ABORIGINAL PEOPLES |
Taxation |
Desnomie v. Canada
A-533-98
Rothstein and Malone JJ.A.
19/4/00
16 pp.
Appeal from Tax Court's denial of appeal from reassessment--Appellant, Indian, Executive Director of Manitoba Indian Education Association (MIEA)--Income tax deducted at source from employment income--Claiming not taxable by reason of Indian Act, s. 87(1)(b) exempting from taxation personal property of Indian situated on reserve; s. 90(1)(b) deeming situated on reserve personal property given to Indians or band under treaty or agreement between band, Crown--Reassessment including employment income in calculation of taxable income--Applying "connecting factors" test to determine situs of intangible property, Tax Court finding Winnipeg residence of employer, employee, where work performed, appellant paid--Holding these factors not connecting appellant's employment income to reserve--Tax Court placing little weight on special circumstances--Finding as working in mainstream of large urban centre, appellant accepting his property not protected--Appeal dismissed--Appellant submitting Monias v. Canada (1999), 99 DTC 1021 (T.C.C.), wherein employment income found exempt from taxation under s. 87, should be followed--Monias under appeal--Inappropriate to pre-empt that appeal by commenting on reasoning of Trial Judge therein--Present appeal must be decided on own facts--Appellant submitting off-reserve location of employer should be given little weight in connecting factors analysis because no realistic way for them to be provided on reserve--Object of connecting factors test to determine situs of intangible property for purposes of s. 87, having regard to whether Indian holds property as part of entitlement of Indian qua Indian on reserve--Necessity argument effectively says employer, employee, place of employment would be on reserve if possible and therefore employment income should be treated as if located on reserve--Although appellant's work related to assisting reserve Indians when move off reserve, employer Indian organization, these factors not connecting appellant's employment income to any particular reserve--Alone not identifying specific reserve to which appellant's property can be connected--Not helping to locate employment income--Purpose of s. 87 to exempt personal property of Indian situated on reserve from taxation--"Situated on reserve" describing location--Tangible property must be physically located on reserve--As to intangible property, question whether situs of transaction on reserve--When, in context of connecting factors analysis location of employer, employee, employment, place where payment made all far from any reserve, not inappropriate to have regard to remoteness in relation to reserve in determining whether property held by Indian qua Indian on reserve--Tax Court distinguishing Canada v. Folster, [1997] 3 F.C. 269 (C.A.)--Appellant submitting Tax Court erred in finding determination for s. 87 purposes must be made by reference to person whose income involved, not by reference to different reserves benefiting from services of that person, because such approach inconsistent with approach in Folster--Nothing in Folster suggesting focus not properly on property subject to taxation, i.e. income of recipient--In close cases, such as Folster, special circumstances of employment may assist in determining situs of employment income--Where all other possible connecting factors would not situate employment income on reserve, highly unlikely special circumstances alone would tip balance other way--Tax Court finding special circumstances herein not sufficient to tip balance in favour of appellant--Not erring in focussing on appellant's property--Appellant arguing if appellant taxed, effect would be to require MIEA to pay more, thereby eroding purchasing power--Appellant's salary level based on its being taxable--Income tax deducted at source--MIEA paying salaries based on Treasury Board, PSAC guidelines which would certainly assume salaries would be taxable--No indication of any adjustment to salaries based on tax exemption under Indian Act--Accordingly, finding against appellant would have no effect on salary levels paid by MIEA--Argument also contrary to purpose of s. 87 exemption--Purpose not to provide general economic benefit on Indians--Erosion of purchasing power argument not apposite because directed at promoting general tax protection for off-reserve property, not objective of s. 87--Appellant arguing services provided by MIEA in discharge of federal government's treaty obligations in Manitoba to maintain schools on reserves--Canada v. Kakfwi, [2000] 2 F.C. 241 (C.A.) holding s. 90(1)(b) agreement must be agreement ancillary to treaty--Insufficient evidence to link Contribution Agreement between Canada, MIEA to any treaty--Appellant submitting should pierce MIEA's corporate veil to reveal tax exempt character of shareholders--MIEA's choice to conduct affairs using corporate structure giving rise to commercial benefits of both corporate veil, limited liability--Pioneer Laundry & Dry Cleaners Ltd. v. Minister of National Revenue, [1939] 4 D.L.R. 481 (P.C.) holding in taxing statute, corporate veil only pierced in instances of fraud, improper conduct--Based on that authority, circumstances appropriate for piercing of corporate veil herein not existing--No error of law committed by Tax Court in refusing to lift corporate veil--Indian Act, R.S.C., 1985, c. I-5, ss. 87(1)(b), 90(1)(b).