstanding subsection (1), a person shall be deemed not to be an eligible individual for a taxation year or a qualified relation or qualified dependant of an individual for a taxation year where the person ...

(c) is, at the end of the year, confined to a prison or similar institution and has been so confined for a period of, or periods the aggregate of which in the year was more than, 6 months.

That is the provision which appears at first blush to be an absolute barrier to the Appellant’s rights because he acknowledged in the presentation of his appeal that he was incarcerated throughout the calendar years 1992 and 1993. And so, on the plain meaning of subsection 122.5(2), he is not entitled to the Goods and Services Tax credit.

The Appellant goes a step further, however, and claims that as a prisoner he has been discriminated against under that provision of the Income Tax Act. He also claims the relief that is provided under section 15 of the Charter of Rights and Freedoms granting relief from discrimination. Section 15(1) of the Charter states:

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.

The Appellant does not fit into one of the identified groups, that is one that can be identified by race, religion, gender or age, but he says that section 15 of the Charter is not restricted to those groups. They are only identified as “in particular”, and he is right. There may be other persons or groups not specifically identified by race, national or ethnic origin, religion or sex which can claim the benefits of section 15 of the Charter, and it is open to the Court to extend the Charter to such a group.

I am bound, however, by the manner in which section 15 has been interpreted and construed by higher courts in cases prior to this. Counsel for the Respondent has referred me to two or three of those cases, and two in particular to which I will refer. I should start by saying that counsel referred to the decision of the Supreme Court of Canada in R. v. Turpin, a decision in 1989 which followed and applied the prior decision of the Supreme Court in a famous case called Andrews v. Law Society (British Columbia), [1989] 1 S.C.R. 143 , 91 N.R. 255, 56 D.L.R. (4th) 1 which really was the first significant case to apply section 15 of the Charter. In the Andrews decision, the Supreme Court in applying section 15 of the Charter and granting relief used the phrase “a discrete and insular minority” as being an apt phrase to describe those who might obtain relief under section 15 of the Charter. In other words, can an individual identify himself as being within a discrete and insular minority?

The cases which I find have a more direct bearing on the decision before me today are, firstly, the decision of the Federal Court of Appeal in Lister v. R., [1994] 2 C.T.C. 365, 94 D.T.C. 6531. In that case, two persons, 13 and 18 years of age, brought an action for the Goods and Services Tax credit under the exact same provision of the Income Tax Act that I am dealing with here, section 122.5, and they claimed the benefit of section 15 of the Charter of Rights and Freedoms because they were discriminated against by reason of their age. They were 13 and 18 years of age and therefore neither one of them was an “eligible individual” as defined in subsection (1) of section 122.5. They said they were discriminated against because of age; a specific category identified in section 15 of the Charter, and they invoked the Charter to have that provision struck down so that they would be entitled to the Goods and Services Tax credit.

In a lengthy judgment, the Federal Court of Appeal unanimously dismissed the action brought on behalf of the two young Appellants and, in particular, Mr. Justice Létourneau speaking for himself and Mr. Justice Robertson considered the specific question at page 376 (D.T.C. 6539) when he asked the rhetorical question whether the impugned legislative provision is discriminatory in its effects. He made the following statement:

In assessing the applicants’ claim of discrimination, I have reviewed at some length the evidence in order to properly place the impugned provision in its social, political and legal context and determine whether the alleged difference of treatment resulted in an inequality or fostered a disadvantage contrary to section 15. I have found no evidence that the impugned provision reinforces disadvantages or promotes stereotyping.

The purpose of section 122.5 of the Act was to redress the inequity generated by regressive taxation, which necessarily involved an assessment by Parliament of the various options and means available in order to do so. At the end of the day, what resulted was the selection of a system that would best achieve the desirable equity, bearing in mind the practical constraints associated with the cost- effective implementation of a selected measure or program. Obviously, this selection process entailed the preference of one approach over the other with the inevitable result that some, but not all, taxpayers would have been better off with a different option than the one selected and vice versa.

There was nothing wrong for Parliament, in its search for an equitable solution to the regressive nature of the GST tax, to confer benefits upon those who suffer most from the imposition of that tax, namely lower-income Canadians and their families.

... I cannot say that the option finally selected by Parliament creates, in its effects, a discriminatory and prejudicial difference of treatment that the applicants can justifiably complain of. It does cut the Gordian knot by creating distinctions between dependent and non- dependent children, the former being included in the family unit and receiving their refundable tax credit through that channel, the latter being considered, as any other unattached individual, a tax unit on its own and receiving the tax credit personally.

