Taxi driver takes on CRA over CRB eligibility and earns another look

Jamie Golombek: Judge rules that the tax agency’s denial of the claim was unreasonable and sends it back for reassessment

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The Canada Revenue Agency continues to pursue taxpayers who may have inappropriately claimed the Canada Emergency Response Benefit (CERB) or its replacement, the Canada Recovery Benefit (CRB). Eligible individuals could have received $500 per week provided they earned at least $5,000 of net income in the prior year.

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I recently shared a story about a Cambridge, Ont., man who was in court challenging the CRA’s decision that he was ineligible for the CRB in 2020 because he didn’t earn $5,000 of income in the prior year. I later described the case of a tutor who allegedly earned $5,250 of income in cash and was denied his claim for the CERB. Both these taxpayers lost their cases.

The most recent CRB eligibility decision was released earlier this month, and involved a Quebec taxi driver with 25 years of experience who, on March 19, 2020, decided to stay home for a while due to the COVID-19 pandemic, which was of particular worry to him due to his medical history.

His colleagues in the taxi industry subsequently told him it was not profitable to hire a taxi during the pandemic and that only taxi owners could survive. Since the taxpayer didn’t own his taxi, and the owner of it refused to lower his rent, he stopped working.

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In October 2020, the taxpayer applied for the CRB. His request was accepted by the CRA without review, and he began receiving the benefit. Fast forward to June 2021, after two separate reviews of his file, when a CRA officer concluded the taxpayer had “voluntarily” left his job, and that his lack of employment and subsequent decline in income were not related to COVID-19. Consequently, the CRA officer concluded the taxpayer didn’t qualify for the CRB.

The taxpayer appealed to the Federal Court to determine whether the CRA’s decision to deny him the CRB was “reasonable.”

Recall that back in 2020 and lasting until late 2021, the CRB was available to taxpayers if they were Canadian residents, at least 15 years old and had a valid social insurance number. To receive the CRB, a taxpayer must have had stopped working due to COVID-19 and was available and looking for work, but had experienced a reduction in (self-)employment income by at least 50 per cent compared to their average weekly earnings in either the previous calendar year or the 12-month period prior to the application date. The taxpayer must not have voluntarily quit their job, and must have had (self-)employment income of at least $5,000 in the previous calendar year or the 12-month period prior to their application date.

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During various calls with CRA agents, the taxpayer in question here cited several factors explaining his decision to stop working in March 2020. First, he explained he had not worked since then due to a recovery period following surgery for cancer, as well as medical recommendations he had received to not have direct contact with passengers. In a subsequent call, the taxpayer explained his work had ceased because many people were telecommuting and, therefore, no longer taking as many taxis.

The CRA officer in charge of the first review concluded the taxpayer was not eligible for the CRB because he voluntarily left his employment, and chose not to work “for reasons other than due to COVID-19.” The officer concluded the taxpayer was, indeed, able to work, but was not actively looking for work.

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A second review was initiated by a different CRA officer. That officer also denied the taxpayer’s claim, finding that, again, he didn’t meet the CRB criteria since he was not working for reasons other than COVID-19. “The taxpayer voluntarily (chose to) leave his employment in March 2020 without having a medical recommendation or layoff due to COVID-19,” the officer wrote. “His field of employment (taxi) was certainly quieter during the pandemic, but the necessary measures had been taken to make (the drivers’) work as safe as possible.”

The key question to be answered in determining CRB eligibility was whether, during the various CRB periods, the taxpayer was not employed for reasons related to COVID-19. The taxpayer explained he decided to stay home, temporarily, at the start of the pandemic because he had concerns about the little-known risks of COVID-19, especially in light of his medical history. He also said his intention in March 2020 was to return to work shortly, but this was not possible since people were working from home and not taking taxis, so it was no longer profitable to hire a taxi to work as a driver.

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The judge felt these statements were highly relevant to determine whether the taxpayer was not working in October 2020 for reasons related to COVID-19. If the state of the taxi industry due to the pandemic in the taxpayer’s city back then was such that he would lose money if he worked, “it seems to me at least possible to conclude that he was not working for reasons ‘related’ to COVID-19,” the judge wrote. “In these circumstances, I find it difficult to accept that this decision was ‘voluntary’ and unrelated to COVID-19, even in the absence of a medical recommendation.”

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The judge also noted the rules do not require that the “reasons related to COVID-19” be medical reasons. The taxpayer said he could not earn income as a taxi driver because of the impact of the pandemic on his field of work. The judge felt it was up to the CRA agent to “meaningfully assess this statement,” something he felt the CRA didn’t fully do. The judge, therefore, concluded that the CRA officer’s decision was unreasonable because it did not properly address the central and relevant issues and concerns of the taxpayer.

While the taxpayer requested that the Federal Court itself recognize his eligibility for the CRB retroactively from Sept. 27, 2020, until Oct. 23, 2021, the court’s power was limited purely to determining whether the CRA’s decision was reasonable. As a result, the judge sent the matter back to another CRA officer for redetermination. The taxpayer was also awarded costs of $1,875.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto.


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