PSAC, Murphy v. CRA

PSAC, Murphy v. CRA
Collection
Canadian Human Rights Tribunal
Date
2010-04-23
Neutral citation
2010 CHRT 9
File number(s)
T1288/1808
Decision-maker(s)
Hadjis, Athanasios
Decision type
Decision
Decision Content
CANADIAN HUMAN RIGHTS TRIBUNAL TRIBUNAL CANADIEN DES DROITS DE LA PERSONNE
PUBLIC SERVICE ALLIANCE OF CANADA
AND CATHY MURPHY
Complainants
- and -
CANADIAN HUMAN RIGHTS COMMISSION
Commission
- and -
CANADA REVENUE AGENCY
Respondent
DECISION
20010 CHRT 9 2010/04/23
MEMBER: Athanasios D. Hadjis
I. The CRA's Organizational History
II. The Pay Equity Cases
III. When and how were the income tax provisions at issue in this case adopted?
IV. How was the QRLSP mechanism to function?
V. How has the CRA administered the QRLSP?
VI. What was the effect of the QRLSP calculation on Ms. Murphy's tax treatment?
VII. Analysis
A. Does the alleged discriminatory practice regarding the QRLSP mechanism arise from the provision of services within the meaning of s. 5?
B. Can the CRA's administration of the QRLSP mechanism be considered to have been made in the course of employment within the meaning of s. 7(b)?
C. Does the evidence demonstrate that the CRA differentiated adversely in relation to Ms. Murphy and the other recipients of pay equity lump-sum payments on the basis of sex?
D. What is the CRA's evidence in response to the Complainant's expert evidence?
E. Is this complaint an effort to avoid the normal and anticipated consequences of the settlement?
F. The basic premise for the complaint
VIII. Conclusion
Schedule 1
[1] The complainant Cathy Murphy was a federal public servant from 1981 to 1994. The other complainant, the Public Service Alliance of Canada (PSAC), was her union. In 2000, Ms. Murphy, along with many other federal public servants who were employed in predominantly female occupational groups, received payments from the Treasury Board of Canada in settlement of two wage discrimination complaints that the PSAC had filed pursuant to s. 11 of the Canadian Human Rights Act, R.S.C., 1985, c. H-6 (CHRA).
[2] The payments (commonly referred to as pay equity payments) included retroactive compensation regarding the employees' wages from 1985 onwards. These lump-sum payments were deemed for income tax purposes to be employment income in the year 2000 even though they related to employment that had occurred years earlier. Ms. Murphy was taxed at a higher marginal rate in 2000 than in previous years, so she claims that she effectively received less money than she would have received had the payments actually been made in each of those years.
[3] The Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.) (ITA) contains a series of provisions offering some tax relief to individuals receiving lump sum payments relating to income earned in previous years. The Respondent, the Canada Revenue Agency (CRA), administers Canada's tax laws, including this relief mechanism. The Complainants allege that the manner in which the CRA has interpreted, applied, and administered this system has, in the vast majority of cases, prevented recipients of retroactive income payments relating to pay equity, like Ms. Murphy, from benefitting from the tax relief.
[4] The Complainants contend that the CRA thereby breached s. 5 of the CHRA by discriminating against Ms. Murphy and the other pay equity recipients on the basis of sex, in the provision of services customarily available to the general public. The Complainants claim that the CRA also adversely differentiated on the basis of sex, in relation to Ms. Murphy and other pay equity recipients, in the course of employment, which would constitute a violation of s 7(b) of the CHRA. For the reasons given in the following decision, I find that the complaint has not been substantiated.
I. The Cra's Organizational History [5] The responsibility for the administration of Canada's tax system has changed over the years. The Department of National Revenue (Revenue Canada) was created in 1927 and was given the responsibility to administer Canada's laws regarding taxation as well as customs and excise.
[6] On November 1, 1999, the Canada Customs and Revenue Agency Act, S.C. 1999, c. 17, came into force (SI/99-111), transforming the department's status to that of an independent agency responsible for national revenue, called the Canada Customs and Revenue Agency (CCRA). In December 2005, the CCRA's name was changed to the Canada Revenue Agency and the newly-created Canada Border Services Agency assumed responsibility for Canada's customs operations. Throughout this decision, I will usually be referring to the Respondent as the CRA, even when discussing events arising prior to the more recent name change.
