Reference re Goods and Services Tax,
[1992] 2 S.C.R. 445
IN THE MATTER OF Section 27 of
the
Judicature Act, R.S.A. 1980, c. J‑1
AND IN THE MATTER OF a Reference by
the
Lieutenant‑Governor in Council
to the
Court of Appeal of Alberta for hearing
and consideration of the questions set
out
in Order-in-Council O.C. 538/90
in respect
of Bill C‑62, an Act proposed by
the House
of Commons of Canada to amend the Excise
Tax Act ,
the Criminal Code , the Customs
Act , the Customs
Tariff, the Excise Act , the Income
Tax Act,
the Statistics Act, and the Tax
Court of
Canada Act
between
The Attorney General of Canada Appellant
v.
The Attorney General for Alberta Respondent
and
The Attorney General for Ontario,
the Attorney General of British
Columbia,
the Attorney General for Saskatchewan
and
the Canadian Federation of Independent
Business Interveners
and between
The Attorney General for Alberta Appellant
v.
The Attorney General of Canada Respondent
and
The Attorney General for Ontario,
the Attorney General of British
Columbia,
the Attorney General for Saskatchewan
and
the Canadian Federation of Independent
Business Interveners
Indexed as: Reference re
Goods and Services Tax
File Nos.: 22635, 22664.
1992: February 24, 25;
1992: June 25.
Present: Lamer C.J.
and La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory, McLachlin,
Stevenson*
and Iacobucci JJ.
on appeal from the court of appeal for
alberta
Constitutional law ‑‑
Distribution of legislative powers ‑‑ Taxation ‑‑ Goods
and Services Tax ‑‑ Whether GST Act ultra vires Parliament in whole
or in part ‑‑ Whether suppliers under GST Act entitled to recover
expenses incurred in collection and remittance of GST from consolidated revenue
fund ‑‑ Constitution Act, 1867, ss. 91(3) , 92(13) , 103 ‑‑
Excise Tax Act, R.S.C., 1985, c. E‑15 , Part IX.
Constitutional law ‑‑
Intergovernmental immunity from taxation ‑‑ Appropriation of
provincial funds ‑‑ Provinces obliged under GST Act to collect and
remit GST on taxable supplies when they act as suppliers ‑‑ Whether
obligation to collect and remit GST amounts to taxation of provinces' property
or appropriation of provincial funds for federal purposes ‑‑
Constitution Act, 1867, ss. 91(3) , 125 , 126 ‑‑ Excise Tax Act,
R.S.C., 1985, c. E‑15 , Part IX.
Agency ‑‑
Obligations of principal ‑‑ Remuneration of agent ‑‑
Vendors of taxable supplies appointed agents of Crown in right of Canada under
GST Act for purposes of collecting and remitting GST ‑‑ Whether
vendors entitled to recover expenses incurred in collection and remittance of
GST ‑‑ Excise Tax Act, R.S.C., 1985, c. E‑15, ss. 122 ,
123 , 221 , 240 , 346 .
Appeal ‑‑
Reference ‑‑ Abstract question ‑‑ Whether Court should
decline to answer question.
Practice ‑‑
Interveners ‑‑ New issues ‑‑ Reference ‑‑
New issues raised by intervener falling outside scope of reference ‑‑
Whether Court should consider intervener's arguments.
The Lieutenant
Governor in Council of Alberta referred to the Court of Appeal of that province
several questions challenging the constitutionality of the federal Goods and
Services Tax ("GST"), which was enacted by Part IX of the Excise
Tax Act ("GST Act "). The GST, a value‑added tax, is
designed to be a tax on consumption. It is imposed on any supply other
than an exempt supply. A taxable supply attracts the tax each time it is
sold. To the extent that the purchaser of a taxable supply uses that good or
service in the production of other taxable supplies, it is entitled to an
"input tax credit" and can recover the tax it has paid from the
government. A number of subordinate entities created by the provincial governments,
such as municipalities, universities, public colleges, public hospitals,
schools and school authorities, are entitled to claim input tax credits to
the extent that their purchases are used in making taxable supplies, and they
are eligible for a special rebate of a portion of the tax paid on other
purchases. The provinces are not liable to pay tax on their
purchases. Under the GST Act , every vendor of a taxable supply,
including a province, is appointed an agent of the Crown in right of Canada for
the purposes of the collection and remittance of the GST .
The questions
referred to the Court of Appeal read as follows:
1.Having
regard to the Constitution Acts, 1867 to 1982 or otherwise, is the GST
Act ultra vires the Parliament of Canada in whole or in part and, if so, in
what particular or particulars and to what extent?
2.Does
the system of collection under the GST Act
(a)at
any stage prior to the supply of taxable supplies to consumers or to suppliers
of exempt supplies,
(b)prior
to the collection by a supplier from a recipient, or
(c)otherwise
constitute
an infringement of the jurisdiction of the Legislature of Alberta with respect
to the regulation of property and civil rights pursuant to s. 92(13) of the Constitution
Act, 1867 , or of another provincial power under that Act , so that the GST
Act in its application of the system of collection or any part of it is ultra
vires the Parliament of Canada?
3.Having
regard to s. 103 of the Constitution Act, 1867 and the common law, are
suppliers entitled to charge and to collect from the Consolidated Revenue Fund
of Canada all costs, charges and expenses incidental to collecting and paying a
remittance under the GST Act ?
4.Having
regard to s. 125 of the Constitution Act, 1867 ,
(a)is
the imposition of obligations under the GST Act on the Government of
Alberta as a supplier to collect and pay a remittance on a taxable supply that
is Alberta property ultra vires the Parliament of Canada,
(b)does
the imposition of a remittance under the GST Act on a recipient from the
Government of Alberta of a taxable supply that is Alberta property or that
generates revenue to the Government of Alberta constitute taxation of Alberta
property that is ultra vires the Parliament of Canada, and
(c)does
the imposition of a remittance that is computed under s. 154 of the GST
Act on the basis of consideration for a taxable supply that includes an
amount of provincial tax constitute taxation of Alberta property that is ultra
vires the Parliament of Canada?
5.Having
regard to s. 126 of the Constitution Act, 1867 , is the requirement
under the GST Act that the Government of Alberta use part of the
Government of Alberta's revenue
(a)to
collect a remittance or cause a remittance to be collected, or
(b)to
pay a remittance prior to the receipt of the remittance from the recipient of a
taxable supply
ultra vires the Parliament of Canada?
6.Having
regard to ss. 125 and 126 of the Constitution Act, 1867 ,
(a)is
the purchase of taxable supplies by provincial authorities, or any of them, in
the course of their exercising a delegated constitutional power of the
Government of Alberta exempt from tax under the GST Act ,
(b)is
the purchase of taxable supplies by provincial authorities, or any of them, designated
as agents of the Government of Alberta, in the course of their exercising a
delegated constitutional power of the Government of Alberta, exempt from tax
under the GST Act ,
(c)is
the acquisition of taxable supplies by the Crown Purchase Agency referred to in
section 2(k) of the Appendix exempt from tax under the GST Act , and
(d)is
the acquisition or use by provincial authorities, or any of them, in the course
of their exercising a delegated constitutional power of the Government of
Alberta, of taxable supplies that are provided by the Crown Purchase Agency to
the provincial authorities exempt from tax under the GST Act ?
The opinion of the
Court of Appeal was unanimous, except on question 4. The answer to
question 1 was no, though the provisions referred to in question 5(a) and
(b) are not binding on the province. The answer to question 2 was no.
The answer to question 3 was yes, but with four limiting qualifications.
The answer to question 4 was yes, with qualifications that differed between the
majority and the minority. The answer to question 5 was yes, to the
extent that the GST Act purported to impose collection and remittance
obligations upon the province. The Court of Appeal declined to answer
question 6.
The Attorney
General of Canada appealed from the judgment of the Court of Appeal with
respect to the answers to questions 1, 3, 4 and 5. The Attorney General
for Alberta appealed with respect to the answers to questions 1, 2, 3, 4
and 6. In this Court, as in the Court of Appeal, the Attorney General
for Ontario sought to raise a new ground for attacking the constitutionality of
the GST Act , arguing that the Act had never been properly passed through
Parliament because the "closure" and "guillotine" rules
invoked by the federal government in the passage of the GST Act were themselves
ultra vires.
Held: The appeal of the Attorney General
of Canada is allowed and the appeal of the Attorney General for Alberta is
dismissed. Questions 1 to 5 were answered in the negative. The Court
declined to answer question 6.
Per Lamer C.J. and Sopinka,
Gonthier, Cory, McLachlin and Iacobucci JJ.: The GST Act as a whole is a
valid exercise of the federal taxation power under s. 91(3) of the Constitution
Act, 1867 . The GST Act is properly characterized as being in relation
to a mode or system of taxation. Its sole purpose is to raise revenue for
the federal government, and the effects produced by the Act on matters within
provincial jurisdiction over property and civil rights are incidental to this
purpose. The means chosen to raise revenue is a tax on value added
throughout the chain of production, with input tax credits granted in respect
of taxable supplies used in the production of other taxable supplies. To sever
the system of input tax credits from the revenue-raising portions of the Act
would fundamentally change the character of the tax, from a value‑added
tax to a federal retail sales tax, and would carve out an exception to the text
of s. 91(3) which the words "any Mode or System of Taxation"
cannot reasonably bear. The means chosen is sufficiently well integrated
into the scheme of the GST Act as a whole that the intrusion upon provincial
jurisdiction is justified.
The registered suppliers
under the GST Act do not have a right, under s. 103 of the Constitution
Act, 1867 , to be reimbursed from the consolidated revenue fund of Canada
for all expenses and charges incurred in collecting the
GST . Section 103 is an appropriations provision, permitting the
Government of Canada to make disbursements from the consolidated revenue fund
for the purposes of raising revenue without the necessity of annual
Parliamentary votes. Its purpose is to immunize the revenue‑collecting
machinery of the federal government from the uncertainties of annual
appropriations by Parliament. It was never intended to create a legally
enforceable right in third parties to receive compensation for revenue‑raising
duties imposed on them by Parliament. Even if s. 103 were to confer
authority on the federal government to compensate such third parties, it would
not create a correlative power in those third parties to enforce these
payments. The decision to spend appropriated funds remains within the
discretion of the government.
