Baptiste v. The Queen

Baptiste v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2011-06-09
Neutral citation
2011 TCC 295
File numbers
2007-2261(IT)I
Judges and Taxing Officers
Lucie Lamarre
Subjects
Income Tax Act
Decision Content
Docket: 2007-2261(IT)I
BETWEEN:
MICHELE BAPTISTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on January 31, 2011, at Toronto, Ontario.
Before: The Honourable Justice Lucie Lamarre
Appearances:
Counsel for the Appellant:
Scott Robertson
Counsel for the Respondent:
Justin Kutyan
____________________________________________________________________
JUDGMENT
The appeals from the assessments or reassessments made under the Income Tax Act for the 1995, 1998, 1999, 2000, 2001, 2002, 2003, 2004 and 2005 taxation years are dismissed without costs.
Signed at Ottawa, Canada, this 9th day of June 2011.
“Lucie Lamarre”
Lamarre J.
Citation: 2011 TCC 295
Date: 20110609
Docket: 2007-2261(IT)I
BETWEEN:
MICHELE BAPTISTE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre J.
[1] These are appeals from assessments or reassessments made by the Minister of National Revenue (Minister) under the Income Tax Act (ITA) for the appellant’s 1995, 1998, 1999, 2000, 2001, 2002, 2003, 2004 and 2005 taxation years.
Issue and preliminary remarks of the parties
[2] The issue is whether during those years the employment income received by the appellant was taxable pursuant to sections 2, 3 and 5 of the ITA, or whether it was exempt income pursuant to paragraph 81(1)(a) of the ITA. The appellant is of the view that her employment income should be considered as personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act (IA) and therefore should be exempt from taxation. The appellant relies principally on the Supreme Court of Canada’s decision in Nowegijick v. the Queen, [1983] 1 S.C.R. 29, to argue that the situs of her employment income was a reserve because the employer’s residence was on a reserve.
[3] The respondent on the other hand, argues that these appeals are related to over 1,000 other appeals before the Tax Court of Canada involving workers from the same placement agency, Native Leasing Services (NLS) or its sister company O.I. Employment Leasing Inc. (OI). The issue raised here has been considered by this Court, the Federal Court of Appeal and the Supreme Court of Canada and the law with respect thereto is well settled. In considering whether employment income is situated on a reserve, various connecting factors have to be taken into account, of which the location or residence of the employer is one. Among the others are the nature, location and surrounding circumstances of the work performed by the employee (including the nature of any benefit that accrued to the reserve from that work) and the residence of the employee. The respondent argues that it was held in Horn v. The Queen, 2008 FCA 352, and Rachel Shilling v. M.N.R., 2001 FCA 178, that the interposition of NLS as the employer does not significantly connect the employment income to a reserve in a manner relevant to section 87 of the IA. The respondent submits that the appellant carried out her income-earning activities in the “commercial mainstream”, and did not receive employment income that was situated on a reserve as contemplated by section 87 of the IA.
Facts admitted by consent through the production of the Statement of Agreed Facts (Exhibit A-3).
