Tax Court of Canada Judgments

Date: 20000316

Docket: 98-3463-IT-I

BETWEEN:

NEIL B. McFADYEN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Bowie J.T.C.C.

[1] The Appellant applied for a goods and services tax (GST) credit under section 122.5 of the Income Tax Act (the Act) for the taxation year 1996. The Minister of National Revenue advised him on July 11, 1997 that he was not entitled to the credit, and that his application for it was denied. He appeals from that decision.

[2] The following facts are not in dispute. The Appellant's net income for the 1996 taxation year was $3,873.00. If he had been assessed as an unmarried individual he would have been entitled to the credit. Throughout 1996, he was married to an individual whose net income for that year was $41,670.00. He was denied the credit because his adjusted income, as that expression is defined in subsection 122.5(1) of the Act, for the 1996 taxation year was $45,453.00 ($3,873.00 + $41,670.00).

[3] Section 122.5 of the Act, so far is it is relevant to this appeal, reads as follows:

122.5(1) In this section,

"adjusted income" of an individual for a taxation year means the total of all amounts each of which is the income for the year of

(a) the individual, or

(b) the individual's qualified relation for the year;

...

"eligible individual" for a taxation year means an individual (other than a trust) who, at the end of December of that year, is resident in Canada and is

(a) married,

(b) a parent of a child, or

(c) 19 years of age or over;

"qualified dependant" of an individual for a taxation year means a person who is

(a) a person in respect of whom the individual or the individual's qualified relation for the year is the only person who deducts an amount under section 118 for the year, or

(b) a child of the individual residing with the individual at the end of the year,

and who is not

(c) an eligible individual for the year,

(d) the qualified relation of an individual for the year, or

(e) a person in respect of whom an amount is deemed under this section to be paid by any other individual for the year;

"qualified relation" of an individual for a taxation year means the person, who, at the end of the year, is the individual's cohabiting spouse (within the meaning assigned by section 122.6).

...

122.5(3) Where a return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) is filed under this Part for a taxation year in respect of an eligible individual and the individual applies therefor in writing, 1/4 of the amount, if any, by which the total of

(a) $190,

(b) $190 for a person who is the qualified relation of the individual for the year,

(c) $190, where the individual has no qualified relation for the year and is entitled to deduct an amount for the year under subsection 118(1) by reason of paragraph (b) thereof in respect of a qualified dependant of the individual for the year,

(d) the product obtained when $100 is multiplied by the number of qualified dependants of the individual for the year, other than a qualified dependant in respect of whom an amount is included by reason of paragraph (c) in computing an amount deemed to be paid under this subsection for the year, and

(e) where the individual has no qualified relation for the year, the lesser of

(i) $100, and

(ii) 2% of the amount, if any, by which

(A) the individual's income for the year

exceeds

(B) the amount determined for the year for the purposes of paragraph 118(1)(c),

exceeds

(f) 5% of the amount, if any, by which

(i) the individual's adjusted income for the year

exceeds

(ii) $25,921,

shall be deemed to be an amount paid by the individual on account of the individual's tax payable under this Part for the year during each of the months specified for that year under subsection (4).

"Cohabiting spouse" is defined in section 122.6:

"cohabiting spouse" of an individual at any time means the person who at that time is the individual's spouse and who is not at that time living separate and apart from the individual and, for the purpose of this definition, a person not be considered to be living separate and apart from an individual at any time unless they were living separate and apart at that time, because of a breakdown of their marriage, for a period of at least 90 days that includes that time;

[4] The Appellant's position is set out in his Notice of Appeal in the following words:

A. Reasons of Appeal

My reason for appeal is that I have been denied the Goods and Services Tax Credit because of my spouses income. I have been discriminated against based on my marital/family status which is a violation of Section 15 of the Canada Charter of Rights and Freedoms, the Canadian Human Rights Act, The Universal Declaration of Human Rights, The International Covenant on Economic, Social and Cultural Rights, The United Nations Charter, and The Convention on the Elimination of all Forms of Discrimination Against Women. It is also illegal to add my wife's income to mine because it violates the Married Womens Property Acts, Article 2.