As well, the
vendors of taxable supplies, as agents of the government for the collection and
remittance of the GST , are not entitled to recover at common law the expenses
incurred in the course of the agency. Firstly, the presumption that compensation
is to be paid where property is taken under a statutory scheme, unless this is
expressly excluded by the terms of the statute, has no application in the case
of the GST collection regime since no property of the supplier is
"taken" by the imposition of the GST collection and remittance
obligations. Secondly, Parliament has the right to legislate to impose
duties relating to the collection of taxes without reimbursing those upon whom
the duties are imposed. In any case, the GST Act does contemplate a limited
right of reimbursement in the form of the transitional credit for small
businesses. Since Parliament did direct its attention to the question of
compensation by providing partial compensation in certain cases, common law
rights which might have operated but for the statute cannot be relied
upon. Thirdly, there is no question of any contractual relationship
between the vendors of taxable supplies and the Government of Canada. In
the absence of a contract, the common law duty of principals to pay remuneration
for services rendered has no application to vendors of taxable
supplies. Fourthly, while the principal has a duty to indemnify an agent
for tortious liability to third parties incurred in good faith in the course of
the agency, compliance with a statutorily imposed duty would constitute a
defence in the unlikely event that such claims of liability were to arise.
Finally, the suggestion that registered suppliers have a restitutionary claim
against the federal government for the costs and expenses of collecting the GST
is without merit.
The GST Act does
not violate s. 125 of the Constitution Act, 1867 . The province's
obligation under the GST Act to collect and remit the GST from purchasers of
taxable supplies when the province acts as supplier does not amount to taxation
of the property of the province. The GST only becomes payable by virtue of
transactions in which some property interest has left the supplier and become
vested in the purchaser. It is clearly the purchaser, not the supplier, which is
liable to pay the tax. The possibility that the application of the GST on
property sold by the provinces may reduce provincial revenues does not render
the GST a "taxation" of provincial property. Nor does the
calculation of the GST as a fraction of a price a portion of which is
provincial tax amount to the federal taxation of provincial tax. Rather, the
price paid for a taxable supply, including a component that is provincial tax,
is the measure chosen by Parliament by which the liability of the purchaser to
pay the GST is calculated.
The GST Act does
not violate s. 126 of the Constitution Act, 1867 . The obligation
imposed by the Act upon provinces to collect and remit the GST when they act as
suppliers does not amount to the appropriation of provincial funds for federal
purposes by Parliament. The obligation is clearly not the same as an
obligation to pay out a sum of money to the federal government from the
provincial consolidated revenue fund. Parliament has simply imposed certain
administrative burdens upon suppliers that are necessarily incidental to a
valid federal scheme of "taxation" within the meaning of
s. 91(3) of the Constitution Act, 1867 . It is only in so far as the
province operates as a commercial entity that it becomes subject to these
burdens.
Question 6
should not be answered. This question is highly abstract and cannot precisely
or usefully be answered in its present form.
The arguments of
the Attorney General for Ontario should not be considered. The issues
sought to be raised by the intervener, which relate to the regularity of the
adoption of the GST Act , fall outside the intended scope of the Reference.
Per La Forest and L'Heureux‑Dubé JJ.: The
GST Act is intra vires Parliament. The Act falls squarely within
s. 91(3) of the Constitution Act, 1867 . The GST, a value‑added
tax, is intended to raise money. It is in pith and substance a mode or system
of taxation, so one need not enquire any further about whether it might be
justified as necessarily incidental to the legislative scheme. The fact that
it may affect activities within provincial regulatory competence is
immaterial. It flows from this that the collection provisions of the GST
Act , which are simply part and parcel of the mode or system of taxation adopted
by Parliament, are also intra vires. There is no indication that they
were enacted for any other purpose than to collect the tax, and colourability
is not lightly to be imputed. To sever the provisions of the Act that do not
result in raising revenues from those that do would result in a completely
different system of taxation. It would fetter Parliament's discretion to raise
money by any mode or system of taxation. That the collection provisions
may have an impact on property and civil rights is of no moment. There is no
hermetic division between the federal legislative domain and that covered by
property and civil rights. Some spillover is inevitable.
Section 103 of
the Constitution Act, 1867 merely provides for the appropriation of
monies from the consolidated revenue fund of Canada and does not impose an
independent legal obligation on Canada to compensate collecting agents.
Rather, it refers to costs, charges and expenses the Government of Canada is
obliged to pay by statute or contract independently of
s. 103 . Whatever duty might reside in the Crown at common law to pay
suppliers for collecting the tax, by providing in the GST Act for a one‑time
transitional credit for small businesses to assist them in offsetting their
initial compliance costs, Parliament has given a clear indication that it did
not intend to provide further compensation for the purpose.
For the reasons
given by Lamer C.J., the GST Act does not violate s. 125 of the Constitution
Act, 1867 . The GST is not, in pith and substance, a tax imposed on
provincial property. It is a tax imposed against the purchaser of goods or
services and simply collected by the province in common with other suppliers of
goods or services. The province is in no different position from an employer
obliged to withhold income under the Income Tax Act.
Under s. 126
of the Constitution Act, 1867 , a province has the exclusive power to
appropriate money from its consolidated revenue for provincial purposes. The
federal government cannot impose on a province the cost of carrying out a
federal activity in the province. It does not follow, however, that an
administrative duty reasonably placed by Parliament on a province in the course
of enacting a scheme falling squarely within a federal power will be invalid
because the performance of that duty will in consequence require some
expenditure by the province. In creating a tax system, which falls in pith and
substance within s. 91(3) of the Constitution Act, 1867 , Parliament
may incidentally require the provinces to assume such a burden. Otherwise, the
broad taxing power there granted would be frustrated.
Question 6
should not be answered. Parliament has seen fit not to impose duties and taxes
of the kind addressed in that question. The Court would ill serve the nation if
it attempted to respond to a question raising such fundamental issues in the
abstract.
For the reasons
given by Lamer C.J., the arguments of the Attorney General for Ontario
should not be considered.
Cases Cited
By Lamer C.J.
Applied: General Motors of Canada Ltd. v.
City National Leasing, [1989] 1 S.C.R. 641; McEvoy v. Attorney General
for New Brunswick, [1983] 1 S.C.R. 704; Reference re Agricultural
Products Marketing Act, [1978] 2 S.C.R. 1198; distinguished: Reference
re The Employment and Social Insurance Act, [1936] S.C.R. 427; Manitoba
Fisheries Ltd. v. The Queen, [1979] 1 S.C.R. 101; Reference re Exported
Natural Gas Tax, [1982] 1 S.C.R. 1004; Regional Municipality of Peel v.
MacKenzie, [1982] 2 S.C.R. 9; Attorney‑General for Quebec v.
Nipissing Central Railway Co., [1926] A.C. 715; Coughlin v. Ontario
Highway Transport Board, [1968] S.C.R. 569; referred to: The
Queen v. Waterous Engine Works Co. (1893), 3 Que. Q.B. 222; Pettkus v.
Becker, [1980] 2 S.C.R. 834; Zaidan Group Ltd. v. London (City),
[1991] 3 S.C.R. 593, aff'g (1990), 71 O.R. (2d) 65 (C.A.); Phillips v. City
of Sault Ste. Marie, [1954] S.C.R. 404; Reference re Troops in Cape
Breton, [1930] S.C.R. 554; Valin v. Langlois (1879), 3 S.C.R. 1; Reference
re Education System in Montreal, [1926] S.C.R. 246; Reference re Waters
and Water‑Powers, [1929] S.C.R. 200; Reference re Angliers Railway
Crossing, [1937] S.C.R. 451; Reference re Authority of Parliament in
Relation to the Upper House, [1980] 1 S.C.R. 54.
By La Forest J.
Distinguished: Reference re Exported Natural Gas
Tax, [1982] 1 S.C.R. 1004; Attorney‑General for Canada v. Attorney‑General
for Ontario, [1937] A.C. 355; referred to: Friends of the Oldman
River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3; Whitbread
v. Walley, [1990] 3 S.C.R. 1273; Reference re Anti‑Inflation Act,
[1976] 2 S.C.R. 373; Bank of Montreal v. Hall, [1990] 1 S.C.R. 121; Zaidan
Group Ltd. v. London (City), [1991] 3 S.C.R. 593; Reference re Troops in
Cape Breton, [1930] S.C.R. 554; Valin v. Langlois (1879), 3 S.C.R.
1; Coughlin v. Ontario Highway Transport Board, [1968] S.C.R. 569; Regional
Municipality of Peel v. MacKenzie, [1982] 2 S.C.R. 9.
Statutes and Regulations Cited
Constitution
Act, 1867,
ss. 91(3) , 92(13) , 102 , 103 , 104 , 105 , 106 , 125 , 126 .
Excise
Tax Act, R.S.C.,
1985, c. E‑15 [am. 1990, c. 45, s. 12], ss. 122 , 123 ,
154 , 221 , 222 , 240 , 313(1) , 346 .
Income
Tax Act, S.C. 1970‑71‑72,
c. 63, ss. 153, 227(4).
Judicature
Act, R.S.A. 1980,
c. J‑1, s. 27.
Authors Cited
Fridman,
G. H. L. The Law of Agency, 5th ed. London: Butterworths,
1983.
APPEAL from a
judgment of the Alberta Court of Appeal (1991), 82 Alta. L.R. (2d) 289, 117
A.R. 321, 84 D.L.R. (4th) 577, [1992] 1 W.W.R. 1, in the matter of a reference
concerning the federal Goods and Services Tax. The appeal of the Attorney
General of Canada is allowed and the appeal of the Attorney General for Alberta
is dismissed.
T. B. Smith, Q.C., James M. Mabbutt,
Q.C., and James N. Shaw, for the appellant/respondent.
James C. MacPherson, Peter J. McIntyre
and Gina A. Ross, for the respondent/appellant.
Janet E. Minor, Peter Landmann and John
Terry, for the intervener the Attorney General for Ontario.
Hunter W. Gordon, for the intervener the Attorney
General of British Columbia.
Graeme G. Mitchell, for the intervener the Attorney
General for Saskatchewan.
F. J. C. Newbould, Q.C., and Freya
Kristjanson, for the intervener the Canadian Federation of Independent
Business.