II. The Pay Equity Cases [7] During most of her career with the federal public service, Ms. Murphy was employed at Revenue Canada. She occupied positions that were principally classified in the CR (clerical and regulatory) occupational group. The PSAC was the union for the CR group of employees. In 1984 and 1990, the PSAC, acting on behalf of federal public service employees in six occupational groups, filed complaints under s. 11 of the CHRA against the Treasury Board of Canada (the Section 11 Complaints). The complaints alleged that the employees of these six occupational groups were predominantly female and that they earned lower wages than those earned by public servants employed in predominantly male occupational groups who performed work of equal value.
[8] The Canadian Human Rights Commission (Commission) referred the Section 11 Complaints to the Canadian Human Rights Tribunal (Tribunal) in October 1990 and hearings commenced one year later. By July 1998, the parties to the Section 11 Complaints were aware that the Tribunal was about to release its decision. PSAC members had begun expressing concerns to the union regarding the tax implications of the Tribunal's decision. One of these concerns was in relation to whether a lump-sum compensation payment would put recipients into a higher tax bracket in the year that it was paid. In anticipation of this possibility, representatives of the PSAC, including PSAC Classification and Equal Pay Officer Margaret Jaekl, met with Revenue Canada representatives to ask a number of questions, including what the tax treatment of pay equity adjustments would be.
[9] Revenue Canada advised the PSAC that under s. 5(1) of the ITA, any lump-sum wage payment must be fully included in the income for the year in which it is received. No legislation existed that would enable a retroactive employment income payment to be taxed for the years to which it relates or to be taxed at a special rate.
[10] On July 29, 1998, the Tribunal found the Section 11 Complaints to be substantiated and established a methodology for calculating the wage gap between the female and male dominated occupational groups that was the source of the discrimination (Public Service Alliance of Canada v. Canada (Treasury Board) (1998), 32 C.H.R.R. D/349). The Tribunal ordered the Treasury Board to make retroactive wage adjustment payments to the affected federal public service employees from 1985 to the date of the decision. The Tribunal also ordered the Treasury Board to pay simple interest calculated semi-annually at the Canada Savings Bond rate on the wage adjustments.
[11] The Attorney General of Canada filed an application for judicial review of the Tribunal Decision in the Federal Court, but the Court upheld the Tribunal's decision on October 19, 1999 (Canada (Attorney General) v. Public Service Alliance of Canada [2000] 1 F.C. 146 (T.D.)).
[12] Within a matter of days following the Court judgment, representatives of the PSAC and the Treasury Board Secretariat commenced talks in the hope of coming to an agreement on all outstanding issues, including the determination of the actual wage adjustment amounts. The Tribunal had not directly addressed this matter in its 1998 decision, having deferred it to a subsequent hearing phase known as Phase III. According to Ms. Jaekl, who sat in on most of these discussions, the Treasury Board Secretary attended the first day's meeting and laid out [the Treasury Board]'s terms of how the negotiations would operate. The PSAC representatives were told that if these terms were not agreed to, the Treasury Board would end talks and proceed with an appeal of the Federal Court decision. These terms included a requirement that any agreement would have to be reached by noon of the third day (a Wednesday). In addition, the parties' lawyers were not to participate in the settlement discussions.
[13] Ms. Jaekl testified that although she was not present during every discussion between officials, to her knowledge, the PSAC did not raise tax implications during the meetings. She explained that the union was focussed on trying to reach an agreement on the implementation of the Tribunal's decision, which alone raised so many issues, that there was insufficient time to consider matters that did not comprise part of the decision.
[14] The negotiations were successful and a memorandum of agreement was drafted and signed on October 29, 1999. Article 13 of the document was entitled Settlement and stated that the parties agree that the terms of this agreement settle all Phase II and Phase III issues relating to the complaints. As I explained earlier, Phase III relates to the determination of the wage adjustment.