[4] The appellant was employed by NLS, a corporation owned and operated by Roger Obonsawin, who is a status Indian for the purposes of the IA. NLS’s head office is on the Six Nations of the Grand River Reserve (Six Nations) and is part of a group of companies all owned by Mr. Obonsawin (OI Group). Mr. Obonsawin is a member of the Odanak First Nation on the Odanak reserve, but he has never lived on that reserve. The OI Group provides consulting services and employment placement services to employers and employees in Canada’s Native communities. NLS was created in 1991 to lease employees, whether status or non-status, to Native organizations. The NLS concept of leasing employees is that they rent out an employee and provide all administration and human resources support services as the employer. The employees get their instructions and direction from the placement organization for which they work and to which they report. NLS is responsible for the payroll, and invoices the placement organization on the basis of employees’ time sheets approved by the on-site supervisor. As regards banking, the operating accounts of NLS were off-reserve up until 1996. Thereafter, it had some on-reserve bank accounts. The key functions of the employee-leasing operations were performed on the Six Nations Reserve by an administrative staff numbering from 8 to 15 people, depending on the year. All NLS files were kept at the Six Nations Reserve office. The rent paid to the Six Nations Band Council and the salary and benefits paid to on-reserve staff, which constituted the direct benefits to the reserve, were approximately $230,000 to $240,000 for the years 1995 and 1996. There were other direct benefits resulting from the training of personnel who lived on the reserve, but those benefits are difficult to quantify. The entire gross revenue of NLS is generated off-reserve. It is estimated that the OI Group had approximately 800 employees by 1997, 1,000 in 1999 and as many as 1,400 in the years between 1999 and 2006. The only functions carried out on-reserve were administrative functions. In 1995 and 1996 respectively, NLS had gross revenue of $15,692,945 and $13,344,801, all of which was derived from the work of NLS employees off-reserve. 95% of NLS’s costs were the wages and benefits paid to its employees who were contracted to off-reserve organizations. These costs of employees’ pay and benefits are funded by the clients in what is essentially a flow‑through whereby the employees’ pay and benefits are deposited by the client in NLS’s bank account to be drawn down (less the service fee) to fund NLS’s payroll for the employees leased to the client. Roger Obonsawin has no financial statements for NLS after 1997 although the business continues to operate.
Relevant legislative provisions
Income Tax Act
81. (1) Amounts not included in income – There shall not be included in computing the income of a taxpayer for a taxation year,
(a) Statutory exemptions [including Indians] – an amount that is declared to be exempt from income tax by any other enactment of Parliament, other than an amount received or receivable by an individual that is exempt by virtue of a provision contained in a tax convention or agreement with another country that has the force of law in Canada;
Indian Act
87. (1) Property exempt from taxation – Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83 and section 5 of the First Nations Fiscal and Statistical Management Act, the following property is exempt from taxation:
(a) the interest of an Indian or a band in reserve lands or surrendered lands; and
(b) the personal property of an Indian or a band situated on a reserve.
[Emphasis added.]
Facts
[5] Ms. Baptiste is a status Indian who is a member of the Pikwakanagan Algonquin First Nation in Golden Lake, Ontario. She was born in Toronto, and her parents moved back to the reserve for a while when she was young. She grew up "a little bit" on the reserve, but her father, an iron worker, had to move around a lot on account of his work. They lived in Ottawa, Toronto, Cleveland and Port Perry. She herself now lives in Toronto (Transcript, p. 13). She still has family living on the reserve and goes there at least twice a year. She votes in band council elections but has very little command of her Native language. She owns with her brother a piece of land on the reserve. She completed studies in marketing management at Centennial College in 1989.
[6] In 1993, the Canadian Council for Aboriginal Business gave her a referral for a position at Miziwe Biik, which is an organization providing training and employment services for the Greater Toronto Area’s Aboriginal community, helping urban Native people to secure employment and to benefit from federal and provincial training programs (see Fresh as Amended Notice of Appeal, par. 10). Ms. Baptiste applied for the position at Miziwe Biik, was interviewed and was offered a job directly by that organization (formerly known as the Greater Toronto Aboriginal Management Board). She was hired as a marketing officer and signed a contract of employment agreement with NLS on June 21, 1993. She was an employee of NLS but received direction from Miziwe Biik. Her salary was paid by NLS from its office located on the Six Nations of the Grand River Reserve (see the contract of employment agreement, Exhibit R‑1, Tab 2). Ms. Baptiste explained that NLS (referred to as OI) was administering the payroll and employee benefits for Miziwe Biik, and that all the employees (all Aboriginal) were “leased employees through the organization [NLS/OI]” (Transcript, pp. 17‑20). As a marketing officer, she helped First Nation clients to find jobs within the Greater Toronto Area. She was working with potential employers to develop training programs and collaborated with Native organizations from the surrounding area with respect to the placement of job candidates. The location of her work was in Toronto but she had a fair number of joint meetings away from the office with other organizations. Miziwe Biik’s clients were Aboriginal people, which include status and non-status Indians (see Transcript, p. 23).