//Lamer C.J.//
The judgment of
Lamer C.J. and Sopinka, Gonthier, Cory, McLachlin and Iacobucci JJ. was
delivered by
Lamer C.J. --
1. The Facts
These appeals
involve a challenge to the constitutionality of the federal Goods and Services
Tax. The legislation enacting the Goods and Services Tax (hereinafter referred
to as the "GST Act ") was passed by Parliament in December, 1990, by
Part IX of the Excise Tax Act, R.S.C., 1985, c. E-15 . It received Royal
Assent on December 17, 1990 (S.C. 1990, c. 45, s. 12). The Goods and Services
Tax ("GST") is calculated at the rate of seven percent and this rate
applies to most sales of taxable supplies, which include most goods and
services. Provincial governments are not liable to pay tax on their
purchases. However, a number of subordinate entities created by the provincial
governments such as municipalities, universities, public colleges, public
hospitals, schools and school authorities, for convenience referred to as the
"MUSH sector", are liable to pay the tax.
The GST is designed
to be a tax on consumption. To this end, the GST Act contemplates three
classes of goods and services. Taxable supplies attract the tax of seven
percent each time they are sold. To the extent that the purchaser of a taxable
supply uses that good or service in the production of other taxable supplies,
it is entitled to an "input tax credit" and can recover the tax it
has paid from the government. The MUSH sector is entitled to claim input tax
credits to the extent that its purchases are used in making taxable supplies,
and it is eligible for a special rebate of a portion of the tax paid on other purchases.
By definition, to
the extent that taxable supplies are not used by the purchaser to produce other
taxable supplies, they are consumed by the purchaser. To this extent, the
purchaser cannot recapture the tax already paid through the input tax credit
mechanism. Hence, the GST is collected and refunded down through each stage of
the production process to the ultimate consumption of a taxable supply, at
which stage the tax paid is not recoverable by the purchaser.
Exempt supplies and
zero-rated supplies do not attract any tax from the ultimate consumer.
However, in respect of exempt supplies, the vendor, while paying the GST on
purchases, is not entitled to an input tax credit. In consequence, in the case
of exempt supplies GST is paid to the federal government at the penultimate
stage in the production chain rather than by the ultimate consumer. In
principle, zero-rated supplies attract the GST in the same way as any other
taxable supply as they move through the production chain to the ultimate
consumer. However, the consumer pays a tax set at "0 %", and
suppliers are entitled to the input tax credit, so that no net revenue is
raised for the federal government at any stage in the production chain by the
production and sale of these goods.
By Order-in-Council
dated October 11, 1990, the Lieutenant-Governor in Council of Alberta referred
several questions relating to the validity and effect of the GST Act to the
Court of Appeal for Alberta, pursuant to s. 27 of the Judicature Act,
R.S.A. 1980, c. J-1. These questions are reproduced below:
1.Having
regard to the Constitution Acts, 1867 to 1982 or otherwise, is the GST
Act ultra vires the Parliament of Canada in whole or in part and, if so, in
what particular or particulars and to what extent?
2.Does
the system of collection under the GST Act
(a)at
any stage prior to the supply of taxable supplies to consumers or to suppliers
of exempt supplies,
(b)prior
to the collection by a supplier from a recipient, or
(c)otherwise
constitute
an infringement of the jurisdiction of the Legislature of Alberta with respect
to the regulation of property and civil rights pursuant to s. 92(13) of the Constitution
Act, 1867 , or of another provincial power under that Act , so that the GST
Act in its application of the system of collection or any part of it is ultra
vires the Parliament of Canada?
3.Having
regard to s. 103 of the Constitution Act, 1867 and the common law, are
suppliers entitled to charge and to collect from the Consolidated Revenue Fund
of Canada all costs, charges and expenses incidental to collecting and paying a
remittance under the GST Act ?
4.Having
regard to s. 125 of the Constitution Act, 1867 ,
(a)is
the imposition of obligations under the GST Act on the Government of
Alberta as a supplier to collect and pay a remittance on a taxable supply that
is Alberta property ultra vires the Parliament of Canada,
(b)does
the imposition of a remittance under the GST Act on a recipient from the
Government of Alberta of a taxable supply that is Alberta property or that
generates revenue to the Government of Alberta constitute taxation of Alberta
property that is ultra vires the Parliament of Canada, and
(c)does
the imposition of a remittance that is computed under s. 154 of the GST Act
on the basis of consideration for a taxable supply that includes an amount of
provincial tax constitute taxation of Alberta property that is ultra vires
the Parliament of Canada?
5.Having
regard to s. 126 of the Constitution Act, 1867 , is the requirement under
the GST Act that the Government of Alberta use part of the Government of
Alberta's revenue
(a)to
collect a remittance or cause a remittance to be collected, or
(b)to
pay a remittance prior to the receipt of the remittance from the recipient of a
taxable supply
ultra
vires the Parliament
of Canada?
6.Having
regard to ss. 125 and 126 of the Constitution Act, 1867 ,
(a)is
the purchase of taxable supplies by provincial authorities, or any of them, in
the course of their exercising a delegated constitutional power of the
Government of Alberta exempt from tax under the GST Act ,
(b)is
the purchase of taxable supplies by provincial authorities, or any of them,
designated as agents of the Government of Alberta, in the course of their
exercising a delegated constitutional power of the Government of Alberta,
exempt from tax under the GST Act ,
(c)is
the acquisition of taxable supplies by the Crown Purchase Agency referred to in
section 2(k) of the Appendix exempt from tax under the GST Act , and
(d)is
the acquisition or use by provincial authorities, or any of them, in the course
of their exercising a delegated constitutional power of the Government of
Alberta, of taxable supplies that are provided by the Crown Purchase Agency to
the provincial authorities exempt from tax under the GST Act ?
These same six constitutional
questions were stated by the Chief Justice on November 14, 1991 and form the
background of these appeals.
The opinion of the
Court of Appeal for Alberta was unanimous, except for Côté J.A., who was in
dissent on question 4: (1991), 82 Alta. L.R. (2d) 289, 117 A.R. 321, 84 D.L.R.
(4th) 577, [1992] 1 W.W.R. 1. The answer to question 1 was no, though the
provisions referred to in question 5(a) and (b) are not binding on the
province. The answer to question 2 was no.
The answer to
question 3 was yes, but with four limiting qualifications: reimbursement was
available provided that (a) the charges are not salary wages or remuneration
for time and effort, (b) they are incurred in the course of the supplier's
activities as an agent for the federal government in collecting the tax, (c)
they are reasonably attributable to Canada's interest in the tax, and (d) they
are incurred reasonably and without negligence or known illegality.
The answer to
question 4 was yes, with qualifications that differed between the majority and
Côté J.A. in dissent. The answer to question 5 was yes, to the extent that the
GST Act purported to impose collection and remittance obligations upon the
province. The Court of Appeal declined to answer question 6.
The Attorney
General of Canada appealed from the judgment of the Court of Appeal with
respect to that court's answers to questions 1, 3, 4 and 5 of the Reference.
The Attorney General of Alberta also appealed, with respect to the answers to
questions 1, 2, 3, 4 and 6. By an order of this Court the two appeals were
consolidated and set down for hearing on February 24 and 25, 1992.
2. Judgment of the Court of Appeal
for Alberta (1991), 84 D.L.R. (4th) 577
(1)Majority
(Laycraft C.J.A., Kerans, Hetherington, Stratton JJ.A., Côté J.A. dissenting
in part)
The majority of the
Court of Appeal concluded that the system of collection created by the GST Act
was not ultra vires the Parliament of Canada. To sever those provisions
of the GST Act that did not result in the raising of money -- the input tax
system and the scheme in respect of zero-rated supplies -- from those that did,
would result in a completely different system of taxation from that
contemplated by Parliament. The tax, instead of being a value-added tax, would
become a retail sales tax.
The Court of Appeal
concluded that nothing in s. 91(3) of the Constitution Act, 1867 ,
restricted Parliament in its choice of any system of taxation, and concluded
that those provisions that did not have the effect of raising money were
necessarily incidental to the scheme of the GST as a whole.
The Court of Appeal
further concluded that various provisions of the GST Act -- notably the agency
and trust provisions, and the imposition upon suppliers of detailed accounting
requirements -- did encroach significantly upon matters traditionally subject
to provincial jurisdiction over property and civil rights in the province under
s. 92(13) of the Constitution Act, 1867 . Relying on the judgment of
this Court in General Motors of Canada Ltd. v. City National Leasing,
[1989] 1 S.C.R. 641, the Court of Appeal concluded that "a strict
test" was required to determine whether the challenged provisions were
sufficiently integrated with the overall scheme of the legislation to be
justified. However, the court noted that the object of the GST Act was the
imposition of a value-added tax on consumers of taxable supplies and suppliers
of exempt supplies, and found that the government achieved this object by
requiring a supplier to pay the tax at the time of purchase and then allowing
recovery, through the input tax scheme, of that portion of the payment that is
attributable to the production and sale of other taxable supplies. In the
opinion of the Court of Appeal, these provisions of the GST Act were essential
if the legislation was to achieve its object, and their inclusion in the scheme
was therefore justified. Consequently, the test of necessary incidence was
passed.
In respect of the
third question, the Court of Appeal stated that there exists a general common
law presumption against the taking of property without payment of
compensation. However, it concluded that it was not necessary to resort to
this general doctrine, since ss. 221(1) and 222(1) of the GST Act unilaterally
designate vendors of taxable supplies agents of the Crown in right of Canada
for the collection of the GST , and trustees of the Crown in respect of the
funds collected. Consequently, the more specific common law duties of
principals to reimburse agents for expenses incurred in the course of their
agency were directly applicable. The court concluded that the obligations of
the principal or person requesting services fell into two distinct categories:
compensation for time and effort expended in the course of the agency, and
indemnification against expense or liability incurred to third parties. The
court concluded that, in the absence of a contract, a principal is under no
duty to reimburse an agent for time and effort expended in the course of the
agency. On this basis, the court concluded, at p. 589, that:
To
suggest that here Canada is impliedly contracting to pay GST suppliers for
their time and effort would be to invent both an intent and an appearance.
Canada is not so promising, and no reasonable person could think that Canada
really is. None of the parties to this reference suggest that there is any
such contract, express or implied. Yet (as noted), that is the common-law test
for remuneration. The standard textbooks on restitution do not appear to offer
any basis to compel payment for such services either.
Therefore,
we conclude that, apart from s. 103 of the Constitution Act, 1867 ,
Canada need not pay suppliers for their time and trouble.
On the other hand, the Court of Appeal
concluded that a principal did have a common law duty to indemnify the agent
for special expenses and liability incurred to third parties in the course of
the agency. While there was no question that valid legislation could
extinguish this duty, the court concluded that there were no provisions in the
GST Act which purported to do this. The great bulk of GST transactions and
remittances would involve no such expense or liability, and therefore would not
bring into play the duty for Canada to reimburse vendors of taxable supplies.
