In a recent tax ruling, Canada’s federal court ruled against the CRA’s heavy-handed approach to assessing low-income Canadians’ eligibility for the pandemic-era CERB benefit.
Canadians may recall that, during the pandemic, the government’s chief response for individuals was the creation of CERB, the Canada Emergency Response Benefit.
Unlike most income-tested benefits, which are gradually phased in or out, CERB had a strict threshold for eligibility.
If Canadians earned $5,000 or more in 2019 and were put out of work by COVID-19, they became eligible to receive as much as $14,000 in 2020. If they earned less than $5,000 by even a few bucks, they received nothing.
As a benefits advocate, I have followed the scores of CERB cases wending their way through the courts. So I have seen how the CRA has been going to the ends of the earth to deny the CERB benefit wherever possible.
This approach is especially frustrating as it reflects a double standard: if you owe the CRA money and you notify them of that fact, they readily accept submissions to prove it. But if you are trying to qualify for a benefit, they go to great lengths to deny them.
The recent federal ruling highlights this point. The case involved a café owner, Masoud Vatankhah, whose business closed because of COVID, after being in operation for 25 years.
After filing his business’s 2019 taxes with the help of a non-designated accountant, Vatankhah hired a chartered professional accountant to review his filings. The CPA found several errors and submitted an adjusted return that increased Vatankhah’s income to $6,745. The adjusted return required Vatankhah to pay an additional $478 in taxes.
Notably, the CRA accepted Vatankhah’s re-filed return, as well as the extra money he was required to pay as a result of declaring the higher income.
However, the CRA refused to accept his application for CERB, despite him now qualifying for it. He appealed the decision and won.
In his ruling, Federal Court Justice Russel Zinn said:
“By accepting the T1 Adjustment Request and Notice of Reassessment for tax purposes yet rejecting these documents for CERB eligibility without explanation, the CRA creates an unjustified inconsistency that undermines the Act’s remedial purpose.
“Therefore, CRA officers need to explain why the same documents deemed sufficient for tax purposes can be instantly viewed as insufficient for CERB assessment, especially given the benefit-conferring nature of the Act and the severe consequences for the livelihoods of benefit claimants like Mr. Vatankhah.”
Many cases have dealt with the CRA’s double standard in assessing income for the purposes of taxation versus benefits. This one does so with an impressive degree of clarity.
Justice Zinn is my new hero.
