Date: 20010525
Docket: 2000-2552-IT-I
BETWEEN:
DENIS LAMOTHE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Alain Tardif, J.T.C.C.
[1] This is an appeal for the 1995, 1996 and 1997 taxation years.
[2] The points at issue are, first, whether the appellant's income for the years in issue was employment income or business income and, second, whether the respondent was correct in disallowing the expenses claimed by the appellant for those same years.
[3] After being sworn, the appellant admitted a number of facts assumed in making the assessments, and in particular the following facts stated in the Reply to the Notice of Appeal (the "Reply"):
[TRANSLATION]
(a) for the 1995 taxation year, the appellant reported gross business income of $41,852 and net income of $35,249 as well as unemployment insurance benefits of $10,158 and a union dues refund of $485;
(b) for the 1996 taxation year, the appellant reported gross business income of $57,767.65 and net income of $51,532.46 as well as employment insurance benefits of $6,391;
(c) for the 1997 taxation year, the appellant reported employment income of $47,136, employment insurance benefits of $2,065 and workers' compensation benefits of $11,751.12;
(d) the Minister determined that the income reported by the appellant as business income was employment income for the years in issue;
(e) the appellant claimed union dues amounting to $922 for the 1995 taxation year, $1,339.28 for 1996 and $1,020 for 1997;
(f) the appellant works as a freelance equipment installer on movie sets;
(g) the appellant is a member of the Syndicat des techniciennes et techniciens du cinéma et de la vidéo du Québec (hereinafter the "STCVQ");
. . .
(j) STCVQ members may draw employment insurance benefits when they are unemployed;
(k) the appellant submitted no T2200 form that could have shown his conditions of employment during the years in issue, nor did he submit any letter concerning such conditions from the production companies for which he worked and which issued him T4 slips in accordance with subsection 8(10) of the Income Tax Act (hereinafter the "Act");
. . .
(m) the appellant has not demonstrated:
(i) that he was ordinarily required to perform the duties of his employment away from his employer's place of business or in different places, and
(ii) that he was required under his contract of employment to pay his expenses within the meaning of subsection 8(1) of the Act and that he was allowed under subsection 8(2) of the Act to deduct the expenses claimed from his employment income.
[4] As his only testimony, the appellant read a text which he had prepared with the help of his spouse. It is appropriate to reproduce its content here:
[TRANSLATION]
TO WHOM IT MAY CONCERN,
Properly understood, the issue here is whether I received employment income or business income in 1995, 1996 and 1997.
That is indeed the heart of the matter. If I have taken the trouble to defend myself in this case it is because I imagine there must be something in the tax laws that opens the door to a fair and reasonable analysis of exceptional cases.
The various aspects of my employment place me on the borderline between the two definitions. The Act recognizes our status as employees of the production companies. Yet how can it be explained that employees continually, year after year, have so many employers? What do you think of employment that provides no sick leave days? As for statutory holidays, they are an exception since, whenever possible, filming weeks are scheduled so as to avoid them. In the circumstances, I would therefore describe myself as a worker-employee who offers a service (just as a business would do). Would logic not dictate that this ambiguity give us instant status as an exceptional case?
Allow me to take the time to show how my conditions of employment are different from those of other workers. I will then explain why it was impossible in 1998 to provide the many supporting documents required for 1995, 1996 and 1997.
Seen from the perspective of an armchair at home or from a seat at a movie theatre, film shoots seem to be ideal and incredibly exciting work. That may once have been true, but I was not around in the days when a feature film would be shot in eight or twelve weeks. Most films shot in Montréal are now done in four or five weeks.
Including travel time, you can easily spend 15 to 18 hours a day on the job. Schedules are not the same for an entire week. Indeed, the collective agreements provide that workers must have 10 hours of recovery time before a new call. Consequently, the next day's call is postponed accordingly, so that the workweek regularly goes beyond the traditional five days. Workers' biological clocks are constantly being upset: apart from the lack of sleep, they never sleep or eat at the same times. They start a week working days and finish it working nights. This is hard both physically and emotionally.
As regards travelling expenses, most workers in everyday life know where they work and choose accordingly how close they want to live to their place of work. This is not the case with workers in the film industry, who never know where they will be working the next day. You know as well as I do that, in the movie business, your workplace can be anywhere at all and it is not always that easy to live nearby. Then there are the days when scenes are filmed on different sites. This increases travel and parking expenses. Forget special flat parking rates, public transit and carpooling. You do not know where, with whom or on what schedule you will be working in two days, two weeks or two months.