However, in situations where such liability was incurred, it would be just that
Canada, the principal, reimburse its fair share of that expense or liability to
its agents. Therefore, and to this extent only, the court concluded that the
obligation to reimburse or indemnify did exist.
In view of its
conclusions with respect to the common law duty to reimburse, the Court of
Appeal found it unnecessary to decide whether s. 103 of the Constitution
Act, 1867 imposes a duty of reimbursement independently of the common law.
However, where the common law duty of reimbursement does operate, the court
concluded that s. 103 makes fulfilment of this duty a first charge upon the
consolidated revenue fund of Canada. In the court's opinion, the words
"first charge" contained in s. 103 were inconsistent with the idea
that such payments were optional.
The Court of Appeal
was of the view that s. 125 of the Constitution Act, 1867 , offered a
province immunity from a tax imposed on its property by Canada, and that Canada
enjoyed the same immunity in respect of taxation by the provinces. This dual
immunity constituted one of the "warning markers" essential to the
working of a federal system of government. The court considered that the
purpose of s. 125 was to head off the temptation for a government to exact
revenue, not from the people directly, but from another level of government.
Similarly, the purpose of s. 126 of the Constitution Act, 1867 , was to
prohibit the appropriation of the funds of one level of government by another,
a logical corollary of interjurisdictional immunity from taxation of government
property.
The majority of the
Court of Appeal concluded that the collection and remittance provisions under
attack did not impose a tax directly on the property of a province. However,
they did purport to impose certain obligations on a province. By virtue of s.
313(1) of the GST Act , the price for non-compliance with collection and
remittance obligations was an action in the superior courts for recovery of the
tax revenued "deemed" to have been collected, and, ultimately, the
issuance of writs of execution against provincial property. Since the
collection mechanism required the vendor of taxable supplies either to collect
and remit the tax or pay the tax itself, it offended s. 125 of the Constitution
Act, 1867 in its application to provincial governments, and was to that
extent inoperative. Thus, while a province might voluntarily comply with the
GST Act 's collection and remittance provisions, it was under no legal
obligation to do so. The court concluded, at p. 602, that:
[A]n
attempt by Canada to oblige a province to expend valuable effort to collect the
GST on taxable supplies by the province is an exaction in the nature of a tax
and is caught by both s. 125 and s. 126 . As a result, the provisions in the
GST Act imposing these duties do not validly operate against a province.
However, we would not declare them of no force and effect, because they do, as
we have elsewhere said, lawfully bind others.
The court also
rejected the suggestion that the application of the GST to taxable supplies
sold by the province amounted to a tax on the province's property. While the
imposition of GST upon sales by the province might well depress the price that
the province could charge on such transactions, the real bite of the tax was
not intended to fall on the seller. Most federal taxes, including the federal
income tax, have some impact upon provincial revenues, but they do not amount,
for this reason alone, to impermissible indirect taxation of provincial
property contrary to s. 125 , or to indirect appropriations of provincial funds
contrary to s. 126 , of the Constitution Act, 1867 .
The Court of Appeal
declined to answer the final question in the Reference, on the grounds that
some of the Crown organizations and agents referred to in the question did not
exist, and that without greater specificity of description, any answers given
would be useless or even misleading. Moreover, even if it were possible to
give the answers requested, exceptions would have to be made if it were decided
that the establishment of these organizations was in truth a colourable attempt
to interfere with a federal scheme of taxation. In the absence of any specific
existing scheme to evaluate, the Court of Appeal concluded that it would not be
appropriate to provide speculative answers.
(2) Côté J.A. (dissenting in part)
Côté J.A. joined in
the judgment of the Court of Appeal except with respect to question 4. In his
opinion, there could arise circumstances in which the imposition of the GST
upon purchasers of taxable supplies from the provincial government could amount
to an impermissible taxation of the province's property. Côté J.A. stated that
the characterization of the tax as a tax upon the purchaser, rather than the
vendor, determined very little, and that the true question was on whom the
burden of the tax actually fell. There could well arise situations where the
imposition of the GST upon the purchaser would simply reduce the price the
vendor could charge for a taxable supply. In these cases, the true burden of
the tax was borne by the vendor.
In Côté J.A.'s
opinion, the value of property is measured by what that property can be sold or
rented for on the market. Therefore, a tax on the income from property is
capable of amounting to a tax on that property itself. Since the purpose of s.
125 was to protect the property of the province from taxation by other levels
of government, the application of the GST to sales of taxable supplies by the
provincial government was ultra vires to the extent that the tax burden
was actually absorbed by the province as vendor. To the extent that the
province could establish by evidence that it, rather than the purchaser, bore
the true burden of the tax in the form of reduced revenues from the sale of its
property, Côté J.A. was of the opinion that the application of the GST to sales
by the province should be declared ultra vires.
3. The Interveners
Before this Court,
the Attorneys General for Saskatchewan, British Columbia and Ontario, as well
as the Canadian Federation of Independent Business ("CFIB"), were
granted leave to intervene. The CFIB intervenes only with respect to the third
constitutional question, on which it adopts the position advanced by the
Attorney General for Alberta. In addition, the CFIB urged the Court to find
that registered suppliers who incurred costs and expenses in complying with the
GST Act have a restitutionary claim against the federal consolidated revenue fund
in full reimbursement of these expenses.
The Attorney
General for Saskatchewan adopts the submissions of the Attorney General for
Alberta with respect to the first five constitutional questions, but urged us
to decide that the Court of Appeal of Alberta was correct to decline to answer
the sixth constitutional question. In addition, the Attorney General for
Saskatchewan offered an argument of its own in respect of constitutional
questions four and five.
The Attorney
General of British Columbia intervenes with respect to both the fifth and sixth
constitutional questions, arguing that questions 5(a), 5(b), 6(a), and 6(b)
should be answered in the affirmative.
The Attorney
General for Ontario intervened on what we consider to be a subject unrelated to
the broad issues involved in these appeals. Put succinctly, counsel for the
Attorney General for Ontario sought to argue that the GST Act had never been
properly passed through Parliament, on the grounds that House of Commons
Standing Orders 57 -- "closure" -- and 78(3) -- government imposed
time limits on debate ("guillotine") -- which were invoked by the
federal government in the passage of the GST Act , are themselves ultra vires.
It will not be
necessary for us to deal separately with the submissions of the interveners in
any detail, as our opinion with respect to their arguments will become apparent
from the answers we give to the six constitutional questions in these appeals.
For reasons that appear later in this judgment, we did not consider it appropriate
to hear the submissions of the Attorney General for Ontario.
4. Analysis
All the parties
agreed, and we accepted their submission, that the first constitutional
question need not be answered separately from the others. The first question
pertains to the global vires of the GST Act . In effect, it is an
"umbrella" question which comprises within itself the answers to the
remaining more specific questions. For this reason, we will proceed directly
to consider the second constitutional question posed.
Constitutional Question 2
Section 91(3) of
the Constitution Act, 1867 , provides as follows:
91. It shall be lawful for the Queen, by
and with the Advice and Consent of the Senate and House of Commons, to make
Laws for the Peace, Order, and good Government of Canada, in relation to all
Matters not coming within the Classes of Subjects by this Act assigned
exclusively to the Legislatures of the Provinces; and for greater Certainty,
but not so as to restrict the Generality of the foregoing Terms of this
Section, it is hereby declared that (notwithstanding anything in this Act ) the
exclusive Legislative Authority of the Parliament of Canada extends to all
Matters coming within the Classes of Subjects next hereinafter enumerated; that
is to say, --
.
. .
3.
The raising of Money by any Mode or System of Taxation.
Section 92(13) of
the Constitution Act, 1867 , provides as follows:
92. In each Province the Legislature may
exclusively make Laws in relation to Matters coming within the Classes of
Subjects next hereinafter enumerated; that is to say, --
.
. .
13.
Property and Civil Rights in the Province.
The interaction between these two
provisions is at the heart of the challenge to the vires of the GST Act
brought by the Attorney General for Alberta.
Canada concedes,
and I am of the same view, that the GST Act affects matters which fall within
the provincial jurisdiction under s. 92(13) to pass legislation in relation to
property and civil rights in the province. It is therefore necessary to answer
two questions in order to determine whether this incursion into provincial
jurisdiction is justified. First, it is necessary to decide whether the GST
Act is a valid exercise of any federal head of jurisdiction under s. 91 of the Constitution
Act, 1867 . Secondly, it must be decided whether the effect the GST scheme
has on matters traditionally within the province's jurisdiction can be said to
be necessarily incidental to the exercise of this federal power.
In my view, the
answer to the first question is quite simple. The GST Act has no purpose
other than to raise revenue for the federal government, and it does in fact
raise revenue at the point of consumption of taxable supplies. As such, it
would be hard to dispute that the Act itself is properly characterized as being
in relation to a mode or system of taxation in the meaning of s. 91(3) of the Constitution
Act, 1867 . While the GST Act certainly affects matters falling under
provincial jurisdiction, it cannot reasonably be said to be aimed at a
provincial purpose.
With respect, in my
opinion, the Attorney General for Alberta's attack on the GST Act at this level
is implausible. The decision of this Court in Reference re The Employment
and Social Insurance Act, [1936] S.C.R. 427, is clearly distinguishable.
In that case, the federal government sought to support legislation creating a
system of unemployment insurance under a number of federal heads of power,
including s. 91(3) . The Court was quite correct to reject the argument that
the goal of the legislation in question was to raise revenue by a mode or
system of taxation, and to find that its true purpose was to impose certain
conditions on employment contracts and create a system of unemployment insurance.
That is clearly not the present case.
The GST Act has
significant effects upon matters within provincial jurisdiction, but it is
impossible to say that the purpose of the Act is to produce these effects. The
purpose of the Act is to raise revenue for the federal government, and the
effects produced by the scheme on matters within provincial jurisdiction are
incidental to this purpose.
It must still be
decided, however, whether these incidental effects are sufficiently a part of
the scheme of the GST Act that they are justifiable, despite the incursion upon
provincial jurisdiction, on the "necessarily incidental" doctrine.
