C. Kerr (Plaintiff) Appellant;
and
Superintendent of Income Tax and Attorney-General or Alberta
(Defendants) Respondents
1942: May 12, 13; 1942: October 6.
Present:—Rinfret, Kerwin, Hudson and Taschereau JJ. and
Gillanders J. ad hoc.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF
ALBERTA
Constitutional law—Taxation—Income tax—Provincial
powers—Whether tax imposed on income or on person found in province—Income from
sources outside province—Dividend cheques of foreign company—The Income Tax
Act, 1932, c. 5 (Alberta).
[Page 435]
The tax imposed by The Income Tax Act of Alberta, 1932,
is not a tax on the income itself, but as a tax on the person receiving the
income who is found within the province. Therefore, under the Act, the taxable
income of such person includes also income derived from sources outside the
province: per Rinfret and Hudson JJ.
On its proper construction, The Income Tax Act of
Alberta, 1932, imposes a tax on a person found in the province with respect to
his income, including that derived from sources outside the province, and is intra
vires the Alberta legislature: per Kerwin and Taschereau JJ. and
Gillanders J. ad hoc.
APPEAL from the judgment of the Appellate Division of the
Supreme Court of Alberta,
reversing the judgment of the trial judge, Ewing J.
and dismissing the appellant's action for declaratory judgment that dividends
earned outside of province are not subject to tax under Alberta Income Tax
Act.
Aimé Geoffrion K.C. for the appellant.
W. S. Gray K.C. for the respondent.
RINFRET J.—For the purposes of this case the parties have
agreed upon the following statement of facts:
1. That Weyerhaeuser Timber Company, the corporation
mentioned in the statement of claim herein, is incorporated; under the laws of
the state of Washington, and has its head office at the city of Tacoma, in the
said state, and that it has no office in the province of Alberta, and does not
carry on any part of its business in the said province.
2. That the plaintiff is now and has been for many years the
owner of 600 shares in the capital of the said Weyerhaeuser Timber Company
[Page 436]
and that all of the said shares have
at all times been registered on the books of the said company in the name of
the plaintiff except that on one occasion 210 of the said shares were
transferred and shortly thereafter replaced by another 210 shares, but that the
plaintiff was at all times the beneficial owner of 600 shares.
3. That during the years 1933 to 1936, both inclusive, the
said company declared the following dividends on the said 600 shares:
|
1933—September
|
$ 600.00
|
|
December
|
600.00
|
|
1934—June
|
600.00
|
|
September
|
600.00
|
|
November
|
1,800.00
|
|
1935—August
|
1,200.00
|
|
October
|
1,200.00
|
|
1936—June
|
1,200.00
|
|
September
|
1,200.00
|
|
December
|
2,100.00
|
and that all of the said dividends
were declared and payable at Tacoma aforesaid, and the said company paid the
said amounts by cheques issued by the said company payable at Tacoma,
aforesaid, less, in some cases, small amounts retained on account of the United
States Tax Regulations.
4. That the cheque for $1,200 in payment of the dividend
declared in October, 1935, was deposited to the credit of the plaintiff in The
Canadian Bank of Commerce (California) at Los Angeles in the state of
California.
5. That the cheque for $1,228.50 in payment of part of the
dividend declared in December, 1936, was deposited to the credit of the
plaintiff in The Canadian Bank of Commerce (California) at Los Angeles, in the
state of California.
6. That the cheque for $1,200 in payment of the dividend
declared in June, 1936, was received by the plaintiff at said city of Calgary
and was not cashed or deposited in Alberta, but was deposited to the credit of
the plaintiff in the branch of The Canadian Bank of Commerce at Victoria, in
the province of British Columbia.
7. That the cheque for $702 in payment of part of the
dividend declared in September, 1936, was received by the plaintiff at said
city of Calgary and was not cashed or deposited in Alberta but was deposited to
the credit of the plaintiff in the branch of The Canadian Bank of Commerce at
Victoria, in the province of British Columbia.
8. That payment of the remainder of the dividends declared in
September and December, 1936, was received separately owing to the transfer and
replacement of the said 210 shares. That the cheques in payment of all the said
dividends set forth in paragraph 3 hereof excepting those mentioned in
paragraphs 4, 5, 6 and 7 hereof, were deposited to the credit of the plaintiff
in the Canadian Bank of Commerce, Calgary, in the province of Alberta.