[15] On November 16, 1999, counsel for the PSAC, the Commission and the Treasury Board presented the settlement agreement to the Tribunal. The Tribunal members asked questions and sought clarification of certain parts of the agreement, following which the Tribunal approved the agreement and issued a consent order (Consent Order).
[16] In 2000, those federal government departments responsible for the current and former public service employees subject to the Consent Order made the requisite adjustment and interest payments. Cheques were issued in three or four instalments between April and November 2000.
III. When and how were the income tax provisions at issue in this case adopted? [17] On February 16, 1999, the federal Minister of Finance announced that as part of the next federal budget, the ITA would be amended to introduce a new approach to computing tax on certain retroactive lump sum payments. This budgetary proposal was described in the Budget Plan, a document prepared by the Finance Department that the Minister tabled in Parliament. Under Canada's progressive income tax system, tax rates increase as taxable income increases. The Budget Plan observed that due to this progressivity, an individual's tax liability on retroactive lump-sum payments was usually higher than it would have been if payments had been made, and taxed, year by year as the income arose. This higher tax liability represented increased revenue for the government.
[18] As a means of ensuring that the government would not unduly benefit from the progressivity of the personal tax system, the budget proposed the implementation of the Qualifying Retroactive Lump-Sum Payment (QRLSP) mechanism. A qualifying retroactive lump-sum payment would be considered to be the principal (i.e., non-interest) portion of a payment received in a given year, but which related to a preceding year. The mechanism would only apply with respect to lump-sum payments of $3,000 or more, derived from a number of specified sources including income from employment or income received due to a termination of employment, received under the terms of a court judgment, arbitration award or in settlement of a lawsuit. The lump-sum payments received by Ms. Murphy pursuant to the settlement of the Section 11 Complaints and subsequent Consent Order related to her employment and exceeded $3,000. They were thus qualified, for the purposes of the QRLSP mechanism.
[19] Donald Wilson was a policy advisor with the Department of Finance during the period when the QRLSP measure was developed. He testified that the general principle set out in s. 5(1) of the ITA, that income is taxable in the year in which it is received, had always been a source of concern for many taxpayers, particularly those who had uneven income streams, such as artists. These individuals were frequently petitioning for relief in their tax treatment.
[20] However, in the period leading up to the QRLSP measure's announcement in the budget, the Finance Department had been in receipt of numerous requests for relief from members of two specific employee groups. The first was comprised of 25,000 Ontario teachers who were receiving retirement benefits that should have been paid to them in prior years. The second group consisted of longshoremen based in Quebec who had been awarded retroactive salary payments by a court order. Mr. Wilson acknowledged that the Finance Department was also aware at the time that the pay equity settlement and that the lump sum payments pursuant thereto were in the works. He emphasized, however, that the QRLSP was not tailored to benefit any particular group but was merely designed after having looked at the specifics of the different cases that had been brought to the department's attention.
IV. How WAS the QRLSP mechanism TO FUNCTION? [21] As proposed in the budget, the mechanism provided for a special notional tax calculation to be made by allocating the qualifying lump-sums retroactively to the years to which they relate and calculating the notional additional tax for those years. However, the notional tax was not just comprised of the tax that would have been payable in those years. It was also to include an interest amount to reflect the delay in payment of tax on the retroactive lump-sum payment. The Budget Plan had noted that governments incurred financing costs when they received tax revenues later than if the payment had been made earlier, when due.
[22] This interest component of the notional tax was to be calculated using the prescribed interest rates for tax refunds, i.e. the interest rate paid by the Minister when refunding tax to a taxpayer. Since October 1, 1989, the prescribed rate for refunds under the ITA has been calculated as the 90-day Treasury Bill rate plus two percent (Income Tax Regulations, C.R.C., c. 945, s. 4301). Since January 1, 1987, interest has been computed on a daily compounded basis (ss. 164 and 248(11) of the ITA).
