The Source Shop v. Kelly Kavanagh, and Ministry of Labour
2529-99-ES The Source Shop, Applicant v. Kelly Kavanagh, and Ministry of Labour, Responding Parties.
BEFORE: David A. McKee, Vice-Chair.
DECISION OF THE BOARD; March 15, 2000
1In response to the Board’s decision of March 7, 2000 the applicant (“Source Shop”) has provided the Board with some correspondence between itself and Ms. Kavanagh. The applicant asserts that it issued a T-4 slip “in good faith” believing that this was the correct thing to do. It was only after receiving Ms. Kavanagh’s letter that the applicant thought to check with an unidentified person at the Canada Customs and Revenue Agency. That person, it is alleged, suggested that the matter was a “grey area” and suggested obtaining a ruling from Revenue Canada. The Source Shop offered to do so on behalf of Ms. Kavanagh if she so wished.
2While this Board has no role to play in administering the Income Tax Act, it is apparent that this arrangement is far more convenient to Source Shop than it is to Ms. Kavanagh. By issuing a T-4 slip she may be considered to have earned the income in 1999 and be required to pay taxes on it by April 30, 2000. The Source Shop can claim it as a deduction for business expenses and not pay tax on that amount. If Ms. Kavanagh is successful, she will in the end have lost nothing, although she will have paid tax in advance of receiving the income, and Source Shop will have filed a correct tax return. If this appeal succeeds, both Source Shop and Ms. Kavanagh will have to apply to recalculate their 1999 income. An employee may wait some considerable time for a refund of tax. Source Shop will have to refile as well, but its only harm will be that it has deferred a small amount of tax for some time. Its obligation will be to pay tax to Revenue Canada on the amount recouped at some convenient time within the limits prescribed by the Income Tax Act.
3Given the very different impact this decision has on Source Shop and Ms. Kavanagh, the Board expects more than an assertion that Source Shop was acting in good faith and that it has the verbal assurances from an unnamed person at Revenue Canada that this is a “grey area”. If a ruling can be obtained as to the proper method of recording this payment to the Director, then it is up to Source Shop to obtain it. The question is one directed at the manner in which it is to operate its business in order to comply with the Income Tax Act.
4The Board cannot make any orders about what parties should or should not do to comply with the Income Tax Act, nor can it order parties to issue or rescind any document issued under it. All that the Board can do is administer the Employment Standards Act. In this file we can deem the action of one party to have a particular significance. Unless Source Shop obtains written clarification of its obligations under the Income Tax Act from Revenue Canada, by way of a ruling or otherwise, if the result of the issuance of the T-4 slip is that Ms. Kavanagh is obliged to pay tax on the monies held in trust before a hearing is held in this matter, the Board will likely deem the issuance of a T-4 slip as an admission that the monies are owing as wages and terminate the appeal. This can only be determined should this event occur. Should Ms. Kavanagh seek this result from the Board, any communication to the Board must de delivered to Source Shop and the Ministry at the same time that it is delivered to the Board.
“David A. McKee”
for the Board