9. That the dividends set out in paragraph 3 constituted
"income" of the plaintiff for the respective years stated in the said
paragraph within the meaning of that word as contained in section 3 of the Income
Tax Act, being chapter 5 of the statutes of Alberta, 1932.
10. That the plaintiff is domiciled and resident at the city
of Calgary, in the province of Alberta, and at all times maintains a residence
here,
[Page 437]
but that the plaintiff has lived
during the winter months of each of the years above mentioned at either
Los Angeles, in the state of California, or Victoria, in the province of
British Columbia, and that the moneys deposited in the said accounts at Los
Angeles and Victoria were used principally to pay her living expenses while
residing at such places, and that the balance unexpended remains to her credit
in the said accounts or one of them, and no part of the moneys so deposited in
the said accounts at Los Angeles and Victoria has since such deposit been
brought into the province of Alberta.
The appellant in the Alberta courts claimed a declaration that
she was not liable for any tax with respect to the dividends in question under
the Income Tax Act 1932, of Alberta, and that if any tax is payable by
her with respect to those dividends under the Act, then the Act, in so far as
it imposes such tax, is ultra vires of the provincial legislature and
hull and void.
It is admitted that those dividends constitute "income"
of the appellant within the meaning of that word as contained in section 3 of
the Act (c. 5 of the statutes of Alberta, 1932); but as such income is derived
from sources outside of the province of Alberta, the question which arises is
as to the validity of that portion of the statute which imposes a tax on income
originating elsewhere than in the province (Swift Canadian Co. Ltd. v. City
of Edmonton).
The answer to that question will depend upon the identification
of the subject matter of the tax; and, in turn, the
identification of the subject matter
of the tax must be found in the charging section of the statute, and it will
only be in the case of some ambiguity in the terms of the charging section that
recourse to the other sections is necessary.
This was the language of Lord Thankerton
delivering the judgment of their Lordships of the Privy Council in Provincial
Treasurer of Alberta v. Kerr, and
the Earl of Halsbury, L.C., in Gresham Life Society Limited v. Bishop
expressed a similar view:
The question in this case seems to me to depend upon the
actual words used by the Legislature, and I deprecate a construction which
passes by the actual words and seeks to limit the words by what is supposed to
be something equivalent to the language used by the Legislature.
[Page 438]
In the statute under consideration (1932) the charging section
read originally as follows:
8.(1) There shall be assessed, levied and paid upon the
income during the preceding year of every person—
(a) residing or ordinarily resident in the Province
of Alberta during such year; or
(b) who sojourns in Alberta for a period or
periods amounting to one hundred and eighty-three days during such year; or
(c) who is employed in Alberta during such year; or
(d) who, not being resident in Alberta, is
carrying on business in Alberta during such year; or
(e) who, not being resident in Alberta, derives
income for services rendered in Alberta during such year, otherwise than in the
course of regular or continuous employment, for any person resident or carrying
on business in Alberta—
a tax at the rates applicable to
persons other than corporations and joint stock companies set forth in the
first schedule of this Act upon the amount of income in excess of the
exemptions provided in this Act, and every person in respect of whose income
any tax has been so assessed and levied shall pay the amount of the tax so
assessed and levied together with an additional sum of three dollars:
In 1934, this section was amended (ch. 68 of the statutes of
Alberta of 1934, s. 2) by striking out the words
and every person in respect of whose
income any tax has been so assessed and levied shall pay the amount of the tax
so assessed and levied together with an additional sum of $3.
Of course, general definitions or expressions of opinion relating
to statutes framed differently or emanating from legislative bodies endowed
with unlimited power and authority are not helpful in enabling the courts to
determine the specific nature of the tax imposed by the particular statute
under consideration.
The legislature of Alberta is that of a province which, under the
Constitution (Head 92-2), can make laws in relation to: "Direct Taxation
within the Province in order to the raising of a Revenue for Provincial
Purposes".
In the present case, the material words in the clause just quoted
are: "within the Province". They are words of limitation; and it
cannot be useful, from the legal or constitutional point of view, to attempt to
ascertain the validity of legislation adopted under such limited powers by
making a comparison with legislation passed by a parliament enjoying sovereign
powers such as, for example, the Imperial Parliament or the Dominion of Canada,
whose authority to raise money may be exercised "by any mode or system of
taxation" (B.N.A. Act, Head 91(3)).