[23] On September 10, 1999, the draft legislation amending the ITA that included the provisions relating to the QRLSP was tabled (Bill C-25). The provisions came into force on June 29, 2000 (ss. 110.2 and 120.31, the full texts of which I have attached to the present decision as Schedule 1). The provisions as enacted had no material differences from the proposals in the 1999 budget. The CRA had identified one obvious drafting error in how the calculation would be performed that was clearly inconsistent with the budget proposal. The CRA brought the error to the attention of the Finance Department, which in turn confirmed that the CRA's observation was correct. The CRA has consequently applied the provisions in the corrected fashion, although Parliament has yet to amend the provision to rectify the error.
[24] Ms. Jaekl testified that when the budget was first presented in Parliament in February 1999, she became aware of the proposed QRLSP mechanism, but did not learn about or inquire into any of its details. She knew from experience that merely because a proposal is announced in Parliament does not necessarily mean it will ultimately be passed into law. She understood, however, that if the mechanism was implemented, it had the potential to benefit pay equity recipients. She only acquired a more fulsome understanding of the QRLSP during a conference that she attended in Halifax on March 8, 2000, at which one of the speakers had provided a detailed explanation of how the mechanism would work. This conference took place over four months after the PSAC and the Treasury Board had negotiated the settlement of the Section 11 Complaints.
[25] No evidence was adduced indicating that Ms. Murphy or any representative of the PSAC had contacted the CRA prior to signing the pay equity settlement to obtain details about the QRLSP mechanism nor that anyone had contacted the Finance Department or other government representatives to request or lobby for any change in regard to how the mechanism would function.
V. How has the CRA administered the QRLSP? [26] Ever since the QRLSP provisions came into force, taxpayers who have been in receipt of qualifying lump-sums have been able to apply to the CRA to learn if they can benefit from this tax relief. Sheila Barnard is the manager of the legislation section in the Individual Returns and Payments Processing Directorate of the CRA, which is responsible for establishing the processes involved in assessing personal income tax. She pointed out that the QRLSP provision enabled taxpayers to allocate their qualifying lump sums as far back as 1978. The CRA recognized that few people keep their tax records for so many years and that the agency, on the other hand, possessed that data in its computer system.
[27] The CRA was therefore in a position to perform the QRLSP calculation for taxpayers and established a process to achieve that result. It developed a special form (T1198), which taxpayers could attach to their tax returns. The form has usually been completed by their employer. If the taxpayers file electronically, the T1198 figures are keyed in. The name of the lump-sum recipient appears on the T1198 form as well as the year in which the lump-sum was received. The amount is broken down between principal and interest. There are then a series of blank spaces identified by year from 1978 (the earliest year to which the QRLSP mechanism's relief extends) to the current taxation year. The amount of principal relating to each year is entered into the appropriate blank spaces. In the case of the federal public service pay equity payments, the employer issued a Form T1198 to all recipients.
[28] Ms. Barnard testified that upon receipt of an income tax return with a T1198 form or an equivalent electronically filed return, the CRA assessing system automatically performs both the regular tax calculation and the special QRLSP tax calculation, provided the portion of the principal relating to prior years is $3,000 or more.
[29] Ms. Barnard explained that the special QRLSP tax calculation is performed as follows:
The amount of the qualifying retroactive lump-sum payment is deducted in computing the taxable income in the year in which the lump-sum was received (the Current Year). Basic federal tax is computed on the reduced taxable income of the Current Year using the tax rates and non-refundable tax credits applicable in the Current Year. A tax adjustment (which is an addition to the basic federal tax) is calculated as a total of:
All amounts each of which would be the increase to the basic federal tax for each preceding year, calculated as if the relevant portion of the lump-sum had been received in the year to which it relates, and Interest computed on the increase to basic federal tax for each preceding year, using the prescribed refund rate, from May 1 of the year following the year to which the portion of the lump-sum relates to the end of the year preceding the year in which the lump-sum is received.
The tax adjustment is added to the basic federal tax on the reduced taxable income for the Current Year.
