November 20, 1998
Professor Peter W. Hogg
Osgoode Hall Law School of York University
Faculty of Law
4700 Keele Street
North York, Ontario
M3J 1P3
Dear Professor Hogg:
Re: subs. 92(2) - "for Provincial Purposes"
Thank-you for your letter dated November 11, 1998 (your "Letter"). You made some interesting conclusions therein, and I thought you might tolerate me, once more, playing the devil's advocate. Specifically, you state in your Letter that:
"The federal Parliament, which can levy "any mode or system of taxation", can certainly impose a "direct" tax. Whether it can impose a direct tax "for provincial purposes" turns on the meaning of the phrase "for provincial purposes". If it essentially means nothing, as I suspect is the case, then the two powers overlap."
I would like to challenge your position that, if the phrase "for provincial purposes" is meaningless (i.e., equivalent to non-existent), then it follows, apparently without question, that the scope of the federal tax law making power in subs. 91(3) is unlimited (i.e., that the federal and provincial powers overlap). Consider the Nova Scotia inter-delegation reference [1951] S.C.R. 31. You will recall that, in that case, the proposed provincial Legislation would have accomodated a situation in which the federal power to make a law which imposes an indirect tax had been delegated to the provincial Legislature of Nova Scotia. In that case, Chief Justice Rinfret stated:
"...Under the scheme of the British North America Act there were to be, in the words of Lord Atkin in The Labour Conventions Reference [[1937] A. C. 326], "watertight compartments which are an essential part of the original structure."
Neither legislative bodies, federal or provincial, possess any portion of the powers respectively vested in the other and they cannot receive it by delegation. In that connection the word "exclusively" used both in section 91 and in section 92 indicates a settled line of demarcation and it does not belong to either Parliament, or the Legislatures, to confer powers upon the other..." (my emphasis).
In short, the Chief Justice made it clear that, whatever the respective powers of the federal and provincial law making bodies might be, the powers were separated by a "line of demarcation". This decision involved a non-obiter discussion of the division of tax law making powers. The court concluded that neither legislative body possesses "any portion of the powers respectively vested in the other". Clearly, the respective legislative powers of the federal Parliament and provincial Legislatures respecting taxation were said not to overlap. To my knowledge, the Supreme Court has not since disagreed with the Chief Justice's decision in that case.
That addresses the assertion that the powers in 91(3) and 92(2) might overlap and, as discussed in my article on the Forbes and Silver Bros. cases, the courts have not made a special exception to the application of the doctrine of paramountcy in taxation cases: the division of taxation powers has not somehow been rendered meaningless by an alleged unwillingness of the courts to apply that doctrine. So, if the federal and provincial taxation powers - whatever their respective scopes might be - do not overlap, and if "for provincial purposes", rather than functioning to distinguish the federal and provincial powers (as in Caron v. R.), is actually meaningless, we must ask how the powers in subsections 91(3) and 92(2) are distinguished.
I think you would agree that the phrases "within the province" and "in order to the raising of a revenue" could not logically be used to distinguish the federal power from the provincial one. Federally imposed tax laws, to the extent that they would apply within the provinces, would impose taxes "within the province". Also, although taxes may be imposed for purposes other than to raise a revenue, I would not think this to be a means of distinguishing federal and provincial taxing powers.
As you point out, it is clearly the case that the federal Parliament does impose direct taxes, but I am sure you would agree that the enforcement of a law, even if for several decades, does not somehow endow the legislative body which imposed the law with the legislative power to impose it. The phrases "within the province", "in order to the raising of a revenue", and "for provincial purposes" (see, for example, the Winterhaven decision) being eliminated as possible means to distinguish the federal and provincial taxation powers, we are left only with "Direct taxation". It logically follows, therefore, that - there being no overlap in the federal and provincial powers - it is the phrase "direct taxation" which distinguishes the scope of the federal power from that of the provincial one (unless the phrase "for provincial purposes" is not meaningless).
It is interesting to consider that this position may, in fact, accord with the federal government's initial position on this matter. I recently received a photocopy of a letter sent by Sir Charles Tupper, father of confederation and then High Commissioner for Canada, to the Colonial Office in July of 1894. The letter concerned the "Application of estate duty to personal property situate in the colonies". Great Britain, at the time, intended to enforce death duties in Canada and the colonies. After informing the Prime Minister of Canada about the proposed death duties, Tupper received a telegram from Sir John Thompson stating that "Council is of opinion that strong opposition should be made to proposed policy of levying death duties on property in Canada...". Tupper thereafter wrote to the Colonial office, conveying this message, and explaining that "In all the Colonies where the death duties are now lower than they would be under the proposed Bill the Governments, in proposing increased taxes, will no doubt explain that it is forced upon them by the Imperial Act, and the responsibility for this increased taxation will fall upon Her Majesty's Government, with the result of endangering that loyal devotion to British institutions which now exists throughout the Colonies". He continued: "The right of taxation for the purpose of maintaining the Governments and carrying on the development of those great Colonies has been held to have been conceded exclusively to the Colonial Parliaments, and I believe I am safe in saying that no precedent for any taxation of this description can be found to have its origin since responsible government was accorded to the Colonies."
Turning to Canada, in particular, Tupper wrote:
"So far as Canada is concerned, the case is even stronger than in the other Colonies, as, under the Confederation Act passed by the Imperial Parliament in 1867, the power of imposing taxation of this description was exclusively assigned to the local governments and legislatures of the Provinces of the Dominion, for the purpose of enabling them to provide the revenue required to carry on the administration of local affairs. In many of those Provinces, considerable difficulty has been experienced in providing the necessary amount of revenue for the purpose, and this invasion of a field of taxation thus exclusively assigned to them would result in very serious inconvenience." (my emphasis).
Tupper, on behalf of the federal government, was communicating its position that direct taxation was a field of taxation assigned exclusively to the provincial Legislatures. Strange wording, and a strange concern, indeed, if the federal Parliament were of the opinion that it too had the power to impose a direct tax. Clearly, the federal Parliament considered direct taxation to be a field which belonged solely to the provincial Legislatures.
Also, it appears that Parliament, until the early 1960's, found it necessary to rent "...from each agreeing province the right to levy personal income tax, corporate income tax and succession duty" (Constitutional Law of Canada, 3rd ed., p. 138). Had Parliament and the provincial Legislatures been of the view that the federal and provincial taxation powers overlap and that Parliament already has the legislative competence to impose a direct tax, why would it have been necessary to rent that power from the provinces?
I would sincerely appreciate any comments or criticisms that you may have respecting the above submissions.
Regards,
Paul McKeever, B.Sc.(Hons), M.A., LL.B.
Back to Articles/Debates/Letters