Now let us talk about the purchases necessitated by this employment. Remember the cold spells in winter. I look at my wife, who, like most workers, runs to her car and comes home from work complaining of the cold. I work outside, 12 to 18 hours a day, in eight-hour blocks, in the middle of winter, often at night. Have you ever considered the fact that, even to film an interior scene, we have to install lighting outside? We then stay outside to do the visual effects, changes in atmosphere, the effect of a car passing in the street and so on. When we are not being soaked by rain, the cold pierces us or the heat overwhelms us, and the hours drag on interminably. We need superior-quality clothing. To be able to work efficiently we must have clothing that, in addition to insulating well, is light and comfortable and draws off perspiration. (Time is money in the movies. If your coat or heavy boots hamper you and waste your energy, it may be decided to hire someone who is more effective.) I would point out that the work is physically demanding, consisting in carrying and setting up heavy and cumbersome equipment in snow, on ice, in mud, and so on. To give you an idea of the order of magnitude of the standard equipment, a connecting cable, for example, weighs 80 pounds and a spotlight more than 100 pounds. Try to be agile when handling these kinds of loads in sometimes awkward and cluttered places, in conditions favourable to wear and tear, soiling and breakage. The distances involved in these installations are often great: entire blocks where spotlights are set up on the roofs of buildings, or vast interior spaces spread over a number of floors. You would be surprised to see how fast shoes wear out. Again, lightness and comfort are essential. There are also special purchases. For example, if you have to work on the ice surface of an arena for a few days, you appreciate the grip of broomball shoes. Is this a luxury or an additional safety measure?
Lastly, as you can see from the number of T4 slips I send you each year, I work as a freelance for various film production companies. The fact that I am working today does not mean that I will not need a contract tomorrow. This is the case when I am not in the regular crew of a film production. I also frequently work on various contracts and for various employers in a single week. I would point out that an employer that pays me for 150 hours of work in one year may also have paid for those hours under five or 10 separate contracts spread out over time. As a result of changing schedules, people cannot always reach me easily at my home. And yet I must always be accessible, otherwise they will call someone else. Communication tools are therefore indispensable for me if I want to work.
In short, I believe you will now have to agree with me that, as a freelance in the film industry, I have the same insecure status as a self-employed worker, which justifies the telecommunications expenses and the expenses incurred to ensure that I made a favourable impression, which I claimed. I must purchase more expensive clothing, footwear and accessories than for everyday use and replace them regularly because of wear and tear. I have more unforeseen transportation and parking expenses than the average person.
T2200
Now with regard to the T2200. If I understand correctly, the main reason for disallowing the deductions I claim is that I have not filed these forms.
I draw your attention to the fact that the everyday reality of freelances has changed a great deal over the years. In addition, everyone is talking about the American productions that are now being filmed here. These productions cause, for limited periods, increased demand, which creates a surplus of workers during the rest of the year. Competition is more fierce and the precariousness of our situation increases to the same degree. Every day we must confirm our value to those who hire us. The Income Tax Act places us in an awkward position by requiring us to file T2200 forms.
During a film production, everyone works under pressure for very long consecutive hours, during which the stress on people often approaches critical levels. For an employee to come and request forms which add to office employees' already heavy workloads is an irritant. Considering the extremely temporary nature of our employment and the fact that we must make sure that the production company will want to rehire us for a future production, it becomes a risky business to insist on getting T2200 forms.
I propose a solution:
Why does the government not ask employers to indicate as "additional earnings" on our T4 slips the expenses they may have incurred for such things as communication, travelling, parking, specialized equipment and work clothing. This practice has been implemented in the past two or three years for meals taken on the job. It makes life easier for us. Extending it to the other aspects would prevent workers from running the risk of being perceived as troublesome when they request duly completed forms. They would no longer be afraid of being overlooked for future productions. It goes without saying that expenses not assumed by the employer are defrayed by the employee.