[30] Once the CRA has completed this calculation, it then compares the results of the regular tax calculation (i.e., taxing the lump-sum in full in the Current Year) with the special QRLSP calculation to determine the method that is most advantageous to the taxpayer. If the QRLSP tax calculation is more advantageous, the CRA uses it to assess the return for the Current Year. If the QRLSP is of no benefit, the CRA assesses the return using the regular tax calculation. The CRA then issues a Notice of Assessment or Reassessment with an explanation indicating whether the QRLSP tax calculation was beneficial, followed by a letter to the taxpayer explaining the calculation and comparison in detail.
[31] Simply put, the exercise consists of recalculating the Current Year's federal income tax without the lump-sum, and then adding to that tax the amount of federal income tax that would have been payable had the lump-sum amounts been paid in the years to which they related. If the lump-sum has placed the taxpayer into a higher tax bracket in the Current Year, then logically, assessing the taxpayer at the lower marginal tax rates that he or she was paying in prior years would result in a reduction of tax payable. However, there is one other factor to be taken into account - the interest that also forms part of the calculation. When the compounded interest is added, the likely effect is that any benefit from calculating the income tax payable on retroactive payments at the lower marginal rates is negated to varying extents by the compound interest that is included in the calculation. For this reason, retroactive payments extending back six years or more are not likely to benefit from the QRLSP mechanism.
VI. What was the effect of the QRLSP calculation on Ms. Murphy's tax treatment? [32] After leaving the federal public service in 1994, Ms. Murphy became an employee of the PSAC. By the time she received her pay equity lump-sum payments in 2000, her employment income had increased significantly from the levels she had been earning as a public servant. She was now in a higher tax bracket. She received three cheques pursuant to the Consent Order, two representing the principal of the wage adjustment (a total of $16,282.26), and the other cheque representing the interest to which she was entitled in the amount of $9,266.03. When these sums were combined with her earned income in 2000, her total income came to $93,452.
[33] The CRA issued a 2000 Notice of Assessment to Ms. Murphy on April 18, 2001, advising her that she was eligible for the QRLSP tax calculation. On April 25, 2001, the CRA sent a letter explaining that the calculation did not benefit her. The regular tax calculation was more beneficial even though her marginal tax rate was now higher than when she worked for the public service. The table accompanying the letter, which explained the calculation, showed that when the pay equity lump-sums (wage adjustment and interest) were included in her taxable income for 2000, her basic federal tax was $15,433.23. The QRLSP calculation would have resulted in basic federal tax in the amount of $18,494.65.
[34] Thus, although Ms. Murphy's income was greater now and therefore subject to a higher marginal tax rate, she could not benefit from any tax relief under the QRLSP mechanism. She considered this unfair. Had she actually received the wage adjustments in the years to which they related, she would have paid tax at a lower marginal rate. She was particularly upset that the QRLSP calculation incorporated an interest component that was set at the refund rate and that it was compounded, particularly since the Consent Order had only provided for the payment of simple interest. She perceived the situation as one where the CRA was assessing interest on arrears relating to income that she had never received.
[35] Ms. Murphy was not alone in her consternation. Numerous pay equity lump-sum payment recipients contacted the PSAC to complain about the QRLSP. On April 2, 2001, the PSAC issued a bulletin to its members indicating that it was considering launching a challenge to this practice on human rights grounds. On June 21, 2001, the PSAC president wrote to the Minister of National Revenue regarding the issue, alleging that the practice was discriminatory. On July 12, 2001, a senior representative from the Minister's department replied by letter, stating that these calculations are an integral part of the retroactive lump sum payment legislation as enacted by Parliament, and do not always result in reduced taxes for lump sum payment recipients. He indicated that the CRA had made every effort in 1999 and 2000 to ensure that recipients of pay equity payments were aware that the QRLSP calculation would not necessarily provide a beneficial result. CRA publications had noted that generally the further back the retroactive entitlement, the smaller the tax savings, if any. He also pointed out that components of the tax calculation for retroactive lump sum payments were a matter of tax policy that is the responsibility of the Finance Department. The CRA was merely responsible for administering the legislation.