[7] In March 1996, she was offered a position as Assistant Manager – Employment Equity in a pilot project at the Bank of Nova Scotia. Her mandate was to recruit primarily Aboriginal people, but also persons with disabilities, to work at branches of the Bank of Nova Scotia located in Toronto. The bank hired her on a one-year contract. On her own initiative, she approached the bank and asked to be employed through OI. This proposal was accepted and there was signed between OI and the bank on July 8, 1996, a placement agreement whereby OI was to be responsible for paying Ms. Baptiste’s salary, using the fees remitted to it by the bank (Exhibit R‑1, Tab 5, par. 1 to 4)). The same day, Ms. Baptiste signed a contract of employment agreement with OI (Exhibit R‑1, Tab 6). Ms. Baptiste explained that she filled out time sheets, which were then approved by her superior at the bank (examples of such time sheets were filed as Exhibit R‑1, Tab 57) and that she regularly faxed to OI, which then invoiced the bank (Transcript, p. 33). OI deposited her salary directly in her bank account located on the reserve. During her first year, she travelled around to various organizations (including some First Nations communities), universities and colleges to advertise the recruitment of Aboriginals by the bank in Toronto and to search for candidates (Transcript, pp. 29‑30).
[8] Her contract was extended year after year. In 1997, the bank had created a National Diversity Program to develop relationships with First Nation communities across the country. She started working in the Diversity division as National Manager - Aboriginal Employment. Her duties were to create an Aboriginal employee retention strategy for the bank and then to travel across Canada, with regional Diversity Managers, to First Nations communities to present that strategy. She would hold information sessions on careers at the bank. She also participated in various career fairs, especially those aimed specifically at Aboriginal students. She said in examination in chef that she travelled on an as-needed basis, probably a week and a half per month, mainly in northern Ontario, but also in the western provinces. Her work was done on-and off-reserve (Transcript, pp. 34‑39). In 1998, although still working on internal programs aimed at hiring Aboriginal employees, she started working closer with the bank’s Aboriginal Banking Unit on business opportunities for the bank with First Nations communities, opportunities such as providing banking services or commercial loans to Aboriginals. She was asked to participate, from a human resources perspective, in the discussion of the bank’s strategy for doing business with those communities (Transcript, pp. 39‑41 and p. 47). In her performance appraisal report for 1999, she said in her own comments that the feedback received from Aboriginal community members was that the bank was seen as investing in the overall well-being of Aboriginal people and looking at the long-term benefits. In that same report, the assessor’s comments were that Ms. Baptiste made a strong contribution by raising the profile of the bank in the Aboriginal community, that she created beneficial partnerships between that community and the bank, although she did not always have the full agreement of internal partners at the bank (see Exhibit R‑1, Tab 20, page 2, Key Accountability # 2). In her examination in chief, she said that the community referred to above included the on-and off-reserve First Nations community as well as the urban Aboriginal community (Transcript, p. 46).
[9] In 2000, she was transferred to a new service line – Shared Services-HR –created by the bank, and became the National Manager - Aboriginal Employment (Transcript, pp. 50‑54, and Exhibit R‑1, Tab 21). She worked on different Aboriginal initiatives programs sponsored by the bank for students (such as career options symposia, mentoring, junior achievement, and a scholarship program) and also on supporting Aboriginal cultural activities such as elders’ gatherings. This entailed more travelling in the field. In addition the bank was approached with respect to financing on-reserve casinos in Alberta, one of the reasons for this being the fact that its largest First Nation customer was the casino located on the Rama First Nation, where the bank had a branch (Transcript, p. 57, and Performance Appraisal Report for 2001, Exhibit R‑1, Tab 22, Key Accountability # 2). Ms. Baptiste also mentioned that she played the lead role in 2003 in securing over $82 million of business for the bank with the Siksika First Nation in Alberta. She stated that because of her relationship with key people on the Siksika reserve, the bank was asked to make a presentation with respect to obtaining the land claim settlement trust account (see the Measurements of Success Report for Ms. Baptiste for 2003, Exhibit R‑1, Tab 23, Objective/Accountability # 3). In cross‑examination, she explained that her role was to assist the bank in preparing for the bid and that she would travel out to the communities to give the First Nations an overall view of how the bank operated within First Nations communities (Transcript, pp. 109‑110). As a general finding in her appraisal reports, Ms. Baptiste was considered by her superior as playing an important role in bridging some of the cultural gaps and in lending credibility to the bank’s message that it was committed to the objective of building strong relationships with Aboriginal communities (see Measurements of Success Report for Ms. Baptiste for 2004 and 2005, Exhibit R‑1, Tabs 24 and 25).
