One of the first things I do each day at the office is to review recent tax rulings, updates, judgements, etc. on a daily tax update service that I subscribe to. When it comes to tax court cases, one thing that constantly astounds me is the incredible percentage of cases that revolve around the determination of whether an individual is an employee or self-employed, given a certain set of circumstances.
It’s not as if there has been any new legislation in the area that needs to be tested in front of the courts. It’s rather that instead of there being actual rules to be followed, there is a list of “factors” that are considered in arriving at any determination. These factors will have different levels of relevance depending on the industry in question as well as the facts of each specific case. In most of these cases, the judges will meticulously go through assessing the relative merits of the case on each factor, and arrive at an overall decision – one that unfortunately can never seem to be conclusively applied to the next set of unique circumstances.
In an October 4th ruling from the Tax Court of Canada in a case involving a taxi driver, Judge Miller made the following comment that summarizes the problem:
There have been many taxi driver cases in this Court and, not surprisingly, given how fact-specific this issue is, the cases go both ways. A careful review of the facts is critical.
Judge Miller of course makes no comment on whether there is any real good reason for this issue to be as fact specific as it is – that is not the purpose of the courts. I have no such constraints however – in my view it is an incredible waste of valuable resources, both of our court system, as well as for the businesses that try to navigate the myriad of rulings to try and see (to their best advantage) what may apply to them.
The time has come for the list of “factors” to be replaced by a set of very clear rules that everybody can follow. I admit there will almost assuredly be a degree of arbitrariness that will be required in order to achieve this, but I cannot imagine that the degree of “fairness” that might be lost by not considering each and every case on its individual merits would not be more than offset by the clarity that would then replace a very long list of often seemingly contradictory rulings.
I also admit that coming up with a set of clear comprehensive rules will not be an easy task. That being said, the resources required to achieve this would be a drop in the bucket compared to the resources used for the literally thousands of individual rulings that have been made in this area.