[36] Ms. Murphy had been in contact with Ms. Jaekl and expressed a willingness to put forward her situation as a basis for a test case. Consequently, on March 11, 2002, the PSAC and Ms. Murphy filed the present human rights complaint with the Commission. The complaint alleged that the CRA maintains the following discriminatory practice:
...charging compound interest at high rates on notional tax arrears which result from attributing income received due to the order of the Canadian Human Rights Tribunal dated November 16, 1999. This practice is discriminatory on the ground of sex (female) in that it prevents affected persons from receiving equal pay for work of equal value, as required by Section 11 of the Canadian Human Rights Act, by reducing the actual value of the payments ordered, contrary to sections 5 and 7(b) of the Canadian Human Rights Act. These practices have, therefore, had the effect of reducing the payments made pursuant to Section 11 of the Act to affected persons in a manner inconsistent with Section 11 of the Act.
[37] Despite the reference in the complaint to s. 11, the Complainants did not allege before the Tribunal that the CRA was in breach of that provision.
VII. Analysis [38] In the adjudication of human rights complaints, complainants must ordinarily first establish a prima facie case of discrimination (Ont. Human Rights Comm. v. Simpsons-Sears Ltd., [1985] 2 S.C.R. 536 at para. 28 (O'Malley)). A prima facie case, in this context, is one that covers the allegations made and which, if the allegations are believed, is complete and sufficient to justify a verdict in the complainant's favour, in the absence of an answer from the respondent. If the complainant establishes a prima facie case of discrimination, then the onus shifts to the respondent to disprove the allegations or prove that there is a reasonable explanation justifying what may appear to be a discriminatory practice. If such an explanation is given, it then falls upon the complainant to demonstrate that the explanation is merely a pretext for the otherwise discriminatory behaviour.
[39] It is not necessary that discriminatory considerations be the sole reason for the actions at issue in order for the complaint to be substantiated. It is sufficient that the discrimination be one of the factors in the impugned decision or action (Holden v. Canadian National Railway Company (1991), 14 C.H.R.R. D/12 at para 7 (F.C.A.); Canada (Attorney General) v. Uzoaba, [1995] 2 F.C. 569 (T.D.)).
A. Does the alleged discriminatory practice regarding the QRLSP mechanism arise from the provision of services within the meaning of s. 5? [40] The Complainants and the Commission allege that the CRA has engaged in a discriminatory practice in the provision of services customarily available to the general public, pursuant to s. 5 of the CHRA, which provides as follows:
5.It is a discriminatory practice in the provision of goods, services, facilities or accommodation customarily available to the general public
(a) to deny, or to deny access to, any such good, service, facility or accommodation to any individual, or
(b) to differentiate adversely in relation to any individual,
on a prohibited ground of discrimination.
5.Constitue un acte discriminatoire, s'il est fondé sur un motif de distinction illicite, le fait, pour le fournisseur de biens, de services, d'installations ou de moyens d'hébergement destinés au public :
a) d'en priver un individu;
b) de le défavoriser à l'occasion de leur fourniture.
[41] The Complainants did not advance any submissions or evidence to the effect that a service was denied to Ms. Murphy or the other recipients of pay equity payments. I conclude from this that the allegation of discrimination is grounded in s. 5(b) - adverse differentiation in relation to an individual in the provision of services customarily available to the general public.
[42] What is a service customarily available to the general public, particularly with regard to activities of public bodies like the CRA? Are all practices of government officials in the performance of their statutory duties services within the meaning of s. 5, as the Tribunal had suggested in Bailey v. Minister of National Revenue (1980), 1 C.H.R.R. D/193, at D/214? The Federal Court of Appeal, in the case of Canada (Attorney General) v. Watkin, 2008 FCA 170, explicitly disavowed this opinion. The Court stated, at paras. 31-2, that all government actions in the performance of a statutory function do not constitute services merely because they are undertaken by the public service for the public good. Services, within the meaning of s. 5, contemplate something of benefit being `held out' as services and `offered' to the public.
[43] The Complainants submit that the determination by the CRA of whether a particular taxpayer would benefit from the application of QRLSP provisions, especially when viewed in light of Parliament's aim of increasing fairness and reducing the tax burden of Canadians through the 1999 budget amendments, is intended to provide a benefit to the public. Accordingly, the Complainants submit that the CRA provided a service to pay equity recipients like Ms. Murphy.
