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Citation: 2005TCC233
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Date: 20050411
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Docket: 2004-2903(IT)I
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BETWEEN:
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DOUGLAS CHAN,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
BowieJ.
[1] This appeal is brought from a
reassessment of income tax for the taxation year 2002. In his
income tax return for that year, the Appellant claimed a
deduction from income of $14,000 for child care expenses under
section 63 of the Income Tax Act[1] (the Act). Initially the
Minister of National Revenue allowed this deduction as claimed
when assessing the Appellant. Later he was reassessed to disallow
the deduction in its entirety; still later he was reassessed a
second time to allow a deduction of $1,700 only. The amount
allowed is the fees that Dr. Chan paid to the Montessori School
for the younger of his two children. The Minister allowed the
Appellant no amount as child care expense in respect of the older
child. Although some other issues were explored in the evidence,
it is clear that the reason for disallowing any child care
expenses for the older child was that, in the Minister's
view, the amounts that the Appellant paid in respect of her did
not meet the definition of "child care expense" found
in subsection 63(3) of the Act, and it is only amounts
that come within that definition that may be deducted under
subsection (1), unless a saving provision in subsection 63(4) may
be invoked in a particular case. The dispute between the parties,
put shortly, is whether Dr. Chan may take advantage of subsection
(4).
[2] The relevant words of subsection
63(1) that permit the deduction are:
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... there may be deducted in computing the
taxpayer's income for the year such amount as the
taxpayer claims not exceeding the total of all amounts each
of which is an amount paid, as or on account of child care
expenses incurred for services rendered in the year in
respect of an eligible child ...
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... est déductible dans le calcul du revenu
du contribuable pour l'année le montant
qu'il demande, ne dépassant pas le total des
montants représentant chacun un montant, au titre
des frais de garde d'enfants engagés pour des
services rendus au cours de l'année relativement
à un enfant admissible du contribuable, ...
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Subsection 63(3) contains a definition of the expression
"child care expense", applicable to all of section 63,
the relevant part of which reads:
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"child care expense" means an expense incurred
in a taxation year for the purpose of providing in Canada,
for an eligible child of a taxpayer, child care services
...
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« frais de garde d'enfants »
Frais engagés au cours d'une année
d'imposition dans le but de faire assurer au Canada la
garde de tout enfant admissible du contribuable, en le
confiant à des services de garde d'enfants,
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Subsection 63(4) reads:
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63(4) Where in a taxation year a
person resides in Canada near the boundary between Canada
and the United States and while so resident incurs expenses
for child care services that would be child care
expenses if
(a) the definition
"child care expense" in subsection (3) were read
without reference to the words "in Canada",
and
(b) the reference
in paragraph (b) of the definition "child care
expense" in subsection (3) to "resident of
Canada" were read as "person",
those expenses (other than expenses paid for a
child's attendance at a boarding school or camp outside
Canada) shall be deemed to be child care expenses for the
purpose of this section if the child care services are
provided at a place that is closer to the person's
principal place of residence by a reasonably accessible
route, having regard to the circumstances, than any place
in Canada where such child care services are
available and, in respect of those expenses, subsection (1)
shall be read without reference to the words "and
contains, where the payee is an individual, that
individual's Social Insurance Number".
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63(4) Les frais qu'une personne
qui réside au Canada, près de la
frontière canado-américaine, engage au cours
d'une année d'imposition pour des
services de garde d'enfants qui seraient des frais
de garde d'enfants s'il était fait
abstraction des passages « au
Canada » à la définition de
« frais de garde d'enfants » au
paragraphe (3) et « résidant au
Canada » à l'alinéa b) de
cette définition, sont réputés (sauf
s'il s'agit de frais payés pour permettre
à un enfant de fréquenter un pensionnat ou
une colonie de vacances à l'étranger)
constituer des frais de garde d'enfants pour
l'application du présent article si les services
de garde sont assurés à un endroit
situé plus près du lieu principal de
résidence de la personne par une route suffisamment
accessible, compte tenu des circonstances, que tout autre
endroit au Canada où de tels services sont
offerts. Pour ce qui est des frais en question, il
n'est pas tenu compte, au paragraphe (1), du passage
« et portant, lorsque celui-ci est un
particulier, le numéro d'assurance sociale de ce
particulier » .
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I have added emphasis to the words that give rise to the issue
between the parties. Before I deal with the meaning of the
statute, however, it is necessary to give some factual
context.
[3] The Appellant and his wife live in
the city of Windsor, Ontario, on the border between Canada and
the United States. He is a periodontist and she is an
orthodontist. They have two daughters. The older one had her
fifth birthday and the younger one her second in 2002. They want
nothing less than the best possible upbringing and education for
their daughters, and their combined family income is such that
they can afford to provide that. For that reason their older
daughter is enrolled at the Cranbrook School, which is located in
Bloomfield Hills, Michigan, in the United States. Cranbrook is an
extremely expensive and extremely high quality school, whose aim
is to provide the best possible quality of education to the
children of those who can afford it, beginning at the age of
three and continuing through lower school, middle school and
upper school. It occupies a campus of more than 300 acres just
outside the city of Detroit. It is replete with streams and
lakes, greensward, sports facilities of all kinds, a science
museum, an art gallery, and the best of educational facilities.