The appropriate test has been stated by this Court on a number of occasions,
but in substance what is required is a high degree of integration between a
scheme enacted pursuant to a valid federal objective, and those portions of the
scheme which impinge upon provincial jurisdiction. In Reference re Exported
Natural Gas Tax, [1982] 1 S.C.R. 1004, the majority of the Court (Martland,
Ritchie, Dickson, Beetz, Estey and Chouinard JJ.) had this to say about the
"necessarily incidental" doctrine (at pp. 1052-53):
One
has to bear in mind . . . in dealing with the arrogation of property rights by
federal authority in the exercise of some other right, that, whatever the
terminology may be, it is only such part of the property right and such
extent of the taking of that right, as may be tied inherently and of necessity
to the exercise of the authority in question by the federal level of government
that the Constitution will permit. [Emphasis added.]
The test is clearly
a strict one. However, in General Motors of Canada Ltd. v. City National
Leasing, supra, at p. 669, Dickson C.J. indicated that a degree of
judicial moderation was appropriate, for the reason that a federal system
requires both levels of government to be accorded a degree of latitude in the
pursuit of valid objectives:
In
determining the proper test it should be remembered that in a federal system it
is inevitable that, in pursuing valid objectives, the legislation of each level
of government will impact occasionally on the sphere of power of the other
level of government; overlap of legislation is to be expected and accommodated
in a federal state. Thus a certain degree of judicial restraint in proposing
strict tests which will result in striking down such legislation is
appropriate.
Dickson C.J. continued at pp. 671-72
to set out an analytical scheme for the evaluation of federal incursions upon
matters within provincial jurisdiction under the "necessarily
incidental" doctrine. The first step is to decide whether the impugned
scheme in fact touches matters within provincial jurisdiction. If it does not,
the inquiry ends, but if it does, then it is necessary to ask whether the
legislation in question is enacted pursuant to some valid federal head of
power. If the legislation is not enacted pursuant to a valid purpose, then of
course it must be struck down. However, if it is enacted pursuant to a valid
federal purpose, then it is necessary to determine whether the impugned
provisions are "sufficiently integrated with the scheme that [they] can be
upheld by virtue of that relationship." If the impugned provisions are
not sufficiently integrated into the scheme as a whole, then they cannot be
sustained as a valid exercise of federal power. However, if the test of
integration is passed, then the provisions are supportable as an exercise of
federal jurisdiction notwithstanding that they affect matters falling within the
jurisdiction of the provinces.
In General
Motors of Canada Ltd. v. City National Leasing, supra, Dickson C.J. was
considering the extent of permissible federal incursion upon provincial matters
in relation to the federal power over trade and commerce. However, in my view,
nothing limits his analysis to the trade and commerce power. Applying this
analysis to the GST Act , it is clear -- indeed it is conceded -- that the Act
intrudes on provincial powers. However, the GST Act was enacted pursuant to a
valid federal objective -- the raising of revenue for the federal government
pursuant to s. 91(3) of the Constitution Act, 1867 . On the question of
integration, I am of the opinion that Canada is correct to say that to sever
the revenue raising portions of the GST Act from those portions which do not
raise revenue would be to change the character of the tax fundamentally, from a
value-added tax to a federal retail sales tax. The objective of the Act is to
raise revenue for the federal government, and the means chosen is a tax on
value added throughout the chain of production, with input tax credits granted
in respect of taxable supplies that are redirected to production instead of
consumed. The means chosen are highly integrated into the scheme of the GST
Act as a whole, and, indeed, to sever the system of input tax credits from the
rest of the Act would be to carve out an exception to the text of s. 91(3) of
the Constitution Act, 1867 which the words "any Mode or System of
Taxation" cannot reasonably bear.
I conclude that the
GST Act is enacted pursuant to a federal head of power under s. 91 of the Constitution
Act, 1867 , and that while the scheme it establishes does intrude upon
matters traditionally falling under the provincial power over property and
civil rights, the scheme is sufficiently well integrated into the GST Act as a
whole that the intrusion upon provincial jurisdiction is justified. The second
constitutional question therefore must be answered in the negative.
Constitutional Question 3
According to the
Attorney General for Alberta, registered suppliers under the GST Act have the
right to be reimbursed from the consolidated revenue fund of Canada for all
expenses and charges incurred in collecting the GST . This argument is based on
s. 103 of the Constitution Act, 1867 , and on the common law of agency.
Section 103 of the Constitution
Act, 1867 reads as follows:
103. The Consolidated Revenue Fund of
Canada shall be permanently charged with the Costs, Charges, and Expenses
incident to the Collection, Management, and Receipt thereof, and the same shall
form the First Charge thereon, subject to be reviewed and audited in such
Manner as shall be ordered by the Governor General in Council until the
Parliament otherwise provides.
By virtue of ss. 123, 221 and 240 of
the GST Act , every vendor of a taxable supply is unilaterally appointed an
agent of the Crown in right of Canada for the purposes of the collection and
remittance of the GST . By virtue of s. 122 the provinces are also bound to collect
and remit the GST when they sell taxable supplies.
The Attorney
General for Alberta's position is that s. 103 of the Constitution Act, 1867
has the effect of giving all vendors of taxable supplies a right to be
reimbursed out of the consolidated revenue fund of Canada for expenses they
incur in collecting and remitting the GST . At the outset, I must say that if
this submission is correct, it produces a startling result. The federal
government would be obliged to reimburse any expenses incurred by statutory
agents of the Government of Canada in the collection of taxes. I see no reason
why this obligation would be limited to expenses incurred in the collection of
the GST . Under ss. 153 and 227(4) of the Income Tax Act, S.C.
1970-71-72, c. 63, for instance, employers are under a duty to withhold and
remit income tax in respect of their employees. It has not hitherto been
suspected that all such persons have a right -- indeed, a constitutional right
which cannot be modified or extinguished by statute -- to be reimbursed for
their time, effort and expenses out of the consolidated revenue fund of Canada.
In my opinion,
Canada is correct to submit that s. 103 is appropriately construed as an
appropriations provision, permitting the Government of Canada to make
disbursements from the consolidated revenue fund for the purposes of raising
revenue without the necessity of annual Parliamentary votes. Indeed, this
construction is quite consistent with the overall scheme in which s. 103 is
embedded. Section 102 of the Constitution Act, 1867 creates the
consolidated revenue fund of Canada. Section 104 creates a charge on that fund
for the payment of interest on the public debts of the old provinces of Canada,
Nova Scotia and New Brunswick. Section 105 creates a charge on the
consolidated revenue fund for the payment of the salary of the Governor General
of Canada. Finally, s. 106 provides for appropriations by Parliament from the
consolidated revenue fund for other public purposes.
It is clear to me
that the scheme of ss. 102 through 106 was intended to insure that the federal
government could carry on at least certain aspects of the business of
government without the necessity of annual appropriations by Parliament. It
was intended, for instance, that the salary of the Governor General should not
be at the mercy of annual votes in the House of Commons. Similarly, it was
recognized that if annual votes were required for the payment of interest on
the public debt it would rapidly have become impossible for the government to
raise funds through borrowing. Equally, it was recognized that without the
authority to expend funds for the collection of taxes, the entire operations of
the government could be brought to a standstill.
Clearly, therefore,
the purpose of s. 103 was to immunize the revenue-collecting machinery of the
federal government from the uncertainties of annual appropriations by
Parliament. It was never intended to create a legally enforceable right in
third parties to receive compensation for revenue-raising duties imposed on
them by Parliament. Even if one were to suggest, arguendo, that s. 103
confers authority on the federal government to compensate such third parties,
it would be a non sequitur to say that this created a correlative power
in those third parties to enforce these payments In The Queen v. Waterous
Engine Works Co. (1893), 3 Que. Q.B. 222, Wurtele J. stated the principle
that appropriations from the consolidated revenue fund are permissive, in the
sense that they authorize, but do not compel, the executive to make the
authorized expenditures. The decision to spend appropriated funds remains
within the discretion of the government. I am therefore of the opinion that
the third constitutional question cannot be answered in the affirmative on the
basis of s. 103 of the Constitution Act, 1867 .
The Attorney
General for Alberta, however, makes the alternative argument that vendors of
taxable supplies are entitled to recover the expenses incurred in collection
and remission of the GST at common law. This common law right of recovery was
urged upon us on two distinct bases. First, it was submitted that the decision
of this Court in Manitoba Fisheries Ltd. v. The Queen, [1979] 1 S.C.R.
101, reaffirms the principle that where property is taken under a statutory
scheme there is a presumption that compensation is to be paid unless this is
expressly excluded by the terms of the statute. This line of argument can be
dealt with quite briefly. In my view, the presumption of "no taking
without compensation" has no application in the case of the GST collection
regime. Alberta's suggestion that in collecting and remitting the GST the
vendor of a taxable supply has had his property "taken" is difficult
to understand. It is the purchaser, not the supplier, who is obliged to pay
the GST . The supplier is simply the agent of the Crown in right of Canada for
the purposes of collection. Even in those cases where the vendor is obliged to
absorb the GST in order to maintain sales, the resulting reduction in revenue
cannot reasonably be characterized as a "taking" of the supplier's
property by the federal government. Were such reasoning to prevail, virtually
any governmental policy which resulted directly or indirectly in the reduction
of a supplier's revenue could be characterized as a "taking" of
property which would give rise to a right to compensation. In truth, since no
property of the supplier is "taken" by the imposition of the GST
collection and remittance obligations, a right to compensation cannot be
supported on this basis.
Alternatively, the
Attorney General for Alberta submits that since suppliers are designated agents
of the government for the collection of the GST , the common law duties of
principals with respect to agents are triggered. These duties are said to
include the duty of the principal to reimburse agents for all costs and
liabilities incurred in the course of the agency. In my opinion, with respect,
this argument constitutes a considerable exaggeration of the common law duty of
principals to agents. According to Fridman in The Law of Agency (5th
ed. 1983), at p. 164:
The
most important duty of the principal is to remunerate the agent for services
rendered. The obligation to pay such remuneration -- the agent's
"commission" -- exists only where it has been created by an express
or implied contract between principal and agent. . . . It is a question of
construction in each case whether it was the intention of the parties that the
agent shall work gratuitously or whether an agreement to pay remuneration was
expressly made, or can be implied into the relationship. [Emphasis added.]
The duty to remunerate the agent for
costs incurred in the course of the agency does not, therefore, arise
automatically. It only arises in cases in which the principal and the agent
contract, expressly or by implication, for such remuneration to be paid.