[44] The Complainants claim that the CRA's dealings regarding the QRLSP provisions are couched in terms of actions for the benefit of taxpayers. The CRA developed software to make the calculations required by these provisions. The Complainants pointed out that in at least one of the documents instructing the software developers on how the QRLSP mechanism functions, taxpayers are referred to as clients. The CRA ran tests to verify the accuracy of the software once it was developed. It trained staff who handled inquires from the public to advise taxpayers on how the QRLSP mechanism functions. The CRA has also issued information bulletins intended for the public, explaining the mechanism.
[45] Once the CRA receives the T1198 form from the taxpayer, its staff keys the data into its information system. The CRA identifies and screens out applicants who have not received lump-sum payments that are qualified for the tax relief (e.g., under $3,000). The CRA's information system performs the calculations provided in the legislation and produces the results that are then reflected in the tables and letters sent to the taxpayers, in which they are advised whether using the QRLSP mechanism is more beneficial to them than the ordinary tax treatment of their lump-sum payments.
[46] The Complainants submit the above sorts of actions on the part of the CRA come within the meaning of services customarily available to the public articulated in s. 5. They point out that although Watkin disavowed the opinion expressed in Bailey suggesting that all government activity is a service, the Federal Court of Appeal did not disavow the specific finding in Bailey that the discretion exercised by the Minister of Revenue in disallowing several tax deductions constitutes a service.
[47] Moreover, the Complainants directed me to another passage in Watkin, at para. 28, in which the Court provided some examples of government actions that could constitute a service for the purposes of s. 5:
Public authorities can and do engage in the provision of services in fulfilling their statutory functions. For example, the Canada Revenue Agency provides a service when it issues advance income tax rulings; Environment Canada provides a service when it publicizes weather and road conditions; Health Canada provides a service when it encourages Canadians to take an active role in their health by increasing their level of physical activity and eating well; Immigration Canada provides a service when it advises immigrants about how to become a Canadian resident. That said, not all government actions are services. Before relief can be provided for discrimination in the provision of services, the particular actions complained of must be shown to be services [...].
(emphasis added)
[48] Not surprisingly, the Complainants see no real distinction between advance income tax rulings and QRLSP assessments. In either case, a taxpayer requests a calculation from the CRA. Ms. Barnard testified that advance income tax rulings are provided to taxpayers for a fee, to assist them in deciding whether to undertake a particular course of action in light of the tax consequences that will ensue. An information circular published by the CRA states that advance income tax rulings are provided as an administrative service but there is no legal requirement to issue them. However, the CRA argued that, in contrast, the assessment of taxes actually owing by taxpayers under the ITA is not an optional prospective tool; rather it is the ultimate application of the ITA in furtherance of tax collection. The CRA submits that there is therefore a distinction to be drawn between the QRLSP calculation provided by the CRA and advance income tax rulings.
[49] The Commission for its part concurs that the assessment of income tax is a service. The Commission noted that a taxpayer has a duty to comply with the ITA and pay any taxes he or she may owe. The benefit that the CRA provides to taxpayers like Ms. Murphy in making the QRLSP calculation and providing the results to her is that she is thereby enabled to fulfill her obligations pursuant to the ITA and pay the appropriate amount of federal income tax. Assisting taxpayers to fulfill their duties to pay taxes is the service being provided and made available to the public by the CRA.
[50] In my view, however, whether or not the calculation pursuant to the QRLSP provisions or even assessment of income tax constitutes a service is immaterial to the real question with respect to s. 5. Even if these activities do constitute a service, they are not what is at issue in this case. Rather, it is the terms of the ITA and its regulations that are at issue.
[51] In this sense, the circumstances of the present case are not unlike those in Forward v. Citizenship and Immigration Canada, 2008 CHRT 5. The complainants in that case were two brothers who are American. Their mother is a Canadian citizen and they had sought to obtain Canadian citizenship through their mother's citizenship. Their application was denied by Citizenship and Immigration Canada because at the time of their birth, neither of their parents held Canadian citizenship. They did not qualify for citizenship under the parental lineage provisions of the Citizenship Act, R.S.C, 1985, c. C-29.