[Page 439]
Speaking of the latter clause of the statutes, Lord Phillimore in
Caron v. The King(1), on behalf of their Lordships of the Privy
Council could say (p. 1006):
They are statutes for imposing on all citizens contributions
according to their annual means, regardless of, or it may be said, not having
regard to the source from which their annual means are derived.
In the abstract, we may assume that a tax upon a man's entire
income or entire property, intangible as well as tangible, is a personal tax
(see Seligman, vol. 58, Annals of the American Academy of Political and Social
Science). But the author of the article just referred to immediately adds:
A tax upon a particular piece of property or upon a
particular business which affords a revenue is a real tax or a specific tax or
a tax on the thing apart from the person.
In the exercise of its powers under the Constitution of Canada
"in order to the raising of a revenue" for provincial purposes, a
province may no doubt directly tax a person in respect of his income. In that
case, the income is used merely as a just standard or a yard-stick (to use the
expression of counsel for the Attorney-General of Alberta) for computing the
amount of the tax. In such a case the person is validly charged because he is a
resident within the province; and it must be conceded that the legislature in
such a case may use the foreign property together with the local property as
the standard by which the person resident within the province is to be charged.
The legality of the tax, under those circumstances, results from
the fact that the person is found within the province.
Assuming that some ambiguity is to be found in the charging
section of the Alberta Act—and perhaps a little more so since the amendment of
1934 already referred to —I must come to the conclusion that, taking the
statute as a whole and reading sec. 8 in the
light of the other sections and of the general tenor of the statute, the basis
and subject-matter in respect to which the taxation here in question is imposed
is the person who receives the income, and that it is not a specific tax upon
the property, a tax on the thing apart from the person; and, therefore, it is a
personal tax.
[Page 440]
Although I may not agree with the argument that by its very
nature an income tax is a personal tax and that its nature cannot be changed by
the particular language of the statute imposing the tax, or that income tax
cannot lose its character of being a personal tax by the wording of the
statute, I have come to the conclusion that the effect of the Alberta Act,
generally speaking, is to impose the tax, not on the income itself, but on the
person receiving the income, for the following reasons:
1. The tax is to be paid in respect of the income earned during
the preceding year; and it is based upon the aggregate amount of that income,
irrespective of the source from which it was derived: income as such; income
envisaged as a whole, as a mere figure representing the total revenue enjoyed
by the ratepayer during the preceding year, without individualizing any of the
moneys comprised in such revenue;
2. It is a tax imposed upon the income of the ratepayer, not upon
the income derived from any specified property;
3. It is not a tax levied on property. In the words of McLennan
J., in Abbott v. City of St. John,
It is not a part of the income * * * No attempt is made to
seize or appropriate the income itself.
The assessment entirely disregards the
source of the annual means (Caron v. The King;
it creates no lien on the moneys or on any particular part thereof. Indeed,
when the tax is assessed and when it comes due, the moneys which went to make
up the income might have completely disappeared. The person alone is called
upon to make good the payment of the tax, which is recoverable by action
against that person and, if not paid then, is levied by distress, not against
the particular property from which the income was derived but against that
person's property generally and indiscriminately.
The appeal should be dismissed with costs.
The judgment of Kerwin and Taschereau JJ. and of Gillanders J. ad
hoc was delivered by
KERWIN J.—In this action the appellant seeks a declaration
that he is not liable to income tax in the province of Alberta with respect to
certain dividends received by him.
[Page 441]
The case came on for trial before Ewing
J., in the Supreme Court of Alberta, on an agreed statement of facts. This
statement is summarized by the learned trial judge in a succinct but
comprehensive manner and I can do no better than quote his summary.
The plaintiff is the owner of 600 shares in the Weyerhaueser
Timber Company, which corporation declared and paid the dividend in question.
This company was incorporated under the laws of the state of Washington and has
its head office at Tacoma in the said state. It has no office in the province
of Alberta and does not carry on any part of its business in the said province.
From time to time during the years 1933 to 1936 inclusive, this company
declared and paid dividends in respect of the plaintiff's 600 shares, which
dividends amounted during these years to about $11,100. The plaintiff is
domiciled in Calgary but spent the winter months during the said years either
at Los Angeles in California or at Victoria in British Columbia. The dividends
in question were declared and were payable at Tacoma. Cheques were issued for
the dividends, which cheques were payable at Tacoma.