[10] In 2005, the bank created a designated budget for Ms. Baptiste’s travel, so that she could travel without submitting a prior request to the bank. Before 2005, she had needed approval from Human Resources (Transcript, pp. 64‑66). Over the years that she was with the bank, she stated, she visited approximately 40‑45 reserves, as per Exhibit A‑2, a document created for the purposes of the trial from her own recollection. She was let go by the bank in 2009 (Exhibit R-1, Tabs 54-55).
[11] In cross-examination, Ms. Baptiste acknowledged that the postings for internship opportunities at the bank were distributed in universities and different organizations located in urban areas (Exhibit R‑1, Tab 30). With respect to travel to reserves, she did not keep any record (Transcript, p. 77). She said that in number of cases, she travelled with other people to visit communities and did not claim mileage expenses. She acknowledged that her business-related travel expenses were debited to her bank’s commercial credit card (Transcript, p. 79). In her Fresh as Amended Notice of Appeal, at paragraph 16, she stated that she visited reserves 70 per cent of the time. However, from the commercial card monthly statements filed as Exhibit R‑1, Tabs 26 to 29, it can be seen that she was staying in hotels in urban areas and that she did not travel away from Toronto more than one week per month (Transcript, p. 96). In her report on “frequent activities/meetings” in the Aboriginal community found in Exhibit R‑1, Tab 21, most of the activities listed were held in Toronto and very few on reserves (Transcript, pp. 99‑102). In re-examination, she mentioned that the records filed before this Court were not a complete record of expense reports (Transcript, p. 104). She also said that mileage claims did not appear on the commercial card statements because she did not use the card for that purpose (Transcript, pp. 105‑106).
[12] Ms. Gertrude Saulnier, Director of Human Resources at the Bank of Nova Scotia, testified. She said that up to 2001, Ms. Baptiste reported to Diversity Managers who in turn reported to her. They worked together on initiatives specific to the Aboriginal community or on diversity in general. The bank worked on employment equity with a view to diversifying its workforce and thereby ultimately benefiting its business. In Ms. Saulnier’s own terms, “it wasn’t just about people; it was about the business as well” (Transcript, p. 117). In 2001, Ms. Baptiste’s role was split into different components. She worked on retention of Aboriginal employees and on programs sponsored by the bank for Aboriginal people. She was also involved as a consultant for the business partners at the bank, helping them understand the Aboriginal community in general (Transcript, pp. 118‑119). Starting in 2001, Ms. Baptiste reported directly to Ms. Saulnier. Ms. Saulnier recommended any salary increase or any incentive pay, which was determined on the basis of her performance rating. Once the pay amount was determined, Ms. Saulnier would advise OI to invoice the bank (see as an example Exhibit R‑1, Tabs 43 and 44 and Transcript, p. 120). OI did not have any input into determining Ms. Baptiste’s salary. Ms. Saulnier estimated from looking at all the parking charges incurred by Ms. Baptiste in Toronto, that Ms. Baptiste spent 40 per cent of her time in her office in Toronto (Transcript, pp. 122 and 127). According to Ms. Saulnier, there were no business records for travel other than the commercial credit card statements (Transcript, p. 129). The bank paid all travel expenses. OI did not pay such expenses. Ms. Baptiste’s mandate was to develop Aboriginal relationships and to recognize business opportunities for the bank (Transcript, pp. 122-123). She would accompany bankers onto reserves to introduce them, but it was not her mandate to go onto reserves to get business (Transcript, p. 123). For example, she was not the one who negotiated the $82 million worth of business with the Siksita First Nation in Alberta. Ms. Baptiste was the expert on the bank’s commitment to the Aboriginal community, but not on the trust business deal. The bankers themselves did the negotiating. The work done by Ms. Baptiste on that project was mostly over the phone. She went out to the reserve for that project maybe two or three times in the course of the year (Transcript, pp. 132‑133).
