You have a good observation, but I think it's casting it in a bit of an unfair light. Parliament, through the Income Tax Act in 1981, set out the law that said where the specified shareholder, the principal shareholder, is essentially carrying out the duties of employment, tax outcomes fail. It did not say that you then ignore the corporation or recharacterize the individual. It just says if it could be reasonably considered that the person is carrying out employment duties, which tracks back to the 1800s and your master-servant concept and has kind of transcended through a couple hundred years. We're not talking about a principal-agent relationship here; we're talking about a master-servant relationship. Parliament decided it would effect an outcome that said that corporation will not be eligible for the small business deduction and will not be eligible for other expenses. It did not say that you ignore the corporation, treat the person as an employee, and go back to the payer company and assess EI.
I think the outcome you're looking for is, would we go back to the company and assess EI? That is an option that the EI legislation could add, that where it's determined that payments are made to personal services corporations, there will be an additional assessment of EI. I think that recommendation is available to you. But it isn't an inconsistent action by the revenue authorities.