Having regard to the use made by the plaintiff of her
dividend cheques, these cheques fall into three classes, viz:
1. Those cheques which never came into Alberta but were
deposited by the plaintiff in banks either in British Columbia or in California
and no part of the moneys represented by these cheques was ever brought by the
plaintiffs into Alberta.
2. Those cheques which were received by the plaintiff in
Alberta and either cashed in Alberta or deposited in banks in Alberta.
3. Those cheques which were received by the plaintiff in
Alberta and endorsed by her and then forwarded to British Columbia or
California for deposit in banks there.
It is admitted that these dividends constitute
"income" of the plaintiff for the said years within the meaning of
that word as contained in section.3 of the Income Tax Act, being chapter
5 of the statutes of Alberta, 1932.
Mr. Justice Ewing continues:
As this section defines "income" as including
"profit, gain or gratuity, whether derived from sources within Alberta or
elsewhere," it is clear that in terms it includes the dividends in
question and the only question arising in this action is the validity of that
portion of the statute which imposes a tax on income originating elsewhere than
in the province.
As to this last statement, it would appear that the first
question must be the construction of the Act since the appellant's contention
is that the statute imposes a tax on property only, while the respondent
contends that, so far as this appeal is concerned, it imposes a tax on persons
with respect to income.
Turning then to the Act, we find that section 3 provides in part:
[Page 442]
3. Without limiting the meaning of "income for the
purposes of this Act, "income" includes the annual net profit or gain
or gratuity, whether ascertained and capable or computation as being wages, salary,
or other fixed amount, or unascertained as being fees or emoluments, or as
being profits from a trade, or commercial, or financial, or other business or
calling, directly or indirectly received by a person from any office or
employment, or from any profession or calling, or from any trade, manufacture
or business, as the case may be, whether derived from sources within Alberta or
elsewhere; and shall include the interest, dividends or profits directly or
indirectly received from money at interest upon any security or without
security, or from stocks, or from any other investment, and, whether such gains
or profits are divided or distributed or not, and also the annual profit or
gain from any other source.
The legislature here includes "net
profit or gain * * * whether derived from sources in Alberta or
elsewhere." By section 4, certain incomes are not liable to taxation, that
is the incomes of named individuals, bodies corporate, etc. By section 5,
"income" as defined in section 3 is subject to specified exemptions
and deductions. By section 6,
in computing the amount of the
profits or gains to be assessed a deduction shall not be allowed in respect of
certain enumerated matters. By subsection
1 of section 7 a deduction from the tax otherwise payable is allowed in certain
cases for income tax paid elsewhere in respect of income derived from sources
therein:
7.—1 A taxpayer shall be entitled to deduct from the tax
that would otherwise be payable by him under this Act the amount paid to any
other province of Canada or to Great Britain or any of its self-governing
dominions, colonies or dependencies other than the Dominion of Canada for
income tax in respect of the income of the taxpayer derived from sources
therein if such province or Great Britain or such self-governing dominion,
colony or dependency imposing such tax allows a similar credit to persons in
receipt of income derived from sources within Alberta.
Subsection 1 of section 8 provides:
8.—1 There shall be assessed, levied and paid upon the
income during the preceding year of every person—
(a) residing or ordinarily resident in the Province
of Alberta during such year; or
(b) who sojourns in Alberta for a period or
periods amounting to one hundred and eighty-three days during such year; or
(c) who is employed in Alberta during such year; or
(d) who, not being resident in Alberta, is
carrying on business in Alberta during such year; or
(e) who, not being resident in Alberta, derives
income for services rendered in Alberta during such year, otherwise than in the
course of regular or continuous employment, for any person resident or carrying
on business in Alberta—
[Page 443]
a tax at the rates applicable to
persons other than corporations and joint stock companies set forth in the
first schedule of this Act upon the amount of income in excess of the
exemptions provided in this Act, and every person in respect of whose income
any tax has been so assessed and levied shall pay the amount of the tax so
assessed and levied together with an additional sum of three dollars:
Provided that the said rates shall not apply to corporations
and joint stock companies.
