Iliya Mekuz v. Her Majesty the Queen (Informal Procedure), [1993] 2 CTC 2769, 95 DTC 314

O'Connor, T.C.C.J.:—This appeal was heard in Toronto, Ontario on July 27, 1993. It is pursuant to the informal procedure of this Court and concerns the appellant's 1991 taxation year.

The facts are simple. The appellant, an engineer, immigrated to Canada from Israel in the second half of 1990 and worked in Canada for three months with Canadian earned income of $11,038. In respect of the 1991 year during which the appellant had total income of $56,883.85, the appellant sought to deduct registered retirement savings plan ("RRSP") contributions of $6,400. The assessment for 1991 allowed an RRSP deduction of only $1,986 being 18 per cent of the appellant's 1990 income earned in Canada. The appellant objected, arguing that his RRSP deduction limit should be based on his 1991 income. The appellant submits firstly that other provisions of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the"Act") allowing allocation of income and deductions based on time of residence in Canada, such as section 114 should, by analogy, apply and since he was resident in Canada for all of 1991 he should be entitled to use his income of the 1991 year as the basis for his RRSP deduction. He also submits that to use the 1990 income as a basis discriminates against immigrants, thus infringing upon his rights guaranteed by section 15 of the Canadian Charter of Rights and Freedoms ("Charter").

The most relevant provisions of the Act are paragraphs 146(1)(c), 146(1)(g.1) and subsection 146(5) all of which formed part of the “Pension Reform" package originally announced in October of 1986 and finally passed into law on June 27, 1990 (38-39 Elizabeth II, c. 35). They read, so far as material, as follows:

146(1)(c) Earned income. —"earned income” of a taxpayer for a taxation year means the amount, if any, by which the aggregate of all amounts each of which is

(i) the taxpayer's income for a period in the year throughout which the taxpayer was resident in Canada from

(A) an office or employment, determined without reference to paragraphs 8(1)(c), (m) and (m.2),

(iii) the taxpayer's income for a period in the year throughout which the taxpayer was not resident in Canada from

(A) the duties of an office or employment performed by the taxpayer in Canada, determined without reference to paragraphs 8(1)(c), (m) and (m.2), or

(B) a business carried on by the taxpayer in Canada, either alone or as a partner actively engaged in the business

except to the extent that the income is exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada, or

(iv) . . .

exceeds the aggregate of all amounts each of which is

(v) the taxpayer's loss for a period in the year throughout which the taxpayer was resident in Canada from

(A) a business carried on by the taxpayer, either alone or as a partner actively engaged in the business, or

(B) property, where such loss is sustained from the rental of real property,

(vi) . . .or

(vii) the taxpayer's loss for a period in the year throughout which the taxpayer was not resident in Canada from a business carried on by the taxpayer in Canada, either alone or as a partner actively engaged in the business,

and, for the purposes of this paragraph, the income or loss of a taxpayer for any period in a taxation year is the taxpayer's income or loss computed as though that period were the whole taxation year;

146(1)(g.1) “RRSP deduction limit”. —"RRSP deduction limit” of a taxpayer for a taxation year means the amount determined by the formula

A 4- B — C

where

À is the taxpayer's unused RRSP deduction room at the end of the immediately preceding taxation year,

B is the amount, if any, by which the lesser of the RRSP dollar limit for the year and 18 per cent of the taxpayer's earned income for the immediately preceding taxation year exceeds the aggregate of all amounts each of which is the taxpayer's pension adjustment for the immediately preceding taxation year in respect of an employer, or a prescribed amount in respect of the taxpayer for the year, and

C is the taxpayer's net past service pension adjustment for the year;

146(5) Amount of RRSP premiums deductible. — There may be deducted in computing a taxpayer's income for a taxation year such amount as the taxpayer claims not exceeding the lesser of

(a) the aggregate of all amounts each of which is a premium paid by the taxpayer after 1990 and on or before the day that is 60 days after the end of the year under a registered retirement savings plan under which the taxpayer was the annuitant at the time the premium was paid. . .; and

(b) the taxpayer's RRSP deduction limit for the year.

With reference to 146(1)(g.1) the concepts of "deduction room" and "pension adjustment" are not germane to the present case and consequently it is clear that the “RRSP deduction limit” of the appellant for the 1991 year was 18 per cent of his Canadian earned income for the 1990 year, which is what the assessment allowed and in the absence of any successful Charter argument that assessment would be correct.