Appellant’s arguments
[13] The appellant argued that the intention of Parliament in implementing section 87 of the IA was to protect Indians from the erosion of their property on a reserve and that a liberal interpretive approach applies to any statute relating to Indians (reference was made to Mitchell v. Peguis Indian Band, [1990] 2 S.C.R. 85 (QL) at paragraphs 15 and 87). Acknowledging that a connecting factors approach has been adopted by the courts to determine the location of employment income for tax purposes, the appellant, submitted, however, that this approach is a very fact‑specific exercise (reference was made to Horn v. The Queen., 2008 FCA 352, at paragraph 8). In her view, the facts of her case are unique and distinguishable from those in the cases relied on by the respondent. She argued that she has demonstrated that she was working on reserves for status Indians.
[14] With respect to the connecting factors, the appellant stated that the residence of the debtor is an important factor, and could even be the exclusive one. Relying on Williams v. Canada, [1992] 1 S.C.R. 877 (QL), at paragraph 18, the appellant argued that the guiding principle is that a status Indian should be able to exercise a choice to situate his or her property within or outside the protection of the IA. In her case, she deliberately made the choice to situate her employment income on a reserve as she chose to work for OI or NLS, those employers being located on a reserve. The respondent has admitted that Ms. Baptiste’s employer was OI or NLS and that can no longer be challenged in any way (Transcript, pp. 149-150, 153-154).
[15] With respect to the other connecting factors, the appellant submitted that her employer conferred significant benefits on the First Nations community generally. It is not disputed by the respondent that the NLS and OI group of companies employ approximately 8 to 15 Six Nations band members at any given time to administrate the employee leasing operations from the reserve (Transcript, p. 161, and Statement of Agreed Facts, Exhibit A-3, paragraph 6). According to the most recent statistics, the salaries and benefits for the office staff located on the Six Nations Reserve totalled almost $250,000. The OI and NLS group of companies also leased their premises from the Six Nations Band Council, and contributed significant indirect benefits to First Nations communities generally. One of the NLS and OI group of companies’ goals was to assist in the development of a self‑supporting network of client organizations and potential Aboriginal employees in Canada. This approach allowed the improvement of skills in Aboriginal organizations through the provision of training, governance and skills development services, and Ms. Baptiste was working in precisely that field (Transcript, pp. 161-163).
[16] With respect to the location and surrounding circumstances of the work performed, Ms. Baptiste’s duties were directly tied to the recruitment of Aboriginal people and helping them acquire management skills and access to equity and loan financing, which is one concern expressed in the Report of the Royal Commission on Aboriginal Peoples (Transcript, pp. 163-167, and Exhibit A-1). In her view, there is little doubt that her work contributed to the Aboriginal community in Canada, both on-and off-reserve (reference was made by counsel to Canada v. Folster, [1997] 3 F.C. 269, where the Federal Court of Appeal suggested that it is the benefit to the community from the duties performed which should be considered and not the strict location of their performance, see Transcript, p. 169). Even if Ms. Baptiste was not working directly on a reserve, she was working on the development of a relationship to benefit First Nations (Transcript, p. 169). In her view, the fact that the work was done off-reserve did not in itself disqualify her income from attracting the protection of section 87 of the IA.
[17] The appellant also referred to the decision of this Court in Robertson v. The Queen, 2010 TCC 552 (under appeal to the Federal Court of Appeal), in which Hershfield J. expressed his thoughts on the concept of the “commercial mainstream” in determining whether property is situated on a reserve. He wrote as follows at paragraphs 117 et seq.:
iii) the commercial mainstream
117 As a preliminary comment, I share the discomfort expressed by counsel for the Appellants and for the Crown that all businesses run by aboriginal people should be found to be outside Canada's "commercial mainstream" simply because of some attachments to a reserve. On the other hand, in seeking clarification of the proper interpretation of this term, I am guided by the words of Linden, J.A. in Recalma v. R. where he confirmed that the section 87 analysis should not overemphasize the "commercial mainstream" test. At paragraph 9 he noted:
... We should indicate that the concept of "commercial mainstream" is not a test for determining whether property is situated on a reserve; it is merely an aid to be used in evaluating the various factors being considered. It is by no means determinative. The primary reasoning exercise is to decide, looking at all the connecting factors and keeping in mind the purpose of the section, where the property is situated, that is, whether the income earned was "integral to the life of the Reserve", whether it was "intimately connected" to that life, and whether it should be protected to prevent the erosion of the property held by Natives qua Natives.