The words underlined were repealed but in
my opinion, as indicated later, such repeal has no effect upon the proper
construction of the enactment for the purposes of this appeal. Subsection 2 of
section 8 provides that certain corporations and joint stock companies shall
pay a tax. By subsection 3, every gas company shall be entitled to deduct
certain amounts from the tax payable in any year by such company. By subsection
4, every electric light company and every power company shall be entitled to
deduct specified amounts from the tax payable in any year by such company, and
by subsection 5, in the case of a public utility corporation, no allowance is
to be made by the Board of Public Utility Commissioners in fixing or regulating
the company's charges for any tax payable by such corporation pursuant to the
Act. It might here be interpolated that with reference to all these
corporations and joint stock companies, the tax appears to be imposed upon them
with respect to their income.
Sections 23 to 28 deal with non-residents. By section 32, every
person liable to taxation must file a return of his total income during the
last preceding year, and under section 47, every person liable to pay any tax
under the Act shall send with the return of the income "the tax of three
dollars and" not less than one-fourth of the amount of such tax. The words
in quotation marks were repealed at the same time as the repeal of the words
underlined in subsection 1 of section 8 and I take it that the reason for the
repeal of the provision last mentioned is the same as that for the repeal of
the words mentioned in section 47.
By section 48, if any person liable to pay any tax under the Act
pays less than the Act requires at the required times, he is to pay interest.
By section 68, all taxes, interest, penalties and costs assessed or imposed or
ordered
[Page 444]
to be paid under the provisions of the
Act shall be deemed to be a debt due to His Majesty and shall be recoverable as
such in a court of competent jurisdiction.
While, therefore, subsection 1 of section 8 states that a tax
shall be assessed, levied and paid upon income, it is to be noted that by the
same subsection the tax is to be paid in one year upon the income earned during
the preceding year. Taken in conjunction with the words used in clauses (a),
(b) and (c) of the subsection,—" residing or
ordinarily resident", "sojourn", "employed", the
reference to income "whether derived from sources within Alberta or
elsewhere", in section 3 and the other sections noted above, I am of
opinion that the Act, taken as a whole, imposes a tax on a person such as the
appellant who is found in the province with respect to his income, including that
derived from sources outside the province.
There was for some time in Great Britain considerable divergence
of opinion as to what was taxed by the Imperial Income Tax Acts but in Colquhoun
v. Brooks, Lord
Herschell stated that
The income tax Acts * * * themselves
imposed a territorial limit; either that from which the taxable income is
derived must be situate in the United Kingdom or the person whose income is to
be taxed must be resident there.
And in Whitney v. Inland
Revenue Commissioners, Lord
Wrenbury says:
The policy of the Act is to tax the person resident in the
United Kingdom upon all his income whencesoever derived and to tax the person
not resident in the United Kingdom upon all income derived from property in the
United Kingdom. The former is taxed because (whether he be a British subject or
not) he enjoys the benefit of our laws for the protection of his person and his
property. The latter is taxed because in respect of his property in the United
Kingdom he enjoys the benefit of our laws for the protection of that property.
Lord Wrenbury then refers to the extract
from Colquhoun v. Brooks(1) already set out as stating the matter
in the same way.
It is true that in dealing with Imperial taxation Acts, the
courts are not troubled with any constitutional difficulties and that no doubt
accounts for the various expressions used to describe the tax. However, the
quotations from the two judgments of the House of Lords are, I think, of
assistance in coming to a conclusion in the present appeal.
[Page 445]
In this connection the solution of the
problem is not assisted by Lord Macnaghten's famous dictum in London County
Council v. Attorney-General that
"income tax, if I may be pardoned for saying so, is a tax on income
", because what Lord Macnaghten meant, as appears from what immediately
follows, is that it is not, for example, a tax on capital. The Alberta Act is
phrased differently from those considered in the two decisions referred to but,
upon consideration, I have concluded that the former should, for the purposes
of this appeal, be construed in the manner already indicated.
It is said, that this construction is precluded by the judgment
of the Privy Council in Provincial Treasurer of Alberta v. Kerr.
