BETWEEN:
and
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Appeal heard on November 1, 2006, at Saskatoon, Saskatchewan
Before: The Honourable Justice D.W. Beaubier
Appearances:
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JUDGMENT
The appeal from the assessment made under the Excise Tax Act, bearing number 00000000222 is allowed and this matter is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 10th day of November 2005.
BETWEEN:
GLOBAL INFOBROKERS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] This appeal pursuant to the Informal Procedure was heard at Saskatoon, Saskatchewan on November 1, 2005. Monica Kreuger, a director of the Appellant was the only witness.
[2] Paragraphs 1, 4, 5, 9, 10 and 11 of the Reply to the Notice of Appeal outline the matters in dispute. They read:
1. With respect to the first page of the Notice of Appeal entitled "Notice of Appeal..."
(a) he admits that the Appellant was assessed for the period of September 1, 2002 to August 31, 2003 (the "Relevant Period") by assessment no. 00000000222 (the "Assessment");
(b) he admits that the Appellant has attached to its Notice of Appeal a copy of the Notice of Decision and the Assessment issued by Canada Customs and Revenue Agency ("CCRA");
(c) he states that the documents referred to in the previous subparagraph speak for themselves and require no further discussion;
(d) he states that the remainder of that page is administrative in nature and contains no relevant facts to admit or deny.
...
4. The Minister of National Revenue (the "Minister") by the Assessment, dated March 31, 2004 assessed the Appellant net tax of $5,886.00, penalty of $194.00 and interest of $77.74 for the Relevant Period.
5. In assessing net tax for the Relevant Period the Minister assessed the Appellant for unreported tax collectible for the Relevant Period of $10,148.81 in respect of supplies made by the Appellant taxable at 7%.
...
9. In so assessing the Appellant and confirming the Assessments, the Minister made the same assumptions of fact as follows:
(a) the Appellant was incorporated under the laws of Saskatchewan as a business corporation;
(b) the Appellant registered for the purposes of the Excise Tax Act (the "ETA") and was a registrant at all relevant times;
(c) during the Relevant Period the Appellant provided individuals, eligible by virtue of a Saskatchewan Government program known as "the Self Employment Program", with instruction, training and support to develop, implement and operate viable businesses ("educational services");
(d) in connection with the educational services the Appellant also provided equipment, materials and supplies ("technology and supplies");
(e) the Appellant received consideration from individuals participating in the Self Employment Program for the educational services and the associated technology and supplies of $132,281.40 and $12,701.60 respectively;
(f) the educational services and the technology and supplies provided to the individuals were taxable at 7%;
(g) the Appellant was required to collect tax on its supply of educational services and associated technology and supplies of $9,259.70 and $889.11 respectively for a total amount of $10,148.81;
(h) in filing its GST return for the Relevant Period the Appellant failed to report the tax collectible referred to in the previous subparagraph.
B. ISSUES TO BE DECIDED
10. The issue to be decided in this Appeal is whether the Appellant is liable for the tax collectible in respect of its supplies of educational services and the associated technology and supplies to individuals participating in the Self Employment Program and if the Minister properly assessed the tax collectible on those supplies.
C. STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
11. The Deputy Attorney General relies on subsections 123(1), 221(1) and 225(1), and sections 165, 224, 228, 296 and 299 of the Excise Tax Act, R.S.C. 1985, c. E-15, as amended (the "ETA"), sections 1 and 8 of Part III of Schedule V to the ETA and section 18.3009 of the Tax Court of Canada Act.
[3] Assumptions 9 (a) to (e) inclusive were not refuted. The remainder are in dispute.
[4] The period assessed is from September 1, 2002 to August 31, 2003 when the Appellant collected fees directly from trainees being trained by it in "Entrepreneurship" and named a "Self-Employment Program" course. Both before and after this period, the fees were paid by the Province of Saskatchewanunder the title Canada- Saskatchewan Career Employment Services which was in part funded by Human Resources Development Canada ("HRDC") and were not subject to GST.
[5] When payees changed during the period the Appellant did not charge GST because it did not think that it was chargeable. It considered the fees to be exempt under Schedule V, Part III, Section 8 of the Excise Tax Act, which reads, in English:
A supply, other than a zero-rated supply, made by a government, a school authority, a vocational school, a public college or a university of a service of instructing individuals in, or administering examinations in respect of, courses leading to certificates, diplomas, licences or similar documents, or classes or ratings in respect of licences, that attest to the competence of individuals to practise or perform a trade or vocation except where the supplier has made an election under this section in prescribed form containing prescribed information.