Clearly there is no
question of a contract between the Government of Canada and the vendors of
taxable supplies for the government to remunerate the vendors for costs
incurred in collecting the GST . The obligation to collect and remit the GST is
imposed unilaterally by ss. 221 (agency) and 222 (trust) of the GST Act . The
government has turned its mind to the question of remuneration and has
expressly provided for a limited right of reimbursement in the form of the
transitional credit for small businesses, as I point out below. The matter
having been expressly considered in the legislation and no further compensation
having been provided for, no contractual duty of reimbursement can be said to
arise either expressly or by implication. It is not necessary in the context
of these appeals to decide whether there could ever arise a case in which
governments would be under a duty to reimburse agents unilaterally created by
statute for the costs incurred in the course of their agency.
Outside of contract
a common law right to recover remuneration does not exist. On the other hand,
a right of indemnification for tortious liability operates in favour of agents
who inadvertently cause tortious injury to others in the course of their
agency. This right of indemnity does not, contrary to the submission of the
Attorney General for Alberta, arise on the facts assumed on this Reference. It
is difficult to see how a vendor of taxable supplies could cause tortious
injury to third parties by complying with its obligations under the GST Act .
Indeed, compliance with a statutorily imposed duty would constitute a defence
in the unlikely event that such claims of liability were to arise. The common
law right of agents to indemnity, therefore, cannot provide support for the
right claimed by Alberta on behalf of registered suppliers under the GST Act .
The CFIB also
relies upon the common law as a basis for the recovery of expenses incurred in
connection with the collection and remittance of the GST by registered
suppliers, but by a different path of reasoning altogether. According to the
CFIB, registered suppliers have a restitutionary claim against the federal
government for the costs and expenses of collecting the GST . In my opinion
this novel suggestion is without merit.
In the decision of
this Court in Pettkus v. Becker, [1980] 2 S.C.R. 834, Dickson J., as he
then was, stated that three basic conditions were to be fulfilled before
restitutionary recovery would be permitted: these are (1) an enrichment, (2) a
corresponding deprivation, and (3) a lack of any juridical reason for the
enrichment. Under the GST Act the expenses involved in collecting and
remitting the GST are borne by registered suppliers. This certainly
constitutes a burden to these suppliers and a benefit to the federal
government. However, this is precisely the burden contemplated by the
statute. Hence, a juridical reason for the retention of the benefit by the
federal government exists unless the statute itself is ultra vires.
This, however, is the subject of constitutional questions 1 and 2.
The CFIB's argument
thus involves it in the following dilemma: If the GST Act is ultra vires,
then registered suppliers cannot be compelled to collect the tax, and it is not
necessary to consider the extent of any restitutionary claim this group might
have against the federal government. If, on the other hand, the GST Act is intra
vires, then the statute itself constitutes a valid juristic reason for the
retention of the benefit the federal government receives by being able to rely
upon registered suppliers to collect the tax at their own expense. In neither
case is the outcome urged upon us by the CFIB supportable.
It follows from all
this that any right to remuneration for the time and trouble involved in
collecting the GST would have to flow from the statute itself, which plainly
lacks any such general provisions. I note, however, that the GST Act is not
entirely silent on the issue of compensation for the costs of compliance.
Section 346 of the statute provides a one-time transitional credit for small
businesses to assist them in offsetting their initial compliance costs. In my
opinion, this is a strong indication that Parliament did direct its attention
to the question of compensation for compliance costs by enacting a provision
providing partial compensation in certain cases. Even if the Attorney General
for Alberta were correct to suggest that a more generous right to compensation
exists at common law, in my view Parliament decided to substitute for that
right its own view of the socially appropriate level of compensation for
compliance costs. As this Court recently decided in Zaidan Group Ltd. v.
London (City), [1991] 3 S.C.R. 593, aff'g (1990), 71 O.R. (3d) 65 (C.A.),
where a statute establishes a scheme providing for compensation, common law
rights which might have operated but for the statute cannot be relied upon.
In my opinion, the
right to compensation contended for by Alberta is supported neither by s. 103
of the Constitution Act, 1867 , nor by the common law, nor by the
operation of the GST Act itself. The third constitutional question must
therefore be answered in the negative.
Constitutional Question 4
Section 125 of the Constitution
Act, 1867 provides as follows:
125. No Lands or Property belonging to
Canada or any Province shall be liable to Taxation.
In Reference re
Exported Natural Gas Tax, supra, at p. 1081, the majority of this
Court concluded that s. 91(3) of the Constitution Act, 1867 must be
subordinated to s. 125 . Section 125 , therefore, is an exception to the general
taxation power of the federal Parliament under s. 91(3) . The Attorney General
for Alberta argues that the imposition upon the province of the obligation to
collect and remit the GST when the province acts as a supplier runs afoul of
this constitutional injunction and is therefore ultra vires Parliament.
Canada does not
contend that a province is liable to pay the GST as a purchaser of taxable
supplies. Instead, it claims simply that the province is under an obligation
to collect and remit the GST from purchasers of taxable supplies when the
province acts as supplier. The Attorney General for Alberta's position is that
this amounts to taxation of the property of the province.
In Reference re
Exported Natural Gas Tax, supra, the majority of this Court said, at
p. 1078, that
Section
125 provides, in broad terms, that no lands or property of the federal or
provincial Crown shall be "liable to taxation". The purpose of this
immunity, as we have seen, is to prevent one level of government from
appropriating to its own use the property of the other, or the fruits of that
property. This immunity would be illusory if it applied only to taxes "on
property" but not to a tax on the Crown in respect of a transaction
affecting its property or on the transaction itself. The immunity would be
illusory since, by the simple device of framing a tax as "in personam"
rather than "in rem" one level of government could with
impunity tax away the fruits of property owned by the other. The fundamental
constitutional protection framed by s. 125 cannot depend on subtle nuances of
form.
By analogy to this
reasoning, the Attorney General for Alberta submits that the imposition of the
GST on taxable supplies made by the province as vendor amounts to taxation of
the "fruits" of provincial property. It is said that if provincial
property is exempt from taxation, then it cannot be taxed indirectly by
characterizing the subject matter of the tax as a "transaction"
involving that property. The imposition of the GST on property sold by the
province, it is argued, runs contrary to the protection of s. 125 of the Constitution
Act, 1867 and therefore is ultra vires Parliament.
In my opinion, with
respect, the Attorney General for Alberta's analogy cannot withstand scrutiny.
In Reference re Exported Natural Gas Tax, this Court was considering
federal legislation which purported to impose a tax upon the receipt by
distributors of natural gas that was the property of the province of Alberta.
By the operation of a deeming provision, where natural gas was exported, the
exporter was treated as a "distributor" of the natural gas exported
and was deemed to have "received" it at the time it was exported. In
consequence, the province became liable to pay a tax upon natural gas that
remained the property of Alberta at the moment of its export.
The GST, in
contrast, does not apply to exports. It applies to the domestic provision of
taxable supplies, and it is the purchaser, rather than the supplier, which is
liable to pay the tax. Indeed, the tax only becomes payable by virtue of
transactions in which some property interest has left the supplier and become
vested in the purchaser. Clearly, therefore, it is the purchaser, not the
vendor, which is taxed.
Nor can it
plausibly be said that the imposition of the GST on sales of provincial
property amounts to a tax on the fruits of provincial property in that, due to
their liability to pay the GST , purchasers will purchase less of such property,
resulting in lost sales and diminished revenues to the province. The fact that
a federal tax renders provincial property less commercially attractive than it
would be if the tax did not apply does not render that tax a tax upon
provincial property. In Phillips v. City of Sault Ste. Marie, [1954]
S.C.R. 404, this Court considered the case of a municipal tax levied on tenants
of land owned by the Crown in right of Canada. The tax was assessed on the
basis of the value of the premises occupied as assessed by the city. This
Court found that the tax was not levied upon the land, but upon the occupants;
the value of the land was simply the measure by which the liability of the
occupants to pay the tax was to be assessed. Consequently, the tax did not
violate s. 125 of the Constitution Act, 1867 , notwithstanding that, de
facto, its collection might lower the returns that the Crown in right of
Canada could realize from rental of the land.
Clearly, a
practical consequence of the collection and remittance responsibilities imposed
by the GST Act may result in a cost to the province, but neither the true aim
and purpose of the scheme nor its incidental effects runs contrary to the
spirit of s. 125 . As the majority of this Court clearly stated in Reference
re Exported Natural Gas Tax, supra, at pp. 1053-54, in order to
violate s. 125 the impugned measure must in pith and substance constitute
taxation. The possibility that the GST may have the effect of reducing
provincial revenues from the sale of provincial property does not render the GST
a "taxation" of provincial property. Nor does the calculation of the
GST as a fraction of a price a portion of which is provincial tax amount to the
federal taxation of provincial tax. Rather, the price paid for a taxable
supply, including a component that is provincial tax, is the measure chosen by
Parliament by which the liability of the purchaser to pay the GST is
calculated.
Since the
obligation of a province to collect and remit the GST when it acts as supplier
does not amount to a taxation of the province's property, s. 125 of the Constitution
Act, 1867 has no application in these situations. Consequently, the fourth
constitutional question must be answered in the negative.
Constitutional Question 5
Section 126 of the Constitution
Act, 1867 provides:
126. Such Portions of the Duties and
Revenues over which the respective Legislatures of Canada, Nova Scotia, and New
Brunswick had before the Union Power of Appropriation as are by this Act
reserved to the respective Governments or Legislatures of the Provinces, and
all Duties and Revenues raised by them in accordance with the special Powers
conferred upon them by this Act , shall in each Province form One Consolidated
Revenue Fund to be appropriated for the Public Service of the Province.
The Attorneys General for Alberta and
Canada agree that s. 126 has the effect of immunizing the consolidated revenue
funds of the provinces from appropriation, except by their provincial
legislatures. The Attorney General for Alberta, however, contends that the
obligation imposed by the GST Act upon provinces to collect and remit the GST
in respect of taxable supplies made by the province amounts to the
appropriation of provincial funds for federal purposes by the federal
Parliament. In support of this position, the Attorney General for Alberta
relies on the decisions of this Court in Reference re Troops in Cape Breton,
[1930] S.C.R. 554, and Regional Municipality of Peel v. MacKenzie,
[1982] 2 S.C.R. 9. In my opinion, neither of these decisions supports the
proposition that the Attorney General for Alberta seeks to advance.