It is important to notice with what that case was concerned. The Alberta Succession
Duties Act was there before the courts and one question was whether the tax
imposed was a direct tax. The other question was not whether a tax was imposed
on a person or a property but whether it was imposed on property or a
transmission. It was with reference to that point that Lord Thankerton remarked
at page 717:
There can be no doubt that the Alberta Succession Duties
Act purports to impose taxation on the basis (inter alia) of
personal property situate outside the province
and it was on the basis of that
construction that it was stated that
identification of the subject matter
of the tax is naturally to be found in the charging section of the statute,
and the conclusion was reached that the
subject matter of the taxation was property and not the transmission of
property. On the point as to whether the taxation was direct taxation, it was
pointed out, at page 722, that the duties in question were imposed on the
executors on their application for probate; so that in the same Act the tax was
found as to property within the province to be a tax on persons but invalid
because it was not direct taxation, and as to personal property outside the
province, the Act was invalid both because the taxation was not direct and because
it was not within the province. The decision affords no assistance in the
determination of this appeal and the remarks of Lord Thankerton must be read
with reference to the matters under consideration.
[Page 446]
This being the proper construction of the statute, in my opinion
the decision in Bank of Toronto v. Lambe
is authority that the Alberta legislature had the power to provide as it has.
The question not being before us, it is strictly unnecessary to express any
opinion as to whether the legislature also imposed a tax on the income within
Alberta of non-residents and, if so, as to the constitutional validity thereof.
The appeal should be dismissed with costs.
HUDSON J.—The appellant, Mrs. Kerr, is domiciled in and a
resident of Alberta. She has been assessed for income tax by the taxing
authorities of the province in respect of her entire income, including sums
received and spent by her while temporarily outside the province. She claims in
this action a declaration that she is not liable to pay taxes in respect of
sums received by her outside the province and that, if such tax is permitted by
the provincial Act, such statute is to that extent ultra vires of the
provincial legislature and null and void.
The respondent, on the other hand, contends that the assessment
is within the Act and that the Act is within the legislative jurisdiction of
the province, because the tax is imposed on a person and not on property.
Under section 92(2) of the British North America Act the
province has power over "direct taxation within the province in order to
the raising of a revenue for provincial purposes".
Income tax is of course a direct tax and there would seem to be
no doubt about the power of the legislature to measure the tax by reference to
the value of property or assets of the taxpayer beyond, as well as within, the
territorial limits of the province. The leading case of Bank of Toronto v.
Lambe(1) is sufficient authority for this view. Lord Hobhouse said at
page 584:
The next question is whether the tax is taxation within the
province. It is urged that the bank is a Toronto corporation, having its
domicile there, and having its capital placed there; that the tax is on the
capital of the bank; that it must therefore fall on a person or persons, or on
property, not within Quebec. The answer to this argument is that class 2
[Page 447]
of sect. 92 does not require that
the persons to be taxed by Quebec are to be domiciled or even resident in
Quebec. Any person found within the province may legally be taxed there if taxed
directly.
* * *
The bank itself is directly ordered
to pay a sum of money; but the legislature has not chosen to tax every bank,
small or large, alike, nor to leave the amount of tax to be ascertained by
variable accounts or any uncertain standard. It has adopted its own measure,
either of that which it is just the banks should pay, or of that which they
have means to pay, and these things it ascertains by reference to facts which
can be verified without doubt or delay.
To the same effect are the succession duty cases, where taxes
have been held to be validly imposed on beneficiaries domiciled or resident
within the province on the value of property outside the province which they
take by succession.
The charging section of the provincial Act, statutes of Alberta,
1932, chapter 5, is section 8 and reads as follows:
8.(1) There shall be assessed, levied and paid upon the
income during the preceding year of every person—
(a) residing or ordinarily resident in the
Province of Alberta during such year;
* * *
a tax at the rates applicable to
persons other than corporations and joint stock companies set forth in the
first schedule of this Act upon the amount of income in excess of the
exemptions provided in this Act * * *
Section 3 defines income:
3. Without limiting the meaning of "income" for
the purposes of this Act, "income" includes the annual net profit or
gain or gratuity * * * received by a person from any office or employment, or
from any profession or calling, or from any trade, manufacture or business, as
the case may be, whether derived from sources within Alberta or elsewhere; and
shall include the interest, dividends or profits directly or indirectly
received from money at interest upon any security or without security, or from
stocks, or from any other investment * * *
The tax is imposed on the income of a person, not on the income
of property. The section is indifferent as to the source or origin of the
income, unless where exceptions are especially mentioned. It would appear then,
on reading the section, that where the taxpayer is both domiciled and resident
within the province the primary question for the assessor is how much did the
taxpayer get, not where or how he did get it.