In that context, although the parties were clearly under a category identified in subsection (1) of section 15 of the Charter, the Federal Court found that although they were distinguished in that way, they were not discriminated against.

The second and more telling case against the Appellant in my view is the decision of this Court in McKinnon v. Minister of National Revenue, [1991] 2 C.T.C. 2284, 91 D.T.C. 1002. It is almost on all fours with the facts of this case. In that case, McKinnon was an inmate of a prison. He claimed the tax credit under the old Federal Sales Tax Act, which was the predecessor of the Goods and Services Tax. Indeed, when they enacted the Goods and Services Tax in 1991, Parliament repealed the old federal sales tax so that one really was brought in to replace the other, and it might be said that McKinnon’s claim to a credit for federal sales tax was basically the same as the Appellant’s claim to a credit for Goods and Services Tax.

Judge Sobier of this Court in his reasons for judgment set out section 15 of the Charter and he quoted at length from the decision of the Supreme Court of Canada in Andrews. In his conclusion, he made statements which, in my view, are really on all fours with this case and have a direct application to the facts before me. Judge Sobier stated at page 2286 (D.T.C. 1004):

Parliament has chosen to exclude those individuals who it saw fit not to benefit, namely, certain types of prison inmates. This is a valid distinction since the objective is to assist low income families and individuals and not to benefit persons serving prison terms.

The distinction is made as part of a legitimate exercise of social policy- making which is Parliament’s right. To strike this down, as Dickson, C.J.C said, would be tantamount to ‘overshooting’ the actual right being sought to be protected.

In addition, not all inmates are excluded, only those incarcerated for crimes the sentence for which exceed six months. The effect of the section in no manner so severely trenches on individual or group rights that the legislative objective is outweighed by the right.

He then quotes from an unreported decision of Strayer J. (Federal Court-Trial Division) in Belczwoski v. R., which dealt with whether the prisoners had voting rights. I will quote a brief passage from Strayer J. in Belczowski because I would want to comment on it here:

for there to be “discrimination” as prohibited by subsection 15(1) the grounds of discrimination must be those specified in subsection 15(1) or others analogous thereto. I am unable to conclude that a law applied to the plaintiff to his disadvantage by reason of the circumstances that he has committed a crime and is imprisoned under lawful sentence amounts to discrimination on some ground analogous to those specified in subsection 15(1).

To me that is a clear statement that the characterization of being in prison is not a ground analogous to race, religion, sex or ethnic origin. It is peculiar to the individual, but that individual, to go back and quote from the Supreme Court in À. v. Turpin, is not part of “a discrete and insular minority.” A person who is imprisoned is not there by some subjective distinguishing mark; he is there or she is there by reason of some conduct prior to entering prison and there was nothing to distinguish that person or discriminate against that person as a member of society before they entered prison. And in prison, there is nothing to distinguish that member of society in the classes which are identified in section 15, or analogous to those classes. It is only an accident of history by reason of conduct which was found to be criminal that causes them to be prisoners, and that is not a discriminatory category. It distinguishes them from citizens who are free, and they are clearly distinguished because they are in prison, but they are not discriminated against just because they have been distinguished as persons who have committed crimes.

Therefore, I would dismiss this appeal, firstly because I am bound by the decision of the Federal Court of Appeal in Lister; and secondly because I accept the decision of Sobier J. in McKinnon.

In closing, I would come back to one of the opening statements of the Federal Court of Appeal in Lister in which the Court stated at page 376 (D.T.C. 6539):

... the GST credit is not a taxing program but rather a benefit program. The purpose of section 122.5 of the Act was not to impose a burden on taxpayers generally and discriminate against some of them. On the contrary, it was to lessen the inevitable and adverse effect of a regressive tax such as the Goods and Services Tax upon lower-income Canadians.

As I stated earlier, it is the extraordinary fact of the Appellant’s wife not being entitled to obtain a social insurance number that prevents her from filing an income tax return and claiming the Goods and Services Tax credit. If I could put that another way, the wife of another male prisoner who is a resident and a citizen of Canada and who is living on very low income by reason of her spouse being in prison could file an income tax return because she would have a social insurance number and she would thereby be entitled to the Goods and Services Tax credit. That would fulfil the social policy of section 122.5. It is the extraordinary and unique circumstance of the Appellant having a spouse who could not qualify even for a social insurance number which puts him in the position of having to make the application himself for the Goods and Services Tax credit. His almost unique family circumstances do not justify invoking the Charter to set aside a provision of the law which is as specific as paragraph 122.5(2)(c). For these reasons the appeals are dismissed.

Appeals dismissed.