In French it reads:
La fourniture, sauf une fourniture détaxée, effectuée par un gouvernement, une administration scolaire, une école de formation professionnelle, un collège public ou une université, d'un service consistant à donner à des particuliers des cours ou des examens qui mènent à des certificats, diplômes, permis ou documents semblables, ou à des classes ou des grades conférés par un permis, attestant la compétence de particuliers dans l'exercice d'un métier, sauf si le fournisseur a fait un choix en application du présent article en la forme déterminée par le ministre et contenant les renseignements requis par celui-ci.
[6] The evidence is that at all times at least 80 percent of the income obtained by the Appellant has been from these training programs.
[7] As a result, the primary question before the Court is whether the Appellant was a vocational school instructing and administering examinations leading to certificates that attest to the compliance of individuals to practise or perform a trade or vocation.
[8] The Appellants nature of business as incorporated is to "provide business intelligence to small businesses" (Exhibit A-1). Since its incorporation in December 1986 it has been teaching this entrepreneurship courses under HRDC auspices. After a start-up period they became 40-week, 3 phase courses. The first 12-week phase is to train employment insurance qualified students in management, market research, financial forecasting, employment management and forming a business plan. In the second phase the students are in a "starting phase" in which they get a location, financing, equipment and set up shop; they are inspected each week by an instructor as they proceed. A business panel approves the whole procedure at the end of this phase. The third phase is when the student operates, makes an income, learns how to achieve sales projections and completes financial statements and balance sheets; inspection occurs once every three weeks. At the successful completion after 40 weeks the panel approves the operation and the student receives a certificate. Some students fail; they may not be able to do the tasks assigned or they may quit. Those who succeed usually break even in their businesses in six to nine months and 70 percent of them are in business five years later.
[9] Monica Kreuger has her M.B.A. and teaches the rudiments of the Global course to students at the College of Commerce, University of Saskatchewanin an elective course titled "Entrepreneurship". It was developed from Global's course.
[10] Essentially, the questions raised in the appeal are:
1. Is the Appellant's school a "vocational" school?
2. Is "entrepreneurship" a vocation or trade?
[11] "Calling" has traditionally been a synonym for "vocation" and has not been related to either a trade or a profession. Meaning 2.b of the word "vocation in The Oxford English Dictionary 2nd edition is:
2. ...
b. One's ordinary occupation, business, or profession.
[12] The word "vocation" does not appear in the French version of section 8. The only words are "l'exercice d'un métier", or a reference to the exercise of a trade, in English. However, the French word "vocation" is usually defined as referring to a profession - commonly one of the historic professions such as the clergy or law.
[13] "Trade" is defined by The Oxford English Dictionary, 2nd Edition as:
5. a. The practice of some occupation, business or profession habitually carried on,...now usually applied to a mercantile occupation and to a skilled handicraft, as distinct from a profession ...
Thus the description or occupation of "trade" is no longer confined to carpentry, plumbing, et cetera. Rather it applies to a business habitually carried on, among other things. It is similar with the French word "métier", as it is defined by the 1994 edition of Le nouveau petit Robert and the 2006 edition of Le petit Larousse illustré.
[14] Section 8 and the provision in question in this appeal are intended to benefit individuals. Moreover, in the modern world there are new trades and vocations. As a simple example a child is often thought to have a "calling" to carry on the business or occupation of a parent. A computer programmer or repairer is not in a traditional "trade" or "vocation". Nonetheless, those occupations are considered to be trades or vocations in the language of the modern world.
[15] In the Court's view the same may be said for an entrepreneur. It is a calling that requires specific skills and talents. Indeed, income tax cases invoke many of the headings taught by the Appellant in its program when determining if a taxpayer is in business. These same strictures were unknown 50 years ago. They may have existed in fact, but they were not formally structured and named. In the Court's view the course of Entrepreneurship taught by the Appellant as a "Self Employment Program" is in fact a course which teaches individuals to practice a trade or vocation. Entrepreneurship, or being in business, is a trade or vocation in Canada's modern World.
[16] For these reasons, the appeal is allowed.
Signed at Ottawa, Canada, this 10th day of November 2006.
"D.W. Beaubier"
Beaubier, J.
COURT FILE NO.: 2005-2205(GST)I
STYLE OF CAUSE: Global Infobrokers Inc. v. The Queen
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: November 1, 2006
REASONS FOR JUDGEMENT BY: The Honourable Justice D.W. Beaubier
DATE OF JUDGMENT: November 10, 2005
APPEARANCES:
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Counsel for the Appellant: |
Benedict Nussbaum
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Counsel for the Respondent: |
Lyle Bouvier |
COUNSEL OF RECORD:
Firm: Nussbaum & Company
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Ontario