Date: 20000927
Docket: 1999-2921-IT-I
BETWEEN:
PERCY R. SMITH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
McArthur J.T.C.C.
[1] This appeal is from a child tax benefit notice in which the Minister of National Revenue determined that the Appellant was not entitled to the child tax benefit for the base taxation years 1994, 1995 and 1996 in the amounts of $1,745, $6,633 and $1,105, respectively, on the basis that he was not an "eligible individual" within the meaning of section 122.6 of the Income Tax Act. The issue is whether he was a resident of Canada during the relevant period.
[2] The Appellant immigrated to Canada from Guyana about 1973 and became a Canadian citizen in 1978. He is highly intelligent and well educated. He had a son Christopher out of wedlock about 1980. From his first marriage, he has six children born between May 1982 and December 1991. His first wife died of lupus in 1992. He remarried in 1994 and had four children from this union. In August 1993, he purchased a property in Guyana from his uncle for $9,000[1] which he believed then had a value of $40,000. On May 31, 1994, he moved to Guyana with his wife and six children.
[3] The property he had purchased contained four or five residential dwellings that were obviously a liability rather than an asset. He received no rents and had great difficulty evicting the occupants in order to convey vacant land. He eventually succeeded and sold the land for $90,000 in July 1998. He had to be a resident of Guyana for at least two years in compliance with the laws of that country in order to buy the land, evict the tenants and eventually sell it.
[4] In the fall of 1994, he purchased a taxi business in Guyana with four operating cars, which he operated at a loss for three years. He explained that he acquired the business so that his six children enrolled in several different schools, would ride safely while they travelled back and forth.
[5] Prior to moving to Guyana, he had been living in Oakville, Ontario from the proceeds of an insurance policy payable on the death of his wife in 1992. During this period he was publishing a Christian newspaper called "Inner City".
[6] While the evidence was somewhat confusing, it would appear that the Appellant returned to Canada four or five times during the period from June 1994 to June 1998 for a total period of at best, three weeks in each of the four years. His wife came back to Canada in July 1995 for three months to have a baby. He returned to Canada (i) for two weeks in November 1994; (ii) less than two weeks in March or April 1995; (iii) less than two weeks in March 1996; and (iv) did not come back until September 1998. While living in Guyana his son Christopher stayed in Canada, presumably with his mother. The Appellant's mother and father also remained in Canada. Upon his return with his wife and children in September 1998, he purchased a home in Winnipeg. His children are outstanding students and athletes. Two of his daughters attended this hearing with their father.
[7] The Appellant's objections taken from his Notice of Appeal include:
1. ... I sojourned in Canada over 190 days during the base taxation year 1994, therefore that year should be excluded.
2. ... My objections were granted by Appeals Office Mr. Andrew Ng on the 17th December 1998 at 10:02 a.m. This decision was confirmed by two witnesses, (i) Mrs. Patricia Smith (204 783-6728) my wife (ii) Mrs. Della Hurley (204 984-2843) an employee of Revenue Canada, Child Tax Benefit Division Winnipeg. Mrs. Hurley called Mr. Andrew Ng at my request within 10 mins. of Ng's communication to me of his decision. Mr. Ng confirmed his decision that I was according to his words "a factual resident for income tax purposes"; that my objections were upheld (successful); and Mrs. Hurley therefore called me back, speaking to both my wife and I indicating she had also received confirmation that I was a "factual resident" for base taxation years 1994, 1995 and 1996 and my objections were upheld. Since I did not in any way pressure Mr. Ng nor was there any additional evidence cited which resulted in the reversal of that decision on Friday December 21st, 1998 – I ask that the court uphold the initial decision and find the reversal egregious.
3. ... The notification of confirmation by the Minister seems to indicate one of two suppositions:
(a) that $9,484.25 was paid to me between March 7, 1996 and September 1, 1998 for the base years 1994, 1995 and 1996
or
(b) that the monies were paid during their respective base taxation years 1994, 1995 and 1996,
but since I was out of the country between March 7/96 and Sept. 1/98, section 122.6 would allow for punitive retroactive measures. I object to both premises since child tax benefits were paid during the base taxation years and section 122.6 does not allow for punitive retroactive measures from Sept./98 (including the amendment of 122.6 in June/98) back to base years 1994, 1995 and 1996.
4. The fourth reasons for my appeal is based on my dependence on Revenue Canada's rules and regulations as printed in their forms for the base taxation years 1994, 1995 and 1996 which sets out the criteria for "Factual Residency" based on residential ties which I met namely personal property and social ties as follows:
(i) supporting a child back in Canada
(ii) active credit card
(iii) active driver's license
(iv) active bank account
I was also able to provide documentation of insurance and monthly receipts of rental of a large storage facility in Oakville, Ontario including taxes paid.
5. ... The section of the Act cited by the Minister's Notice of Confirmation should be limited to the Income Tax Act for those base years.
6. ... Section 122.6 is not a retrospective law or statute therefore cannot be applied retroactively.
7. ... I cite this statement in the General Income Tax Guide for base years 1994, 1995 & 1996. "If on December 31, 1996 you lived outside Canada but you maintained residential ties (as defined on page 5) with Canada, you may be considered a factual resident of a province or territory. Use the package for the province or territory where you kept your residential ties". I not only met the requirements as stated on page 5 for 1996 and other base years being appealed, but also followed the instructions and used the Ontario package where my residential ties were.
8. ... In order to qualify as a "Factual Resident" according to Revenue Canada's established guidelines for the base years of my appeal, residency outside of Canada is essential. Therefore to cite my living outside of Canada as the reason for dismissing my objection is both contradictory and discriminatory.