The language of the provincial Act is almost identical and
apparently is taken from the provisions of the
[Page 448]
Dominion Income Tax Act. In the
latter the charging section is section 9 and it is identical with section 8 of
the provincial Act as above.
There are several cases where the provisions of the Dominion Act
came before the courts for consideration.
Smith v. Attorney-General of Canada.
Mr. Justice Audette held that profits arising from illicit liquor transactions
are income within the meaning of the Income War Tax Act and taxable. At
page 195 he says:
* * * the appellant comes under section 4 of the Taxing Act,
being a person residing in Canada, carrying on business therein and his income
is thereunder subject to assessment. * * * It is not necessary to inquire into
the source from which the revenue is derived, as the tax is a charge imposed by
the legislature upon the person, and all his revenues—from whatever source
derived—mingle with the rest of the income.
This decision of Mr. Justice Audette was
reversed by this Court. But
on further appeal to the Judicial Committee of the Privy Council, the decision
of this court was reversed. Lord
Haldane held that Parliament had power to impose this tax if they so chose. The
words construed literally include these profits and there was not shown that it
was intended to exclude them. The judgment of Mr. Justice Audette was restored.
In the case of Waterous v. Minister of National Revenue,
a company declared a dividend payable in Dominion of Canada war loan bonds held
by it, at the par value thereof. The bonds each provided that
the obligation represented by this
bond and the annexed interest coupons and all payments in discharge thereof are
and shall be exempt from taxes, including any income, imposed in pursuance of
any legislation enacted by the Parliament of Canada.
Appellant, a shareholder in the company,
received a dividend in bonds as aforesaid, and was assessed upon the amount
thereof under the Income War Tax Act. It was held by this court that the
assessment was valid. In giving judgment of the Court, Mr. Justice Smith says
at page 410:
I think it is clear that this is not a taxation on the
obligation represented by the bond or upon payments in discharge
thereof, but merely taxation upon the appellant's income, which is in part
measured by the amount of the bond which he received as divided, and which
constitutes income.
[Page 449]
Mr. Justice Smith further referred with approval to the decision
in the case of In re McLeod v. The Minister of Customs and Excise,
at page 464 where Mr. Justice Mignault made the following remark:
All this is in accord with the general policy of the Act
which imposes the income tax on the person and not on the property. In other
words, it is the person who is assessed in respect of his income.
In Abbott v. City of Saint John,
it was held by this Court that the city of Saint John had authority to assess
the appellant, an official of the Dominion Government, on his income as such,
he being a resident of the city of Saint John and the city being empowered
under provincial legislation to impose an income tax. It was there said by Mr.
Justice Maclennan at p. 616:
From all this it is apparent that the tax to be levied in
any year is not a part of the income, as such, of the inhabitant, but a sum of
money to be measured by, or in proportion to the amount of his income during
the preceding year. It is the inhabitant who is taxed for his fair and
reasonable share of the expenses incurred by the municipality on his behalf,
and on behalf of all the other inhabitants, and his income for the preceding year
is referred to solely for the purpose of ascertaining what is just and
reasonable that he should be required to pay. No attempt is made to seize or
appropriate the income itself, or to anticipate its payment. He receives it,
and applies it as he thinks fit.
This decision was approved of by the
Judicial Committee of th ePrivy Council in the case of Caron v. The
King. Lord
Phillimore says at page 1006
They are statutes for imposing on all citizens contributions
according to their annual means, regardless of, or it may be said not having
regard to, the source from which their annual means are derived.
These cases decided in effect that a tax imposed in similar
language to that under consideration here was a tax on a person rather than on
property or on a source of revenue. There the courts were not called on to
decide whether or not the tax was imposed "within the province But if the
tax is imposed on a person and that person is resident and domiciled in the
province, it must, I think, follow that the tax is imposed within the province.
I cannot find that any of the other provisions of the Act
conflict with this view, rather do they support it. Under section 32(1) the
taxpayer is bound to make a return in each year before the 31st of March of his
income for the
[Page 450]
preceding year. Meanwhile the taxpayer is
free to spend his income as he pleases. There is no lien on any of the moneys
received and the remedy for non-payment is first, by action under section 68
and, after failure to pay, a distress may be levied.
I think the appeal should be dismissed with costs.
Application dismissed with costs.
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