118 In another part of the judgment he expressed the same view slightly differently:
9 ... It is also important in assessing the different factors to consider whether the activity generating the income was "intimately connected to" the Reserve, that is, an "integral part" of Reserve life, or whether it was more appropriate to consider it a part of "commercial mainstream" activity.
[Emphasis added.]
119 The first passage looks at the connection of the activity to the life on the reserve as if that could prevail as a governing factor even if the activity is in the commercial mainstream. The second passage introduces an "or" which suggests that an activity cannot be both an integral part of life on the reserve and be in the commercial mainstream. I cannot accept that these two aspects were meant to be mutually exclusive in all cases. The test is to find whether the activity being part of the commercial mainstream is the dominant aspect of its being undertaken with its contribution to community life being incidental or contrived. Viewing the test in this way permits the historical significance of the activity to life on the reserve to weigh-in as a relevant factor in helping to assess the dominant aspect of the activity.
[18] The appellant is of the view that there is evidence that her work was integral to the Indian community. She gave as an example the $82 million land grant trust on which she worked for the bank. In her view, it helped the First Nation concerned develop and grow its economy, as recommended in the Report of the Royal Commission on Aboriginal Peoples (Transcript, pp. 176-177).
[19] Finally, the appellant submitted that her work greatly benefited Aboriginal communities, specifically in providing financing and business acumen and by charitable contributions that were provided to First Nations through different organizations.
[20] In summary, Ms. Baptiste is of the view that steps taken by her through her work to maintain and foster the connection with reserve communities, coupled with the fact that her employer was located on a reserve and the fact that she travelled to reserves for her work, are important factors that should weigh in favour of exempting her employment income from taxation.
Respondent’s arguments
[21] The respondent is of the view that taxing Ms. Baptiste’s employment income does not erode the property of those living on a reserve. In Monias v. The Queen, 2001 FCA 239, Evans J.A. stated:
22 However, before I turn to the application of the connecting factors test, I would make three preliminary observations. First, as La Forest J. said in Mitchell v. Sandy Bay Indian Band, [1990] 2 S.C.R. 85 (S.C.C.), at 131, the policy underlying section 87 is not to redress generally the economic disadvantages suffered by Indians "by ensuring that Indians may acquire, hold and deal with property in the commercial mainstream on different terms than their fellow citizens."
23 Rather, like the companion provision in section 89, the more limited and specific purpose of section 87 is to protect reserve lands, and Indians' personal property on a reserve, from erosion, so that the Bands are able to sustain themselves on the reserves as economic and social units. Hence, it is fully consistent with legislative policy to apply section 87 to income that is earned by Indians who reside on a reserve from work that is performed on a reserve.
. . .
66 That the work from which employment income is earned benefits Indians on reserves, and indeed may be integral to maintaining the reserves as viable social units, is not in itself sufficient to situate the employment income there. It is not the policy of paragraph 87(1)(b) to provide a tax subsidy for services provided to and for the benefit of reserves. Rather, it is to protect from erosion by taxation the property of individual Indians that they acquire, hold and use on a reserve, although in the case of an intangible, such as employment income, it is the situs of its acquisition that is particularly important.
67 By enacting paragraph 87(1)(b) Parliament made an important exception to the principle that those similarly situated should be treated in the same way for tax purposes. However, the paragraph cannot be read as exempting from income tax Indians' employment income that was not clearly earned in circumstances that link its acquisition to a reserve as an economic base.