Finally, let us talk now about the other supporting documents that were requested from me in September 1998: copies of contracts, number of days worked and number of days unemployed, daily mileage record and places where the various sets were located. Where were you on the same date three years ago? Our schedules are constantly being changed and the scheduled film locations may also vary. You must therefore admit that, to provide all this different information, one would have had to record it along the way and carefully preserve documents which, at first glance, I thought were of no importance. I would like to emphasize that I was never told it was preferable to keep them. I do not see why I would have engaged in that kind of exercise since, as stated above, when filming is being done, it is difficult even to ensure you get an adequate number of hours of sleep. As a result, the request made of me years after the contracts in question were performed amounted to mission impossible; it is not that there was any lack of good will on my part. In the circumstances, I feel that the request so made was an abuse of the situation for the purpose of putting me in a no-win position.
I am not some rich guy benefiting inordinately from tax avoidance. I am a worker who is already paying his share of tax. I pay the GST and QST on all the expenditures for which I request tax deductions and those expenditures, I repeat, have enabled me to perform my work efficiently and safely. I therefore persist in believing that my position is fair and reasonable.
[5] In cross-examination, the appellant admitted that he had not submitted T2200 forms or filed any documents in support of the expenses claimed.
[6] In his final submissions, the appellant indicated that the expenses claimed represented approximately 10 percent of his income and that it seemed normal and reasonable to him that he should have had to incur expenses of that order. He therefore argued that it was unreasonable and inappropriate to demand supporting documents.
[7] The appellant's testimony was certainly engaging and spoke to the special conditions facing workers in the film industry. However, that is not sufficient for him to succeed in his appeal.
[8] The appellant clearly believed that this Court had the power to amend the Income Tax Act (the "Act") to make it, according to him, more modern, more human, more appropriate and, above all, more attuned to the working conditions in the important sector of economic activity that is the film industry.
[9] I obviously do not have any such authority and must follow and apply the Act as enacted by Parliament. In this regard, the relevant statutory provisions are very clear. It is appropriate to reproduce subsection 8(10) of the Act:
(10) Certificate of employer. An amount otherwise deductible for a taxation year under paragraph (1)(f), (h) or (h.1) or subparagraph (1)(i)(ii) or (iii) by a taxpayer shall not be deducted unless a prescribed form signed by the taxpayer's employer certifying that the conditions set out in that provision were met in the year in respect of the taxpayer is filed with the taxpayer's return of income for the year under this Part.
[10] The requirement in subsection 8(10) may seem superfluous to the appellant but, until such time as Parliament finds it fit and appropriate to amend it, persons subject to it will have to comply with it, failing which they must suffer the consequences, no matter how painful.
[11] The Tax Court of Canada does not have authority or jurisdiction to interpret or alter the Act on the basis of the sympathy that certain cases may inspire. Only Parliament can amend the Act. Consequently the appellant, if he believes his cause to be just, would be well-advised to take whatever steps are necessary in order to have the leaders in his sector of economic activity make representations to the competent authorities. Those authorities have absolutely nothing to do with this Court, whose mission is essentially to apply and follow the Act as enacted by Parliament.
[12] The requirement to provide supporting documents is a fundamental one. When a taxpayer claims an expense, he must be able to prove that it is fair and relevant. For that, it is essential to have the appropriate documentary evidence, failing which, once again, a person who has incurred expenses runs a very great risk of seeing them disallowed, and rightly so.
[13] In the instant case, the appellant may have been entitled to deduct certain expenses from his employment income by virtue of an exception provided for by Parliament, since such entitlement is generally granted to entrepreneurs, who must however be able to provide all supporting documents on request.
[14] The appellant deliberately chose not to comply with the requirements to which he was subject under the Act. He did so for various reasons, referring in particular to the following:
· the particular characteristics and requirements of his work;
· according to him, the Act did not take into account the new reality in the film production industry;
· the unreasonable and inappropriate nature of the requirements of the Act.
[15] The various grounds cited by the appellant to justify his behaviour may be quite legitimate in his view, but they have no legal merit and may not be considered by this Court, which is essentially bound to follow and apply the provisions of the Act.
[16] In view of the evidence, I must dismiss the appeal.
Signed at Ottawa, Canada, this 25th day of May 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true on this 24th day of October 2002.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-2552(IT)I
BETWEEN:
DENIS LAMOTHE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 16, 2001, at Montréal, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Diane Lemery
JUDGMENT
The appeal from the assessments made under the Income Tax Act, for the 1995, 1996 and 1997 taxation years is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 25th day of May 2001.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true on this 24th day of October 2002.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]