T-219-78
Gene A. Nowegijick (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Mahoney J.—Ottawa, February 28
and March 6, 1979.
Income tax — Indians — Wages paid on reserve by corpo
ration on reserve for work done off reserve — Whether or not
wages subject to income tax — Indian Act, R.S.C. 1970, c. I-6,
s. 87.
ACTION.
COUNSEL:
P. Burnet for plaintiff.
W. Lefebvre and J. P. Fortin, Q.C. for
defendant.
SOLICITORS:
Wyatt, Menczer & Burnet, Ottawa, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
MAHONEY J.: The plaintiff, an Indian, disputes
his liability to include in the computation of his
taxable income for 1975 wages paid to him on his
reserve, by a corporation on the reserve, for work
performed off the reserve. The material facts are
agreed. The full text of the agreement filed fol
lows. The words in brackets reflect corrections,
none of them material to the issue, made by the
parties at the trial.
1. The Plaintiff is a registered Indian within the meaning of
that term as defined by the Indian Act, R.S.C. ch. I-6, and
amendments thereto, and is a member of the Gull Bay Indian
Band, Gull Bay, Ontario.
2. During the 1975 taxation year the Plaintiff was an employee
of the Gull Bay Development Corporation hereinafter referred
to as the Corporation. The Corporation is a corporation without
share capital with its head office and administrative offices
situated on the Gull Bay Reserve. All directors, members and
employees of the Corporation live on the Reserve and are
registered Indians.
3. During 1975, the Corporation, in the course of its business,
conducted logging operations, and was involved in cutting trees
for sale to third parties outside the Reserve. The actual site of
the logging operations was [ten] miles from the Gull Bay
Reserve.
4. During 1975, the Plaintiff maintained his permanent dwell
ing on the Gull Bay Reserve. Each morning, as a logger for the
Corporation, he would leave the Reserve to work on the site of
the logging operations, and then return to the Reserve at the
end of the working day.
5. The Plaintiff was paid [on a piece work basis] for his work
and was paid [bi -weekly] by cheque at the head office of the
Corporation on the Gull Bay Reserve.
6. The Plaintiff earned in such employment, $11,057.08, and
his assessed taxable income for the 1975 taxation year was
$8,698.00.
The Letters Patent incorporating Gull Bay De
velopment Corporation, Revenue Canada Interpre
tation Bulletin IT-62, dated August 18, 1972 and
documents transmitted by the Minister of Nation
al Revenue pursuant to subsection 176(2) of the
Income Tax Act' are also of record. The only
other evidence is that of Stanley King, a councillor
of the Gull Bay Band, a registered Indian, member
of the Gull Bay Band, resident on the Gull Bay
Reserve, and a director of Gull Bay Development
Corporation (hereafter the "Corporation"). He
corroborated, by his circumstantial evidence, some
of the agreed facts as they pertain to the Corpora
tion and its modus operandi.
The plaintiff is a person entitled to invoke sec
tion 87 of the Indian Act. 2
87. Notwithstanding any other Act of the Parliament of
Canada or any Act of the legislature of a province, but subject
to subsection (2) and to section 83, the following property is
exempt from taxation, namely:
(a) the interest of an Indian or a band in reserve or surren
dered lands; and
(b) the personal property of an Indian or band situated on a
reserve;
and no Indian or band is subject to taxation in respect of the
ownership, occupation, possession or use of any property men
tioned in paragraph (a) or (b) or is otherwise subject to
taxation in respect of any such property; and no succession
duty, inheritance tax or estate duty is payable on the death of
any Indian in respect of any such property or the succession
thereto if the property passes to an Indian, nor shall any such
property be taken into account in determining the duty payable
under the Dominion Succession Duty Act, being chapter 89 of
the Revised Statutes of Canada, 1952, or the tax payable under
' S.C. 1970-71-72, c. 63.
2 R.S.C. 1970, c. I-6.
the Estate Tax Act, on or in respect of other property passing
to an Indian.
Section 83 of the Indian Act has no application.
Subsection 87(2) was repealed in 1960, 3 although
the reference to it in what was formerly subsection
(1) remains. Paragraph 81(1) (a) of the Income
Tax Act was not pleaded and, in my view, has no
application.
Wages, once received, lose the character of
wages and become simply a negotiable instrument
or money in their recipient's hands. Only up to the
point of receipt are they wages. Wages are a
contract debt, a chose in action, personal property
which, strictly speaking, has no situs; however,
where the law has found it necessary to attribute a
situs to a debt, that situs has been the debtor's
residence. The authorities pertinent to the forego
ing were recently considered by Thurlow A.C.J.,
and need not be recited here.'
It was not argued that the fact the services by
which the wages were earned were performed off
the Gull Bay Reserve is determinative of anything.
No reason has occurred to me why it should. The
Corporation had but one residence: the Gull Bay
Reserve. Wages payable by it to the plaintiff were
situated there.
The Income Tax Act does not, however, impose
a tax on property; it imposes a tax on persons. 5
The question is whether taxation of the plaintiff in
an amount determined by reference to his taxable
income is taxation "in respect of' those wages
when they are included in the computation of his
taxable income. I think that it is.
The tax payable by an individual under the
Income Tax Act is determined by application of
prescribed rates to his taxable income calculated in
the prescribed manner. If his taxable income is
increased by the inclusion of his wages in it, he will
pay more tax. The amount of the increase will be
3 S.C. 1960, c. 8.
° The Queen v. National Indian Brotherhood [1979] 1 F.C.
103.
5 Sura v. M.N.R. [ 1962] S.C.R. 65.
determined by direct reference to the amount of
those wages. I do not see that such a process and
result admits of any other conclusion than that the
individual is thereby taxed in respect of his wages.
The appeal against the Minister's assessment
will be allowed. This is a test case. It was agreed
that the plaintiff be entitled to his costs, to be
taxed as between solicitor and client, in any event.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.