[52] The complainants in Forward alleged that the rejection of their citizenship applications amounted to adverse differentiation in the provision of services customarily available to the general public (s. 5(b)). They argued that was at issue was not citizenship per se but rather the right of someone claiming citizenship to have his or her application reviewed and administered in a non-discriminatory manner. The reviewing of applications for citizenship was accordingly a service.
[53] The Tribunal, at paras. 37-8, rejected this characterization, noting that the evidence and argument in the case was not directed at the conduct of ministerial officials, the exercise of discretion, or at the implementation of departmental policies and practices. The sole source of the alleged discrimination was the legislative language of the Citizenship Act. The Tribunal pointed out that in reviewing the application for citizenship, the officials did nothing more than apply categorical statutory criteria to undisputed facts. Any issue taken with the application review process was really an issue taken with the Citizenship Act.
[54] In my opinion, these findings are equally applicable to the present case. Even if the tasks undertaken by the CRA in processing QRLSP claims constitute a service, they are not the basis for the adverse differentiation alleged in the complaint. The source of the alleged discriminatory practice is found solely within the legislative language of ss. 110.2 and 120.31 of the ITA. None of the evidence before me establishes that the alleged discrimination arises from the conduct of CRA officials or the discretionary implementation of policies or practices by the CRA. The CRA applies the formula as set out in the ITA using each applicant taxpayer's tax data. Presumably, taxpayers armed with their own prior tax data could perform the mathematical exercise for themselves, without the CRA's involvement.
[55] There is no evidence suggesting that the CRA did not perform Ms. Murphy's QRLSP calculation in accordance with s. 110.2 and 120.31 of the ITA. Since the CRA already possesses taxpayers' prior tax filing information as well as the technological resources to efficiently perform the QRLSP calculation, it has undertaken this task. It could perhaps be argued that the CRA does exercise some discretion in the screening process of the QRLSP provision by determining if a particular lump-sum is qualified under the provision. That is not at issue in the present case, however. The CRA had accepted that Ms. Murphy's and the other recipients' lump-sum payments were qualified provided, of course, that the sums exceeded $3,000.
[56] The Complainants suggested that the CRA could have, in its discretion, waived the interest portion of the QRLSP calculation. According to the QRLSP provisions of the ITA, however, the interest portion is deemed to be tax. Ms. Barnard testified that under the applicable fairness provisions, the CRA can only waive interest, not tax (s. 220(3.1) of the ITA). It was not open to the CRA to exercise any discretion in this regard.
[57] In sum, the source of the alleged discriminatory practice is not, in whole or in part, the CRA's activities, be they a service customarily available to the public or not, but rather exclusively the tax legislation itself. In Wignall v. Canada (Department of National Revenue (Taxation), 2003 FC 1280, at para. 30, the Federal Court noted that the conduct of Revenue Canada cannot be held to be discriminatory under the CHRA when what is really being impugned is a provision of the ITA.
[58] Accordingly, where the alleged discrimination, as in the present case, arises solely from the legislative language of the ITA and not the activities of the CRA, it is not as a result of the provision of services by the CRA, within the meaning of s. 5 of the CHRA. Consequently, a prima facie case pursuant to that section cannot be substantiated.
[59] If I am wrong, however, and the alleged discriminatory practice does constitute a service within the meaning of s. 5, I still find that the Complainants have not established a case of adverse differentiation on a prohibited ground in the provision of that service, for the reasons that I provide later in this decision.
B. Can the CRA's administration of the QRLSP mechanism be considered to have been made in the course of employment within the meaning of s. 7(b)? [60] Section 7(b) of the CHRA provides that it is a discriminatory practice to directly or indirectly differentiate adversely in relation to an employee, in the course of employment:
<7.It is a discriminatory practice, directly or indirectly,
(...)
(b) in the course of employment, to differentiate adversely in relation to an employee,
on a prohibited ground of discrimination.
7.Constitue un acte discriminatoire, s'il est fondé sur un motif