Beyond Decriminalization: Sex-work, Human Rights and a New ...

BEYOND DECRIMINALIZATION: Sex Work, Human Rights and a New Framework for Law ReformJudging by the experience in other countries, 30 this concern about the prospect of arbitrary standardsbeing used to assess sex worker incomes is well founded. Current Canadian taxation practices givefurther substance to these concerns. For example, with respect to claiming income from tips, RevenueCanada accumulates data on the average amount of tips earned by workers in a particular profession,and then compares amounts claimed against what these data indicate. With respect to prostitution,this could be a matter of particular concern given the considerable range in tips across the sex trade. 31Tax deductionsBusiness expensesUnder the ITA, taxpayers earning business income are entitled to deduct expenses incurred forthe purpose of earning business income. 32 All business expenses can be deducted, except for deductionsspecifically prohibited by the ITA. Personal or living expenses cannot be deducted from businessincome, 33 and all deductions must be seen as reasonable in the circumstances. 34 Sex workers earningbusiness income have a right to deduct their business expenses if they file income tax returns. TheSupreme Court of Canada has held that, if business income is taxed, deductions for business expensescannot be prohibited on the basis of public policy considerations. 35 Expenses for condoms, lubricants,sex toys, costumes, taxi rides, classified ads, and other items may be deductible business expensesunder the ITA. For sex workers working out of their homes, the home office exemption allowing aportion of rent or mortgage to be deducted would be available. 36 While an argument can be madethat expenses for enhancing a sex worker’s appearance, such as breast implants or gym memberships,are business expenses, Revenue Canada may consider these to be personal or living expenses. The linebetween personal or living expenses and business expenses is blurry, and is determined on a caseby-casebasis. The test is whether the expense was incurred for the purpose of gaining or producingincome from a business. To determine whether the test has been met the court may ask:1. What is the need that the expense meets?2. Would the need exist apart from the business? and3. Is the need intrinsic to the business? 3730 The English Collective of Prostitutes and US PROStitutes Collective website states that some of the work they do is “helpingwomen fight extortionate tax demands.” The site goes on to say that “women have successfully challenged tax demands based onbiased assumptions about what sex workers earn rather than the facts on the situation of each individual woman.” “Summary of Workby the English Collective of Prostitutes and the US PROStitutes Collective” online: All Women Count .See also Petra Östergren, “Sexworkers Critique of Swedish Prostitution Policy” online: Petra Östergren .“The legal situation regarding taxation is unclear and varies from city to city. Some tax authorities will leave sex workers alone, otherswill seek them out and tax them according to an arbitrary estimate. This worries sex workers. Some of them have been subjected tothis procedure with disastrous financial consequences. Others have only heard about it and worry it will happen to them.”31 Some sex workers in massage parlours stated that they earned up to $10,000 month while sex workers in other areas of the industry,such as the street level, earn barely subsistence amounts.32 Supra note 1, s. 18(1)(a).33 Supra note 1, s. 18(1)(a).34 Ibid., s. 67.1: “In computing income, no deduction shall be made in respect of an outlay or expense in respect of which anyamount is otherwise deductible under the Act, except to the extent that the outlay or expense was reasonable in the circumstances.”35 The Supreme Court of Canada confirmed in its decision in 65302 B.C. Ltd. v. The Queen, 99 D.T.C. 5799, that taxpayers areallowed to deduct expenses incurred for the purpose of earning income from an illegal business activity. The Court noted that eventhough the deduction of such expenses might appear to frustrate the intent of the Criminal Code, the “tax authorities are not concernedwith the legal nature of an activity” (at 5811).36 Supra note 1, s. 18(12).37 Scott v. Queen, F.C.A. 98 D.T.C. 6530 at para 9.171