Another taxpayer loses his plea for CERB payments in court


Jamie Golombek: The burden is on the taxpayer to show that the CRA’s decision is unreasonable

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We’re starting to see a trickle of cases come before the courts in which taxpayers are fighting for their entitlement to the Canada Emergency Response Benefit (CERB) that they claimed back in 2020.

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The CERB was the first pandemic support widely available to individuals, and it lasted until the fall of 2020, when it was replaced by the Canada Recovery Benefit (CRB). Eligible individuals could receive $500 per week, for a maximum of 28 weeks, provided they earned at least $5,000 of net income in the prior year and earned less than $1,000 during the period in which they claimed the CERB.

Last month, I shared a story about a Cambridge, Ont., man who in court challenged the Canada Revenue Agency’s decision that he was ineligible for the CRB in 2020 because he didn’t earn $5,000 of income in the prior year. Now, another case has come before the Federal Court, this time dealing with CERB eligibility.

The taxpayer was in court seeking a judicial review of a CRA decision in December 2020 that denied his application for the CERB. The taxpayer had applied for, and received, the benefit for the four four-week periods between March 15 and July 4, 2020. He relied on invoiced tutoring income totalling $5,250 that he allegedly received in January and February 2020 as the basis for his application.

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In July 2020, the taxpayer learned a “hold” had been placed on his account that prevented him from applying for a fifth CERB payment for the period of July 5 to Aug. 1, 2020. After a number of calls with the CRA, a Canada Emergency Benefit Validation agent informed him the CRA would require proof of the tutoring income for him to continue collecting the CERB.

To support the income requirement, the taxpayer submitted a series of invoices addressed to clients, each of which was stamped “PAID.” In response to a CRA request for supplementary proof of income in the form of bank statements, the taxpayer stated his clients paid him in cash and that he didn’t deposit the funds in the bank.

In November 2020, the taxpayer received a letter from the CRA stating he was not eligible to receive the CERB because he did not satisfy the $5,000 income requirement. The following month, the taxpayer requested a review of the CRA’s decision, arguing that the CERB Act and the information listed on the Canada.ca website regarding the validation of CERB applications were “ambiguous.” He felt the invoices he submitted to the CRA as proof of his income were adequate supporting evidence and that there was no requirement for him to deposit his income into a bank account as a means of proving he was actually paid.

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The taxpayer requested a second review, which was done by a different CRA officer, who also concluded he didn’t meet the CERB’s eligibility criteria and denied his application. In January 2021, the taxpayer filed a request for judicial review of the CRA’s second review decision.

The case went to the Federal Court last fall where the judge had to decide whether the CRA’s decision to deny his CERB claim was “reasonable.” To do so, the court examines the reasons given by the CRA and determines whether the decision “ is based on an internally coherent and rational chain of analysis” and is “justified in relation to the facts and law that constrain the decision maker.” The burden, however, is on the taxpayer to show that the CRA’s decision was unreasonable.

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The CRA officer’s testimony noted that the invoices the taxpayer submitted were not sufficient to prove he had earned at least $5,000 in the prior 12 months for several reasons. First, the taxpayer was unable to provide any documents showing the invoices had been paid. Second, the CRA officer was unable to match the names and addresses of the purported tutoring clients on the invoices to those on the CRA’s computer system. As the invoices themselves didn’t contain full names or addresses (for example, the unit numbers were missing), the officer performed further searches to match the names and addresses, but those searches were also unsuccessful. Finally, the CRA officer noted that in the prior tax year, 2019, the taxpayer only reported social assistance payments on his personal tax return.

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The taxpayer was advised to provide further documents in support of his CERB application on several occasions. During one call, he informed the CRA he had additional information, but “was not prepared to share it.”

The judge reviewed the evidence and, in a decision released in February, concluded she could not find any significant error or oversight in the CRA’s second review decision that warranted the court’s intervention.

“The CRA’s refusal to accept the invoices without further evidence of payment is justified in light of the (taxpayer’s) interactions with the CRA … and the absence of any history of self-employment income,” the judge wrote. “In the present case, the circumstances surrounding the (taxpayer’s) alleged tutoring income raised questions for the CRA and it was not unreasonable for the (CRA) to request further documents.”

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The judge dismissed the case, concluding that the reasons given by the CRA for refusing the taxpayer’s CERB application were “intelligible and justified in light of the evidence.”

The taxpayer also attempted to argue that the $5,000 income requirement to collect the CERB was a violation of the Charter of Rights and Freedoms in that the amount was an arbitrary threshold that discriminates against the poor and low net-income individuals.

The judge, however, was unwilling to address the merits of the taxpayer’s constitutional arguments, because he didn’t provide any factual evidence to back up his claim of discrimination. As prior jurisprudence has concluded, “Charter decisions cannot be based upon the unsupported hypotheses of enthusiastic counsel” when it comes to a constitutional challenge.

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