Its early childhood centre has a staff to pupil ratio of
approximately five to one. In short, no expense is spared to
provide for the education and well-being of every child enrolled
there. Given the Appellant's description of the school and
its facilities, it is not surprising that the fees for his
five-year old daughter to attend senior kindergarten at the
Vlasik Family Early Childhood Center at Cranbrook from September
1, 2002 until June 30, 2003 were U$14,290.00, which at the time
equated to more than C$22,000.00. The Appellant's younger
daughter was not enrolled at Cranbrook during the 2002 year, only
because she was not old enough to be admitted. By the time of the
hearing of the appeal in December 2004 both children were
enrolled there.
[4] In presenting his case, Dr. Chan
made no pretence that child care is not available in the City of
Windsor; as I have said, his younger daughter attended the
Montessori School there, which is not far from the family home.
Indeed, there is a day-care facility on their street. Neither of
these, nor any school or day-care in Windsor, approaches either
the quality or the cost of Cranbrook, however. It is his position
that he is entitled to deduct the cost of sending his daughter to
Cranbrook because his situation falls within the literal meaning
of the words of subsection 63(4). In particular, he relies
on the words "... such child care services
..." that I have emphasized above. He says that the
words "child care services" as they appear at the end
of subsection (4), because they are modified by the word
"such", must be read as referring back to the use of
the same words where they first appear in the subsection. The
result, he then argues, is that if there are no child care
services available in Windsor that are of a standard equal to
those child care services that he and his wife chose to engage
for their daughter in Michigan, then he is entitled to the
benefit of subsection (4) and may deduct the Cranbrook fees.
[5] The fallacy in Dr. Chan's
argument is that the word "such" cannot be read
literally to refer back to the child care services where that
expression appears earlier, because those child care services are
the precise ones for which he has incurred the expense, and they
are located in the United States. What Dr. Chan would have it
mean is not literally the same services, but services of the same
outstanding quality that he can only obtain for his daughter in
Michigan. In other words, he would have me read the words
"such child care services" to mean "child care
services of the same kind and quality". To do so would
be to add words to the Act, and that I cannot do.[2]
[6] Nor does the interpretation that
the Appellant proposes accord at all with the purpose of section
63 as a whole, or that of subsection (4). In Symes v.
Canada,[3] the
Supreme Court of Canada referred to the following extract from
the 1969 White Paper on Tax Reform[4] that gave rise to the introduction of
section 63 into the Act.
2.7
We propose to permit deduction of the child care expenses that
face many working parents today. The problem of adequately caring
for children when both parents are working, or when there is only
one parent in the family and she or he is working, is both a
personal and a social one. We consider it desirable on social as
well as economic grounds to permit a tax deduction for child care
expenses, under carefully controlled terms, in addition to the
general deduction for children.
...
2.9 This new deduction for
child care costs would be a major reform. While it is not
possible to make an accurate forecast of the number who would
benefit from this new deduction, it seems likely to be several
hundred thousand families. It would assist many mothers who work
or want to work to provide or supplement the family income, but
are discouraged by the cost of having their children cared
for.
The object of section 63, then, was to provide, on carefully
controlled terms, a deduction that would assist mothers to
go to work to supplement the family income. It was never intended
to subsidize the well-to-do when they enroll their children in
upscale private schools in the United States. Parliament could
hardly have intended to provide such a subsidy, and certainly not
for only those who reside near the boundary between Canada and
the United States, to the exclusion of all those other Canadians
who live even an hour or two away. The purpose of subsection (4)
is obvious - it is to relieve against the great inconvenience
that a few people living in border communities that have no child
care facilities would suffer if the requirement that child care
facilities must be supplied in Canada to be deductible were
applied without exception.
[7] Having regard to the words of
subsection (4) in their context within section 63, and
considering also the purpose of both the section as a whole and
subsection (4) within it, it is clear that it provides a
deduction for the cost of child care in the U.S. only in
circumstances where a child care facility is available in the
U.S. at less distance from the taxpayer's home than the
closest child care facility that is available in Canada. The
subsection calls for no comparative analysis of the nature and
quality of the child care facilities available in the United
States and in Canada. If there is a child care facility in Canada
that is closer to the taxpayer's home than the one that the
child in fact went to then subsection (4) can have no
application. Dr. Chan's argument focused on the word "such"
in the English version of the subsection, but I have also
considered the French version, and I find no significant
difference between them. In either language it would require the
addition of several words to the Act to convey the meaning
for which the Appellant contends. While this may be thought to
render the word "such" ("tel") redundant, it should be regarded
simply as a linguistic flourish: see G.S.W. Appliances Limited
v. Canada.[5]
[8] The appeal is dismissed.
Signed at Ottawa, Canada, this 11th day of April, 2005.
Bowie J.
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