[8] The Appellant filed income tax returns for at least 1996, 1997 and 1998 reflecting under $1,000 of tax payable. He explained that he had been mistreated by Revenue Canada officials and his Mississauga bank account was seized or garnisheed in December 1999 while this appeal was active. He has sued Revenue Canada in Federal Court for damages as a result of this seizure. While it is unfortunate if he has been treated improperly, I have explained that it is not relevant to this decision.
Analysis
[9] To be eligible for the child tax benefit, the Appellant had the burden of proving that he was a resident of Canada during the base taxation years pursuant to the definition of "eligible individual" contained in section 122.6.
[10] I rely on the decision and analysis of Mogan J. in Boston v. The Queen,[2] wherein he was faced with determining residency under somewhat similar facts. In Boston, the taxpayer was transferred by his employer from Alberta to Malaysia. He worked in Malaysia from September 1989 to at least 1992. During that period, he made two 14-day visits to Canada. His wife continued to live in Canada in their family home and visited him eight times during the four-year period. Judge Mogan had no difficulty concluding that Boston was not a resident of Canada but a resident of Malaysia during the four years. I apply the reasoning of Mogan J. to the present case and quote extensively from it. Judge Mogan stated:
When attempting to determine in law the residence of an individual for income tax purposes, the leading case is the decision of the Supreme Court of Canada in Thomson v. Minister of National Revenue, [1946] S.C.C. 209. In that decision, Rand, J. stated at pages 224-225:
... It is important only to ascertain the spatial bounds within which he spends his life or to which his ordinary or customary living is related. ...
... On the lower level, the expressions involving residence should be distinguished, as I think they are in ordinary speech, from the field of "stay" or "visit".
... Applying the specific words of Rand, J. in Thomson to the Appellant's situation, I find that the Appellant after 1988 had settled into or maintained or centralized his ordinary mode of living with its accessories and social relations, interests and conveniences in Malaysia.
In Griffiths v. The Queen, 78 DTC 6286, a long-time resident of Canada decided to retire to the British Virgin Islands where he lived on his yacht which was registered in Canada. When deciding that Mr. Griffiths had ceased to be resident in Canada, Collier, J. stated at page 6288:
I see nothing incompatible with a severance of residence, but the keeping of investments in this country.
... I would distinguish this appeal from the Ferguson case because the Appellant went to Malaysia for a minimum period of three years; he had significant employment responsibilities there; he hoped to stay on after three years if he became manager of the Port Dickson Refinery; and he became active in the residential community of Port Dickson.
... The Appellant's presence in Canada during the four years 1989, 1990, 1991 and 1992 in terms of time was minuscule. In fact, he was here for only 14 days in 1990 and for another 14 days in 1992. He was not here at all in 1989 or 1991. If as Rand, J. observed in Thomson, the word residence is to be distinguished from "stay" or "visit", I should think that the time which the Appellant spent in Canada in 1990 and 1992 is more accurately characterized as a visit to Canada in each of those years. I find that the Appellant was not resident in Canada in the years 1989 to 1992.
[11] I will now deal with the Appellant's Notice of Appeal submissions in their numerical order referred to earlier:
1. The base years are as contained in the Minister's Reply to the Notice of Appeal which were not questioned by the Appellant, namely, in conformity with section 122.6 of the Act;
(a) the 1994 base taxation year means the months of July 1995 to June 1996 inclusively;
(b) the 1995 base taxation year means the months of July 1996 to June 1997 inclusively; and
(c) the 1996 base taxation year means the months of July 1997 to June 1998.
2. There was no further evidence of a settlement at trial and I do not find a binding contract between the Appellant and the Minister. The Notice of Confirmation is the Minister's decision.
3. I believe that the child tax benefit notice is equivalent to the Minister's assessment. Normally under subsection 152(3.1), the Minister has three years after the day of mailing a notice of original assessment to reassess.
4. For the reasons set out, particularly with reference to the Boston case, the Appellant was not a "factual resident" of Canada. It is a common sense conclusion. The Appellant moved to Guyana with his wife and six children where he ordinarily resided for four years. He purchased and operated a taxi business, had a real estate investment that required his residency in Guyana and enrolled his children in the school system.
5. Refer to my comments for number 1 above.
6. Refer to my comments for number 3 above.
7. Refer to my comments for number 4 above.
8. Under the child tax benefit definition, section 122.6 "eligible individual" means, amongst other things, a resident of Canada. The Appellant was not a resident of Canada and not an "eligible individual" within the meaning of section 122.6 and therefore not eligible to receive the child tax benefit within the meaning of paragraph 122.61(1)(a) of the Act for the 1994, 1995 and 1996 base taxation years. I do not find this conclusion either contradictory or discriminatory. It is the clear interpretation of the Income Tax Act given the facts of this case.
[12] The Appellant submitted further that because he was called on to file Canadian returns and pay Canadian taxes, then he has to be an eligible individual. Again, I find it boils down to whether or not he was a resident in Canada. Having paid tax in Canada does not make him a resident.
[13] For the above reasons, I find that the Appellant was resident of Guyana through the years under appeal.
[14] The Minister has correctly calculated the amounts of child tax benefits to which the Appellant is entitled in accordance with the provisions of section 122.61 of the Act with respect to the 1994, 1995 and 1996 base taxation years and the appeals are dismissed.
Signed at Ottawa, Canada, this 27th day of September, 2000.
"C.H. McArthur"
J.T.C.C.