Revenue Canada
Deputy Minister
July 11 1996
Mr. Pierre Lemieux
Post Office Box 725
Tour de la Bourse
Montréal, Quebec
H4Z 1J9
Dear Mr. Lemieux:
The Honourable Jane Stewart, Minister of National Revenue, has asked me to respond your letter of May 8, 1996, concerning the constitutionality of the Income Tax Act.
Under the Constitution Act, 1867, section 91(3) gives the federal gouvernement the power to make laws in relation to "the raising of money by any mode or system of taxation". This power extends to both direct and indirect taxation. Under section 92(2) of the Constitution Act, 1867, provincial legislatures are given the power to make laws in relation to direct taxation within the province in order to raise a revenue for provincial purposes.
Regarding the federal gouvernement's power with respect to direct taxation, I would mention that the 1950 Supreme Court of Canada decision in Attorney General of Nova Scotia v. Attorney General of Canada, [1950] S.C.R. 31 dealt with the specific issue of the competency of the Parliament of Canada and the legislature of a province to delegate authority to the other to legistate on certains matters, namely labour and taxation. The supreme Court of Canada decision certainly did not hold unconstitutional the imposition of income tax by the federal gouvernement.
I would note that, in 1988, a challenge was brought on the basis that the Income Tax Act was invalid because it constitutes direct taxation within a province for provincial purposes. The Alberta Court of Appeal upheld the constitutionality of the Income Tax Act . The judgement in that case is reported at 53 D.L.R. (4th) 413: Wintherhaven Stables Ltd. v. Attorney General of Canada. The Supreme Court of Canada refused leave to appeal on April 13, 1989. I would also like to add that the Canadian income tax system relies, for its effectiveness, on self-assessment by taxpayers. This means that a taxpayer is expected to prepare his or her own tax return or have it prepared, to disclose all relevant information to Revenue Canada, and to determine and pay any tax owing. The system only works if taxpayers voluntary comply with these requirements in an honest and responsible manner.
Generally, subsection 150 (1) of the Income Tax Act provides that an individual who has tax payable, or has a taxable capital gain or has disposed of capital property in a taxation year, is required to file an income tax return in respect of that year on or before April 30 of the following year.
I trust my comments address the issues you have raised.
Yours Sincerely,
Pierre Gravelle, Q.C.
COMMENTARY ON MR. GRAVELLE's LETTER