In Reference re
Troops in Cape Breton, the question was whether the province of Nova Scotia
was liable to reimburse the federal government for the expense of sending
troops to quell a local disturbance in Cape Breton at the request of the
Attorney General of the province. The Militia Act, R.S.C. 1906, c. 41,
as amended by S.C. 1924, c. 57, purported to impose such an obligation upon the
government of a province whose Attorney General had called in federal troops to
assist the civil power in the province. The majority of this Court decided
that Parliament lacked jurisdiction to impose this obligation. Appropriations
from the consolidated revenue fund of the province belong exclusively to the
legislature of the province.
Similarly, in Peel,
this Court was required to rule upon the constitutionality of s. 20(2) of the Juvenile
Delinquents Act, R.S.C. 1970, c. J-3, which purported to authorize judicial
orders directing the expenditure of money by municipalities for the custody and
support of delinquent children. Relying upon Reference re Troops in Cape
Breton, Martland J. decided that Parliament had no jurisdiction to compel
municipalities, which are creatures of the provincial legislatures, to expend
money. Interestingly, however, Martland J. did suggest, at p. 22, that s.
20(2) could have been intra vires Parliament if it had been shown to be
necessarily incidental to the operation of valid federal legislation in
relation to criminal law. However, as the section pertained to the continuing
support of delinquent children after criminal proceedings had terminated, it
could not be justified as criminal law in the meaning of s. 91(27) of the Constitution
Act, 1867 :
The
effect of s. 20(2) is to alter the role of municipal institutions, not
necessarily limited to financial matters but also with respect to their duty
toward persons found within their boundaries. This is an indirect amendment to
provincial legislation respecting municipalities. It could not be justified
in the absence of a direct link with federal legislative power under s.
91(27) . There is no direct link between the municipality "to which the
child belongs" and the issue of the child's criminality. The
obligation sought to be imposed on the municipality arises only after the
criminal proceedings have been completed and sentence has been imposed.
[Emphasis added.]
I have already concluded that there
does exist a "direct link" between the obligations placed on
suppliers by the GST Act and the federal power over taxation under s. 91(3) of
the Constitution Act, 1867 . On the above reasoning, therefore, even if
the GST Act imposed an obligation to pay out a sum of money for federal
purposes this might be justified.
The GST Act ,
however, does not go nearly this far. The obligation to collect and remit the
GST is clearly not the same as an obligation to pay out a sum of money to the
federal government from the provincial consolidated revenue fund. To this
extent, Reference re Troops in Cape Breton and Peel are beside
the point. Parliament has simply imposed certain administrative burdens upon
suppliers that are necessarily incidental to a valid federal scheme of taxation
within the meaning of that term as it is used in s. 91(3) of the Constitution
Act, 1867 .
The Attorney
General of Canada argues that there is nothing impermissible in valid federal
legislation imposing administrative burdens upon provincial governments,
provided that these are necessarily incidental to the operation of a valid
federal scheme of taxation. In Attorney-General for Quebec v. Nipissing
Central Railway Co., [1926] A.C. 715 (P.C.), for instance, it was decided
that federal legislation in relation to railways could authorize the compulsory
taking of provincial Crown lands to the extent necessary for the building of
railway lines. In Valin v. Langlois (1879), 3 S.C.R. 1, this Court
upheld the Dominion Controverted Elections Act, 1874, which conferred
upon provincial superior courts the jurisdiction, and imposed the duty, of
trying controverted elections of members of the House of Commons.
The case of Coughlin
v. Ontario Highway Transport Board, [1968] S.C.R. 569, also relied on by
Canada, is less helpful. In that case, the issue was whether the Motor
Vehicle Transport Act, S.C. 1953-54, c. 59, which permitted the respondent
Board, an entity created by the Ontario legislature, to issue and review
licenses for the interprovincial transport of goods, was ultra vires as
an impermissible delegation of Parliament's legislative powers to a provincial
body. Cartwright J., for the majority, found that there was no delegation,
but, rather, simply the adoption by Parliament of the legislation of another
body, as it might from time to time exist, as its own. The decision in Coughlin
is not clearly relevant to the question we are faced with here, as Parliament
did not purport to compel Ontario to establish a Highway Transport Board to
administer the federal statute, nor did Cartwright J. suggest that it could have
done so.
In any case, in my
opinion it is not necessary for us to analyze the limits of the federal power
to impose administrative obligations on the provinces, pursuant to a valid
federal scheme of taxation, in order to answer the fifth constitutional
question. The most that can be said of the collection and remittance
obligations created by the GST Act is that they impose certain administrative
burdens on commercial entities operating in the province. It is only in so far
as the province operates as a commercial entity that it becomes subject to
these burdens. This is not the same thing as an appropriation of money from
the provincial consolidated revenue fund, without the consent of the provincial
legislature, for federal purposes. Indeed, from the point of view of policy,
it is far from clear that it would be desirable to adopt an interpretation of
the GST Act which would give special advantages to provinces when they act as
commercial entities. Section 126 of the Constitution Act, 1867 does not
come into play. For this reason I conclude that the fifth constitutional
question must be answered in the negative.
Constitutional Question 6
The Alberta Court
of Appeal declined to answer the final constitutional question. In my view, it
was correct so to decide, and, for the reasons given by the Court of Appeal, I
am of the view that this Court ought not to answer it either. The sixth constitutional
question is highly abstract, in that it does not refer to specific provincial
institutions, and, indeed, refers to some hypothetical provincial institutions
which apparently do not exist. Without greater specificity and detail, answers
given by this Court could be quite misleading. Worse yet, they could be
invoked to justify provincial attempts to frustrate the operation of the GST by
the disingenuous manipulation of institutional forms.
In my view, the
Attorney General of Canada is quite correct to argue that in the absence of a
legislative scheme the pith and substance of which can be ascertained, this
Court is placed in the impossible position where it cannot distinguish between
valid schemes of provincial legislation, and colourable attempts to circumvent
a valid federal scheme of taxation enacted under s. 91(3) .
Where this Court is
faced with a hypothetical question which cannot be answered with any assurance
of correctness, the appropriate course of action is for us to decline to answer
the question. In McEvoy v. Attorney General for New Brunswick, [1983] 1
S.C.R. 704, we said (at p. 708):
This
Court is entitled to exercise its judgment on whether it should answer referred
questions if it concludes that they do not exhibit sufficient precision to
permit cogent answers. This is irrespective of the fact that the reference
power is couched in broad terms . . . .
It is clear that we are entitled to
decline to answer a question referred to us on a reference if the question is
such that the answer given would not be precise or useful: see also, Reference
re Education System in Montreal, [1926] S.C.R. 246, Reference re Waters
and Water-Powers, [1929] S.C.R. 200, Reference re Angliers Railway
Crossing, [1937] S.C.R. 451, Reference re Authority of Parliament in
Relation to the Upper House, [1980] 1 S.C.R. 54. The sixth constitutional
question in this Reference cannot usefully be answered in its present form, and
we therefore respectfully decline to answer it.
5. Arguments of the Attorney General
for Ontario
The Attorney
General for Ontario was granted leave to intervene in these proceedings and
filed a factum. After reviewing these materials and hearing the submissions of
counsel on the point, we decided that we would not hear the submissions of the
counsel for the Attorney General for Ontario.
Briefly, it was the
position of the Attorney General for Ontario that the GST Act had been passed
through Parliament by an invalid procedure and was therefore void in its
entirety. The Attorney General for Ontario pressed this argument as an
intervener before the Alberta Court of Appeal, which, in its judgment, declined
to deal with these submissions on the merits. In my view, the Court of Appeal
was quite correct in this decision.
The Attorney General
for Ontario has sought to raise an entirely different ground for attacking the vires
of the GST Act , and one which was not addressed by the principal parties in
these appeals. To address the issues raised by the Attorney General for
Ontario would require this Court to embark on a lengthy analysis of issues not
raised by any of the other parties and not related to the substance of these
appeals.
We are all of the
opinion that the issues sought to be raised by the Attorney General of Ontario
fall outside the intended scope of the Reference. In Reference re
Agricultural Products Marketing Act, [1978] 2 S.C.R. 1198, this Court
declined to address a similar argument sought to be raised by an intervener on
this very ground. I would adopt the reasoning of Pigeon J. in this respect
where he said at p. 1290:
It
does not appear to me that the appellants' attack based upon the alleged
absence of a message from the Governor General recommending its enactment,
comes within the scope of the question submitted. Nothing in the order of
reference or in the material submitted therewith, raises any issue with respect
to the regularity of the adoption of the Act , as opposed to its
intrinsic validity depending on Parliament's legislative authority. On a
reference the Court has to give answers on the basis of the questions submitted
exclusively (Re: Quebec Magistrates' Court, [1965] S.C.R. 722),
intervening parties are not permitted to raise other issues and to bring up
other facts as they might in ordinary litigation. I would therefore decline to
consider this ground of attack.
With all due
respect, therefore, the arguments sought to be raised by the Attorney General
for Ontario are not helpful. Intervener status is granted when this Court
feels that the intervener may be of assistance to the Court in resolving the principal
issues before us. Intervener status is not granted to allow the intervener to
raise an entirely new set of issues which are not addressed by the principal
parties. This principle is even stronger in reference cases, where the scope
of the appeal is governed by specific questions posed by the
Lieutenant-Governor or the Governor General in Council.
We therefore will
not address the merits of the arguments sought to be raised by counsel for the
Attorney General for Ontario. They are not helpful to us in the disposition of
these appeals.
6. Conclusion
In the result, the
appeal of the Attorney General of Canada is allowed and the appeal of the
Attorney General for Alberta is dismissed. The constitutional questions are
answered as follows:
1.Having
regard to the Constitution Acts, 1867 to 1982 or otherwise, is the GST
Act ultra vires the Parliament of Canada in whole or in part and, if so, in
what particular or particulars and to what extent?
Answer: No.
2.Does
the system of collection under the GST Act
(a)at
any stage prior to the supply of taxable supplies to consumers or to suppliers
of exempt supplies,
(b)prior
to the collection by a supplier from a recipient, or
(c)otherwise
constitute
an infringement of the jurisdiction of the Legislature of Alberta with respect
to the regulation of property and civil rights pursuant to s. 92(13) of the Constitution
Act, 1867 , or of another provincial power under that Act , so that the GST
Act in its application of the system of collection or any part of it is ultra
vires the Parliament of Canada?
Answer: No.
3.Having
regard to s. 103 of the Constitution Act, 1867 and the common law, are
suppliers entitled to charge and to collect from the Consolidated Revenue Fund
of Canada all costs, charges and expenses incidental to collecting and paying a
remittance under the GST Act ?
Answer: No.