There have been several cases before the Courts where taxpayers have resorted to the Charter. In this present case the applicable Charter section is subsection 15(1) which reads as follows:

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.

It is the Court's view that subsection 15(1) does not apply to the present case. The appellant is not discriminated against because of national origin because the sections of the Act in question treat different taxpayers differently because of residence, not national origin and the concept of residence as a determinant of tax liability is basic to numerous provisions of the Act, including, in particular, those relating to RRSP deductions, as appears from a reading of the provisions of the Act mentioned above.

The Court refers to O.PS.E.U. v. The National Citizens Coalition Inc., [1987] 2 C.T.C. 59, 87 D.T.C. 5270 (O.S.C.); aff'd [1990] 2 C.T.C. 163, 90 D.T.C. 6326 (Ont. C.A.), where the Ontario High Court stated at page 61 (D.T.C. 5272):

The argument advanced with respect to subsection 15(1) is that the circumstances disclosed in paragraphs 10 and 11 of the statement of claim show that certain taxpayers could be disentitled to equal benefit of the tax laws. I have some difficulty in understanding how tax laws can be said to bestow benefits on taxpayers. But, having said that, it is clear that some taxpayers are entitled to certain deductions from their income while others are not. The Income Tax Act is full of examples where one taxpayer for certain reasons has certain deductions which another taxpayer does not have. Also, certain taxpayers are called upon to pay more taxes than others. Some taxpayers are called upon to pay taxes at a higher rate than others.

The Charter, as it has been said in many, many cases, too numerous to mention, is an important piece of legislation which constitutionally protects important rights and freedoms of people who live in this country. It seems to me that it comes very close to trivializing that very important constitutional law, if it is used to get into the weighing and balancing of the nuts and bolts of taxing statutes.

The Court also refers to the decision of Rip, T.C.C.J. in Smith v. M.N.R., [1989] 2 C.T.C. 2401, 89 D.T.C. 639 at page 2406 (D.T.C. 643):

The Charter guarantees individuals rights and freedoms. However, in interpreting the rights, the courts, in the words of Dickson, J. (as he then was) in R. v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295, 18 D.L.R. (4th) 321, page 344 (D.L.R. 360), must not:

. . . overshoot the actual purpose of the right or freedom in question, but to recall that the Charter was not enacted in a vacuum, and must, therefore, as the Court's decision in Law Society of Upper Canada v. Skapinker, [1984] 1 S.C.R. 357, 9 D.L.R. (4th) 161, illustrates, be placed in its proper linguistic, philosophic and historical context.

It is the government's responsibility to govern and in doing so to address the complex social, economic and fiscal problems facing the state.

In Andrews v. Law Society of British Columbia, [1989] 1 S.C.R. 143,2 W.W.R. 289, McIntyre, J. stated, at pages 168-69 (W.W.R. 303):

It is not every distinction or differentiation in treatment at law which transgressed the equality guarantee of section 15 of the Charter. It is, of course, obvious that legislatures may — and to govern effectively — must treat different individuals and different groups in different ways. Indeed, such distinctions are one of the main preoccupations of legislatures. The classifying of individuals and groups, the making of different provisions respecting such groups, the application of different rules, regulations, requirements and qualifications to apply to different persons is necessary for the governance of modern society.

La Forest, J. was convinced in Andrews, supra, at pages 329 to 330:

. . . that it was never intended in enacting section 15 that it become a tool for the wholesale subjection to judicial scrutiny of variegated legislative choices in no way infringing on values fundamental to a free and democratic society. Like my colleague, I am not prepared to accept that all legislative classifications must be rationally supportable before the courts. Much economic and social policy- making is simply beyond the institutional competence of the courts: their role is to protect against incursions on fundamental values, not to second-guess policy decisions . . . it bears repeating that considerations of institutional functions and resources should make courts extremely wary about questioning legislative and governmental choices in such areas.

It is true that prior to the adoption of the new legislation in June, 1990, applicable to the 1991 and subsequent years a taxpayer's RRSP deduction limit was based on his income for the year in which he claimed the deduction and not the previous year. For many reasons the new legislation found it more appropriate to refer to the previous year. There must have been consideration given to enacting a transitional provision to enable part-time residents of 1990 to use some basis other than their 1990 income to determine their 1991 deduction limit, but parliament did not choose to do so. This Court must enforce the law as enacted and cannot substitute its conception of fairness for that of parliament.

In conclusion, for the reasons discussed above the appeal is dismissed.

Appeal dismissed.