[22] The respondent submitted that Ms. Baptiste’s case does not depart significantly from that of the appellant in Rachel Shilling, supra. In that case, Rachel Shilling was placed in a non-profit organization in Toronto to help other Aboriginal people in the Greater Toronto Area. In 1995 and 1996, Ms. Baptiste worked at Miziwe Biik, an organization that assisted Aboriginal people in the Greater Toronto Area in finding work and improving their skills, and that assisted them in general. The respondent referred to the Miziwe Biik 2003/2004 annual report (Exhibit R-2). With respect to that organization’s vision, it is stated that Aboriginal people in Toronto face many barriers when attempting to join the workforce and that the organization is committed to breaking down those barriers by providing Native people with access to training programs and employment services, and by entering into partnerships within the Aboriginal community and non-Aboriginal community. Its mission is to assist all persons of Aboriginal ancestry in the Greater Toronto Area to attain a better quality of life (Exhibit R-2, Tab 1, page 1). Miziwe Biik has its office in downtown Toronto and the people working for that organization work in Toronto.
[23] Subsequently, and for the majority of the years at issue, Ms. Baptiste worked for a commercial, for-profit bank. Her superior testified that when Ms. Baptiste worked for the bank she spent approximately 40 per cent of her time at the office in Toronto. The fact that Ms. Baptiste was travelling outside the office and visiting reserves is not in itself determinative of the situs of the income (reference was made to Monias, supra, at par. 37, and Akiwenzie v. The Queen, 2003 FCA 469, at par. 3). Finally, with respect to the necessity argument made by the appellant regarding the $82 million land claim settlement trust account, namely, that Ms. Baptiste could not work from the reserve the entire time, the respondent referred to the decision of the Federal Court of Appeal in Desnomie v. Canada, [2000] F.C.J. No. 528 (QL). In that case Rothstein J.A., as he then was, said the following:
(2) The location of the employer, the employee and the employment is dictated by factors beyond the control of the employer or employee.
15 The appellant says that the off-reserve location of the employer should be given little weight in the connecting factors analysis. All directors of the MIEA reside on reserves. All are members of Indian bands. Meetings of the board are held in Winnipeg out of necessity. A related argument is that the place where the appellant works and where the services are performed -- off-reserve -- also should not be given significant weight. Education opportunities beyond grades 9 or 10 are not available on reserves. Students must leave the reserve and move to Winnipeg to pursue their education. The services provided by the appellant in these circumstances are provided in Winnipeg because there is no realistic way for them to be provided on a reserve. Therefore, the employer, the employee and the employment are intensively connected to various Indian reserves in Manitoba.
16 In Union of New Brunswick Indians v. New Brunswick (Minister of Finance), a similar argument was made in respect of sales tax paid by New Brunswick Indians on purchases of goods made off-reserve to be used on the reserve. It was said that the Indians were obligated to make such purchases off the reserve and therefore the protection afforded by section 87 was eroded. McLachlin J. (as she then was), for the majority, rejected this argument. After noting that in the event of ambiguity, an interpretation that most favours the Indians is to be preferred (paragraph 6), she stated at paragraphs 37 and 38:
37. The respondents argue that s. 87 is intended to protect Indians from taxation in respect of their use of property on-reserve. Where Indians are obliged to purchase most of their goods off reserve, as most are in New Brunswick, this protection is eroded. Therefore, they submit that s. 87 should be read as applying to sales tax levied off reserve on goods purchased by Indians for use on the reserve. This was the view of the majority of the New Brunswick Court of Appeal.
38. The first difficulty with this argument is that it takes the purpose of s. 87 far beyond that articulated by this Court in Williams -- to prevent Indian property on Indian reserves from being eroded by taxation or claimed by creditors. No support has been offered for the proposed extension, except this would economically benefit Indians. But that, this Court has stated, is not the purpose of s. 87: see Mitchell and Williams. La Forest J. in Mitchell (at p. 133), specifically cautioned against attributing an expansive scope to the s. 87 exemption:
...one must guard against describing an overly broad purpose to ss. 87 and 89. These provisions are not intended to confer privileges on Indians in respect of any property that they may acquire and possess, wherever situated. Rather, their purpose is simply to insulate the property interest of Indians in their reserve lands from the intrusion and interference of the larger society so as to ensure that Indians are not dispossessed of their entitlements.
