Kavort Enterprises Inc. v. M.N.R., docket 1999-3967-CPP

Date: 20000523

Docket: 1999-3967-CPP

BETWEEN:

KAVORT ENTERPRISES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Reasonsfor Judgment

Porter, D.J.T.C.C.

[1]            This appeal was heard at Calgary, Alberta on April 12, 2000.

[2]            The Appellant has appealed the decision of the Minister of National Revenue (the "Minister") confirming an assessment dated June 3, 1999 for Canada Pension Plan contributions in the amount of $614.40, plus penalty and interest for the 1998 taxation year.

[3]            The issue in the appeal is as simple as it is old. The worker, Kathy Meunier, at the material time, was a 50% shareholder in the Appellant company and the wife of Brian Baltis, the owner of the other 50% shareholding. They also owned another company, Torchan Enterprises Inc. for which she worked and was paid a salary of $35,000.00 in 1998. From that salary, earned at Torchan, had been deducted $1,068.80 by way of Canada Pension Plan contributions which had been remitted, along with a similar amount, being the corporate employer contribution. This was the maximum contribution in relation to the worker with respect to that year.

[4]            During the year, she also worked for the Appellant corporation, earning an additional $15,000.00. It is in respect of this latter salary that the assessment has been made.

[5]            The argument of the Appellant is that as the maximum contribution had already been paid for that year with respect to her employment at Torchan, no further deduction or contribution needed to be made by it as the second employer.

[6]            Whilst it is clear that the worker can claim back any of the payment made on her behalf, there is no corresponding provision in the Canada Pension Plan (the "Plan") for the employer to be so reimbursed.

[7]            The issue in simple terms is whether the second employer is required to make an employer's contribution on behalf of the employee when that employee and her previous employer have already remitted the maximum contribution for the year.

[8]            The relevant provisions of the Plan read as follows:

"8.(1) Every employee who is employed by an employer in pensionable employment shall, by deduction as provided in this Act from the remuneration for the pensionable employment paid to the employee by the employer, make an employee's contribution for the year in which the remuneration is paid to the employee of an amount equal to the product obtained when the contribution rate for employees for the year is multiplied by the lesser of

                (a) the employee's contributory salary and wages for the year paid by the employer, minus such amount as or on account of the basic exemption for the year as is prescribed, and

                (b) the employee's maximum contributory earnings for the year, minus such amount, if any, as is determined in prescribed manner to be the employee's salary and wages paid by the employer on which a contribution had been made for the year by the employee under a provincial pension plan.

9. Every employer shall, in respect of each employee employed by the employer in pensionable employment, make an employer's contribution for the year in which remuneration for the pensionable employment is paid to the employee of an amount equal to the product obtained when the contribution rate for employers for the year is multiplied by the lesser of

                (a) the contributory salary and wages of the employee for the year paid by the employer, minus such amount as or on account of the employee's basic exemption for the year as is prescribed, and

                (b) the maximum contributory earnings of the employee for the year, minus such amount, if any, as is determined in prescribed manner to be the salary and wages of the employee on which a contribution has been made for the year by the employer with respect to the employee under a provincial pension plan.

12.(1) The amount of the contributory salary and wages of a person for a year in his income for the year from pensionable employment, computed in accordance with the Income Tax Act, plus any deductions for the year made in computing that income otherwise than under paragraph 8(1)(c) of that Act, but does not include any such income received by him ..."

[9]            The contribution rate for 1998 was, according to the schedule (subsection 11.1(2)), 3.2% for each of the employer and employee. There is no issue on the amount of the calculation, but simply whether a second contribution is required from the second employer.

[10]          Counsel for the Minister relies upon the following cases:

                W. Somerville & Associates Management Ltd. v. Minister of National Revenue, 1968-1985 P.A.B. decisions paragraph 8513;

                Kellogg Salada Canada Ltd. v. Minister of National Revenue, 1968-1985 P.A.B. decisions paragraph 8728;

                O & K Orenstein & Koppel Canada Ltd. v. Minister of National Revenue, 1968-1985 P.A.B. decisions paragraph 8729.

[11]          All of these cases stand for the proposition that a contribution has to be made by each separate employer, even though a prior employer may have paid the maximum contribution and that such contribution is not refundable. I appreciate that in effect, this is a windfall for the Plan. If there were several employers, each would have to make the appropriate contribution up to the maximum each time, even if this was a multi-fold windfall for the Plan. The contributions so made provide no additional benefit for the employee, and to this extent, it seems somewhat unjust, certainly to the Appellant. However, such is the state of the law and as was pointed out in the above cases, it is Parliament which must change the law, not the Court. It is certainly a matter that the Appellant may wish to take up with his Member of Parliament. However, I have been unable to find any case decided differently from the above, nor can I see from reviewing the legislation, how it could be. Accordingly, although the situation may be somewhat an anomaly, the Appellant cannot succeed. I understand the confusion and frustration of Ms. Meunier and Mr. Baltis, but that is of no assistance to them.

[12]          For the above reasons, the appeal is dismissed and the decision of the Minister confirmed.

Signed at Calgary, Alberta, this 23rd day of May 2000.

"Michael H. Porter"

D.J.T.C.C.

COURT FILE NO.:                                                 1999-3967(CPP)

STYLE OF CAUSE:                                               Kavort Enterprises Inc. and M.N.R.

PLACE OF HEARING:                                         Calgary, Alberta

DATE OF HEARING:                                           April 12, 2000

REASONS FOR JUDGMENT BY:      Honourable Deputy Judge Michael H. Porter

DATE OF JUDGMENT:                                       May 23, 2000

APPEARANCES:

Agent for the Appellant:                     Brian Baltis

Counsel for the Respondent:              Belinda Schmid

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

1999-3967(CPP)

BETWEEN:

KAVORT ENTERPRISES INC.,

Appellant,

and

THE MINISTER OF NATIONAL REVENUE,

Respondent.

Appeal heard on April 12, 2000, at Calgary, Alberta, by

the Honourable Deputy Judge Michael H. Porter

Appearances

Agent for the Appellant:                       Brian Baltis

Counsel for the Respondent:                Belinda Schmid

JUDGMENT

          The appeal is dismissed and the decision of the Minister is confirmed in accordance with the attached Reasons for Judgment.

Signed at Calgary, Alberta, this 23rd day of May 2000.

"Michael H. Porter"

D.J.T.C.C.