The Spouse Wars Trilogy:
Episode 2 The Taxman Strikes Back

Supreme Court of Canada Building
Ottawa, Canada
May 25, 1995

In Episode 1 The Rebel Allowance, we saw that restricting the definition of "spouse" to members of the opposite sex didn't violate the Charter.

But in the world of Canadian Human Rights Commission, Charter challenges lurk everywhere. The main actor in this episode is a woman named Suzanne Thibaudeau - a divorced mother of two children.

The plot is simple: Suzanne is getting child support payments from her ex-husband, but while she's getting the support income, he's getting the income tax deduction. Under the law - sections 56(1)(b) and 60(b) of the Income Tax Act - a parent who receives a child support payment has to pay tax on it (s. 56(1)(b). But the parent who pays the support gets to deduct the payments from his or her income (s. 60(b)).

Does that violate Suzanne's equality rights under section 15 of the Canadian Charter of Rights and Freedoms? Both she and her ex husband are required to support the children, but the law seems to put a burden on her which does not affect her husband. As we'll see though, the law is designed to benefit a great many other families in this situation especially the children.

The short answer from the Court is no.

Section 15(1) is all about protecting human dignity and recognized that everyone is equally deserving of concern, respect and consideration. The Income Tax Act doesn't undercut that at all.

Sections 56(1)(b) and 60(b) of the Income Tax Act are designed to work at the level of the couple to benefit the children by making more money available. I know that this isn't a tax course, but here's the basic idea. The parent with the higher income is usually the man and the parent without custody. Because he pays a higher tax rate, he gets a bigger deduction, and that means more money between the two parents to support the children. Actually, the Court says, these sections give a benefit to the post-divorce "family unit" that married family units don't get.

The fact that one member of the unit might derive a greater benefit from the legislation than the other doesn't mean s. 15(1) has been violated.

The gross-up rules help ensure that it all works out fairly.

Boy meets girl. Boys loses girl. Boy doesn't get girl back. Boy pays child support and girl pays tax on it.

The fact that child support is taxed in the hands of the recipient parent and a deduction for the paying parent doesn't violate s. 15 of the Charter.

Gross-Up - Not Out

When Courts award alimony, they "gross-up" the payment to take into account the fact that the receiving parent will be taxed. Let's say a court decides $1,000 a month is the amount needed for child support. If the receiving parents tax rate is 30%, the court will award $1430 a month, which after taxes, will amount to $1,000. "The purpose of section 15(1) is to protect human dignity by ensuring that all individuals are recognized at law as being equally deserving of concern, respect and consideration."

From the case of Thibaudeau v. Canada

Want To Know More?

See:
Thibaudeau v. Canada
Section 56(1)(b) of the Income Tax Act
Section 60(b) of the Income Tax Act