17 The necessity argument in New Brunswick Indians is, if anything, more compelling than in the appeal at bar. There, the goods being purchased, of necessity off the reserve, were for use on the reserve. Nonetheless, the argument failed as taking the purpose of section 87 far beyond what was articulated in Williams -- to protect Indian property on Indian reserves from being eroded by taxation.
18 In this case what is at issue is the appellant's employment income. The appellant is a member of the Peepeekisis Band, located twenty miles east of Fort Qu'Appelle in Saskatchewan. In 1989, he had lived off his reserve, in Winnipeg, for nine or ten years. As the learned Tax Court Judge stressed, it is the appellant's personal property that has to be "situated on a reserve ...". There is no connection here between the appellant's employment income and the Peepeekisis Reserve in Saskatchewan.
19 The necessity argument is based on the connection between the MIEA and the services performed by the appellant on the one hand, and students from various reserves in Manitoba on the other. It explains why it makes sense for the MIEA and the appellant to be located in Winnipeg, even as they are providing services to Indian students from reserves.
20 However, the object of the connecting factors test is to determine the situs of intangible property for purposes of section 87, having regard to whether the Indian holds the property as part of an entitlement of an Indian qua Indian on the reserve. In Union of New Brunswick Indians McLachlin J. reaffirmed this purpose at paragraph 8:
The purpose of the s. 87 exemption was to "preserve the entitlements of Indians to the reserve lands and to ensure that the use of their property on the reserve lands was not eroded by the ability of governments to tax, or creditors to seize". It "was not to confer a general economic benefit upon the Indians": see Williams, supra, at p. 885.
Having regard to intangible property she continued at paragraph 12:
Again, in Williams, supra, the Court, per Gonthier J. confirmed the approach in Mitchell in determining whether the situs of unemployment insurance benefits was on or off the reserve for the purposes of taxation. As the benefits, intangible personal property, were effectively on the reserve at the time of taxation, they were exempt from taxation pursuant to s. 87.
21 The necessity argument in effect says that the employer, employee and place of employment would be on a reserve if that were possible and therefore the employment income should be treated as if it were located on a reserve. The difficulty with this argument is that in the circumstances of this case, it does not deal with the issue at hand, namely, whether the appellant's employment income is his property on a reserve. This is a locational, or situs determination, based upon the location of the relevant transactions. The implication of the appellant's argument is that as long as an Indian is performing work for an Indian employer and for Indians from reserves, his employment income should be tax exempt, irrespective of where he, his employer, or the place of the employment is located, or where he is paid. There is no doubt the nature of the appellant's work is related to assisting reserve Indians when they move off the reserve. There is also no doubt that his employer is an Indian organization. The problem is that these considerations do not connect the appellant's employment income to any particular reserve. Even if it could be argued that the section 87 exemption applies when the property of an Indian is located on a reserve other than his own, in this case the nature of the employer and the employment alone do not identify a specific reserve to which the appellant's property can be connected. Therefore, these considerations do not help to locate his employment income.
22 To accept the necessity argument as justifying a section 87 exemption from tax on the appellant's employment income would, as found by McLachlin J. in Union of New Brunswick Indians, extend the purpose of section 87 far beyond that articulated in Williams. While not having to pay income tax would undoubtedly benefit the appellant, that is not the purpose of section 87. In the circumstances of this case, the necessity argument does not assist the appellant.
[24] The respondent is of the view that Ms. Baptiste’s work was more beneficial to the bank than to the Aboriginal community. An example of this is the $82 million worth of deposits in 2003. The present case invloves a commercial bank doing commercial business on a reserve. There is no immediate and discernable nexus between Ms. Baptiste’s work and the occupancy of reserve land. In summary, the location of the work, the nature of the work and the circumstances surrounding it point towards an off-reserve source of the income.
[25] With respect to the benefits to reserves and the location of the employer, the case law with respect to the same employer has already determined the issue in a way which is not favourable to the