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On December 5, 2011, the Federal Court of Appeal released its
decision in John Fluevog v. The Queen (
2011 FCA 338). In a unanimous judgment, Justices Nadon,
Sharlow, and Mainville allowed the Crown's appeal, reversing an
interlocutory decision of Justice Margeson of the Tax
Court of Canada (
2010 TCC 617). In that decision, the Tax Court
had permitted the taxpayer, Mr. Fluevog, to amend his Notice of
Appeal to add a claim of discrimination under section 15 of
the Canadian Charter of Rights and Freedoms.
Mr. Fluevog made payments to Swim Canada, an organization that
is a "registered Canadian amateur athletic association",
as that term is defined in section 248(1) of the Income Tax
Act (the "ITA"). He claimed a tax credit in
respect of these payments under section 118.1 of the ITA as an
eligible gift. The credit was denied by the Minister of
National Revenue (the "Minister"), on the basis that Mr.
Fluevog had received consideration in the form of swimming lessons
for his children. As such, the payment was not a gift at
law.
The proposed Charter claim arose from an
administrative position of the Canada Revenue Agency
("CRA") that permits a tax credit for payments to
religious schools that solely provide religious instruction.
This position is described in Information Circular IC 75-23
, which states that "it has been the Agency's practice
not to view religious instruction provided at parochial schools as
consideration". Mr. Fluevog sought to argue that this
administrative position was discriminatory on religious grounds and
prohibited under section 15 of the Charter. He took
the position that the administrative policy should therefore be
extended to the receipt of non-religious consideration such as
swimming lessons.
The arguments at the Tax Court of Canada on the motion to amend
the pleadings focused primarily on the question of whether the
policy discriminated against Mr. Fluevog, such that the proposed
amendments may disclose a cause of action. As noted
above, Justice Margeson ruled in favour of the taxpayer, holding
that the amendment presented "at least an arguable
case".
Writing for the panel, Justice Nadon stated that the decision to
grant or deny an amendment to pleadings is discretionary
and is entitled to deference, barring an error in law or an
improper use of discretion. In this case, however, the
decision at the Tax Court of Canada was based on an error of
law. In a brief paragraph, the Federal Court of Appeal
concluded:
It is not open to the Minister to determine that a payment
that is not a gift as a matter of law will nevertheless be treated
as a gift for income tax purposes. If that is what the Minister has
done by adopting the impugned assessing policy (and I express no
opinion on that point), then the policy is wrong in law and cannot
stand. But that is of no assistance to Mr. Fluevog. The remedy for
adopting a policy that is wrong in law is to reject the policy, not
extend it to everyone who pays for swimming lessons for their
children.
As a result, Mr. Fluevog's motion to amend his pleadings was
dismissed. There has been no word on whether Mr. Fluevog
will seek leave to appeal the decision to the Supreme Court of
Canada.
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