[5] If section 122.5 is contrary to the Canadian Charter of Rights and Freedoms then the Court may, to the extent necessary, strike it down for that reason.[1] The various international conventions which are referred to in the Notice of Appeal may inform the construction of the statute, but they cannot render it invalid.[2] The Appellant, in argument, did not suggest that the Minister had misconstrued the Act. Nor did he address any argument to the possible effect that the Canadian human Rights Act[3] might have on the issue he has raised.

[6] The Appellant argued his own case, largely by reading a written brief of some 57 pages. The thrust of that brief, as I understood it, was that married women have historically been subject to discrimination generally, and in particular by the system of income taxation. They are, as the Appellant put it, victims of "the male breadwinner family model" stereotype. He sought to support this thesis by reference to a number of monographs, and to the dissenting judgment of L'Heureux-Dubé J. in Symes v. Canada.[4] He referred, as well, to an extract from a publication of Statistics Canada to establish the fact that, on average, women in the workforce earn less than men.

[7] The Appellant's argument is founded upon section 15 of the Charter:

15(1) 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.

[8] Specifically, the Appellant argues that section 122.5, because it is structured to make the entitlement to the credit dependant upon the income of the family unit, and not simply that of the individual, discriminates on the basis of marital status, and so must be struck down.

[9] Marital status is a ground of discrimination analogous to those enumerated in section 15.[5] If the Appellant had been an unmarried person in 1996, he would have been entitled to a GST credit of $199.00. It does not follow from that, however, either that the distinction made by section 122.5 of the Act is based on marital status, or that it is a distinction which is discriminatory.

[10] The Federal Court of Appeal pointed out in Lister v. The Queen[6] that the GST, being a tax on consumption, is regressive in nature, and that the GST credit was introduced into the Income Tax Act to give some relief from it to those at the lowest income levels. The credit is made available on the basis of family income, in recognition of the fact that much of the spending on the basic necessities of life is done on the basis of the family unit, rather than at the individual level. For this reason, the GST credit is given on a family unit, means-tested basis. The distinction made by Parliament in section 122.5 is not between persons who are married and those who are single, but between those who belong to a family whose aggregate income exceeds the threshold established by the Act, and those whose aggregate family income falls below it. In other words, the distinction is based not on marital status, but on aggregate family income level. There is no evidence before me to suggest that this could be considered an analogous ground for the purposes of section 15. The Appellant directed neither evidence nor argument to any ground other than marital status. For that reason alone, the appeal fails.

[11] If I am wrong in my conclusion that this appeal fails because the ground of distinction in section 122.5 is family income rather than marital status, then I nevertheless conclude that it cannot succeed because the distinction is not a discriminatory one. In Lister, the Federal Court of Appeal considered the claims of two children below the age of 19 that the exclusion of those under that age from eligibility to receive the GST credit is discriminatory, contrary to section 15 of the Charter, and that paragraph (a) of the definition of the expression "eligible individual" is therefore invalid. In dismissing their appeals, Létourneau J.A., with whom Robertson J.A. concurred, said:[7]

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.

In view of the evidence as to the remedial nature of the impugned provision, the larger context in which it operates, and the inherent limits in the implementation of such a benefit program, 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.

[12] Heald J.A. reached the same result, although for different reasons. Although section 15 analysis has developed somewhat in the intervening years,[8] I do not believe that Lister would be decided differently today. That decision is, of course, binding on me. In my view, the considerations that Létourneau J.A. relied upon apply equally in the present case. This Appellant, as a family member, is treated no more severely than children under the age of 19. In fact, he is treated less severely, in that he might in some circumstances qualify for the credit, which they never could.

[13] I have not overlooked the Appellant's statement made during the course of the hearing to the effect that he felt humiliated and demeaned by the effect of the legislation in depriving him of the GST credit. I do, however, attach no weight to it, for two reasons. First, I was not at all persuaded that it was genuine. My impression of the Appellant was that he would say whatever he felt might enhance his prospects of success in the appeal. Second, the effect of the impugned legislation must be considered objectively. The Appellant did not offer any objective evidence to support his view that the legislation demeans the family member whose income is below the GST credit threshold, although the aggregate family income exceeds it. Nor is it a proposition that I would accept as being self-evident. I do not consider it demeaning to any member of a family that the Act treats the family as an economic unit for this purpose.

[14] The appeal is dismissed.

Signed at Ottawa, Ontario, this 16th day of March, 2000.

"E.A. Bowie"

J.T.C.C.

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