4.Having
regard to s. 125 of the Constitution Act, 1867 ,
(a)is
the imposition of obligations under the GST Act on the Government of
Alberta as a supplier to collect and pay a remittance on a taxable supply that
is Alberta property ultra vires the Parliament of Canada,
(b)does
the imposition of a remittance under the GST Act on a recipient from the
Government of Alberta of a taxable supply that is Alberta property or that
generates revenue to the Government of Alberta constitute taxation of Alberta
property that is ultra vires the Parliament of Canada, and
(c)does
the imposition of a remittance that is computed under s. 154 of the GST Act
on the basis of consideration for a taxable supply that includes an amount of
provincial tax constitute taxation of Alberta property that is ultra vires
the Parliament of Canada?
Answer: No.
5.Having
regard to s. 126 of the Constitution Act, 1867 , is the requirement under
the GST Act that the Government of Alberta use part of the Government of
Alberta's revenue
(a)to
collect a remittance or cause a remittance to be collected, or
(b)to
pay a remittance prior to the receipt of the remittance from the recipient of a
taxable supply
ultra vires the Parliament of Canada?
Answer: No.
6.Having
regard to ss. 125 and 126 of the Constitution Act, 1867 ,
(a)is
the purchase of taxable supplies by provincial authorities, or any of them, in
the course of their exercising a delegated constitutional power of the
Government of Alberta exempt from tax under the GST Act ,
(b)is
the purchase of taxable supplies by provincial authorities, or any of them,
designated as agents of the Government of Alberta, in the course of their
exercising a delegated constitutional power of the Government of Alberta,
exempt from tax under the GST Act ,
(c)is
the acquisition of taxable supplies by the Crown Purchase Agency referred to in
section 2(k) of the Appendix exempt from tax under the GST Act , and
(d)is
the acquisition or use by provincial authorities, or any of them, in the course
of their exercising a delegated constitutional power of the Government of
Alberta, of taxable supplies that are provided by the Crown Purchase Agency to
the provincial authorities exempt from tax under the GST Act ?
Answer: This question should not be answered.
//La Forest J.//
The reasons of La
Forest and L'Heureux-Dubé JJ. were delivered by
La Forest
J. -- These appeals raise the constitutional validity of the federal Goods and
Services Tax ("GST") passed by Parliament as Part IX of the Excise
Tax Act, R.S.C., 1985, c. E-15 . The case began by a reference by the
Lieutenant-Governor in Council of Alberta to the Court of Appeal of that
province of six questions regarding the validity and effect of the tax. The
nature of the tax and the history of the litigation are set forth in the
reasons of the Chief Justice, and I need not repeat them. I agree with his
proposed disposition and his answers to the referred questions, but our views
diverge on several matters. For that reason, I have thought it best to write
short reasons of my own. The questions and my answers and reasons therefor
follow:
1.Having
regard to the Constitution Acts, 1867 to 1982 or otherwise, is the GST
Act ultra vires the Parliament of Canada in whole or in part and, if
so, in what particular or particulars and to what extent?
I would answer this
question "no". Section 91(3) of the Constitution Act, 1867
empowers Parliament to make laws for "[t]he raising of Money by any Mode
or System of Taxation". There can be no question that the GST is intended
to raise money and that a value-added tax, which is what the GST is, is a mode
or system of taxation. The GST thus falls squarely within s. 91(3) . It is in
pith and substance a mode or system of taxation, so one need not enquire any
further about whether it might be justified as necessarily incidental to the
legislative scheme. The fact that it may affect activities within provincial
regulatory competence is of no moment. This basic proposition was recently
restated in Friends of the Oldman River Society v. Canada (Minister of
Transport), [1992] 1 S.C.R. 3, where, speaking for the Court, I stated, at
p. 62:
. . .
if the Guidelines Order is found to be legislation that is in pith and
substance in relation to matters within Parliament's exclusive jurisdiction, that
is the end of the matter. It would be immaterial that it also affects matters
of property and civil rights . . . .
See also Whitbread v. Walley,
[1990] 3 S.C.R. 1273, at p. 1286. I might add that it is hard to imagine a tax
that would not affect property and civil rights.
Nor does the case
of Attorney-General for Canada v. Attorney-General for Ontario, [1937]
A.C. 355 (Employment Insurance Reference), have any relevance. In that
case, the Privy Council held that the statutory scheme there in question was in
pith and substance an unemployment insurance scheme, a matter then falling
exclusively within provincial legislative competence. Here the pith and
substance of the Act is simply to impose a tax to raise money.
2.Does
the system of collection under the GST Act
(a)at
any stage prior to the supply of taxable supplies to consumers or to suppliers
of exempt supplies,
(b) prior
to the collection by a supplier from a recipient, or
(c) otherwise
constitute
an infringement of the jurisdiction of the Legislature of Alberta with respect
to the regulation of property and civil rights pursuant to s. 92(13) of the Constitution
Act, 1867 , or of another provincial power under that Act , so that the GST
Act in its application of the system of collection or any part of it is ultra
vires the Parliament of Canada?
I would answer this
question "no". The answer flows largely from what I have said about
question 1. The collection provisions of the GST are simply part and parcel of
the mode or system of taxation adopted by Parliament. There is no indication
that these provisions were enacted for any other purpose than to collect the
tax, and colourability is not lightly to be imputed. As Laskin C.J. stated in Reference
re Anti-Inflation Act, [1976] 2 S.C.R. 373, at p. 390:
The
Parliament of Canada is authorized to raise money "by any mode or system
of taxation", and it would be an unusual case where this power, so
apparently limitless, could be challenged as colourably used and thus make it
appropriate for the Court to consider extrinsic material to show colourability.
I agree with the
Court of Appeal that severing the provisions of the Act that do not result in
raising revenues from those that do, would result in a completely different
system of taxation. It would transform the tax from a value- added tax to a
retail sales tax. It would fetter Parliament's discretion to raise money
"by any mode or system of taxation".
That these
provisions may, as I earlier noted, have an impact on property and civil rights
is of no moment. As I stated in Bank of Montreal v. Hall, [1990] 1
S.C.R. 121, at p. 145, there is no hermetic division between the federal
legislative domain and that covered by property and civil rights. Some
spillover is inevitable.
3.Having
regard to s. 103 of the Constitution Act, 1867 and the common law, are
suppliers entitled to charge and to collect from the Consolidated Revenue Fund
of Canada all costs, charges and expenses incidental to collecting and paying a
remittance under the GST Act ?
I
would answer this question "no". Section 103 reads:
103. The Consolidated Revenue Fund of
Canada shall be permanently charged with the Costs, Charges, and Expenses
incident to the Collection, Management, and Receipt thereof, and the same shall
form the First Charge thereon, subject to be reviewed and audited in such
Manner as shall be ordered by the Governor General in Council until the
Parliament otherwise provides.
As counsel for the Attorney General of
Canada argued, s. 103 merely provides for the appropriation of monies from the
consolidated revenue fund of Canada. It does not impose an independent legal
obligation on Canada to compensate collecting agents. Rather, it refers to
costs, charges and expenses the Government of Canada is obliged to pay by
statute or contract independently of s. 103 .
I need not go into
the common law position. Whatever duty might reside in the Crown at common law
to pay suppliers for collecting the tax, by providing (s. 346 of the Act ) for a
one-time transitional credit for small businesses to assist them in offsetting
their initial compliance costs, Parliament, in my view, has given a clear
indication that it did not intend to provide further compensation for the
purpose. For a similar situation, see Zaidan Group Ltd. v. London (City),
[1991] 3 S.C.R. 593.
4.Having
regard to s. 125 of the Constitution Act, 1867 ,
(a)is
the imposition of obligations under the GST Act on the Government of
Alberta as a supplier to collect and pay a remittance on a taxable supply that
is Alberta property ultra vires the Parliament of Canada,
(b)does
the imposition of a remittance under the GST Act on a recipient from the
Government of Alberta of a taxable supply that is Alberta property or that
generates revenue to the Government of Alberta constitute taxation of Alberta
property that is ultra vires the Parliament of Canada, and
(c)does
the imposition of a remittance that is computed under s. 154 of the GST Act
on the basis of consideration for a taxable supply that includes an amount of
provincial tax constitute taxation of Alberta property that is ultra vires
the Parliament of Canada?
I would answer this
question "no" for the reasons given by the Chief Justice. The
majority in the circumstances in Reference re Exported Natural Gas Tax,
[1982] 1 S.C.R. 1004, interpreted the tax there as in pith and substance one
imposed on provincial property, indeed the public domain, which at
Confederation was intended, as the majority underlined, to provide the primary
source of revenue for the provinces, a constitutional principle s. 125 was
designed to protect. Here the tax is in pith and substance one imposed against
the purchaser of goods or services and simply collected by the province in
common with other suppliers of goods or services. The province is in no
different position from an employer obliged to withhold income under the Income
Tax Act, S.C. 1970-71-72, c. 63, ss. 153 and 227(4).
5.Having
regard to s. 126 of the Constitution Act, 1867 , is the requirement under
the GST Act that the Government of Alberta use part of the Government of
Alberta's revenue
(a)to
collect a remittance or cause a remittance to be collected, or
(b)to
pay a remittance prior to the receipt of the remittance from the recipient of a
taxable supply
ultra
vires the Parliament
of Canada?
There can be no
doubt that the province by virtue of s. 126 has the exclusive power to
appropriate money from its consolidated revenue for provincial purposes, just
as by s. 102 the federal Parliament has exclusive power of appropriation from
the federal consolidated revenue fund. And the very structure of the
Constitution, which creates two sovereign levels of government with their own
fiscal organization flies against the idea that one level of government can
appropriate monies from the other's consolidated revenue fund. That was
decided in Reference re Troops in Cape Breton, [1930] S.C.R. 554, where
this Court held invalid an attempt by the federal government to impose on a
province the cost of carrying out a federal activity in the province.
It by no means
follows, however, that an administrative duty reasonably placed by Parliament
on a province in the course of enacting a scheme falling squarely within a
federal power will be invalid because the performance of that duty will in
consequence require some expenditure by the province. In creating a tax
system, which falls in pith and substance within s. 91(3) of the Constitution
Act, 1867 , Parliament may incidentally require the provinces to assume such
a burden. Otherwise, the broad taxing power there granted would be
frustrated. It must be remembered that this power, subject to s. 125 , is a
paramount power, which must be given room for its effective exercise.
The present
situation, as counsel for the Attorney General of Canada noted, is somewhat similar
to that in Valin v. Langlois (1879), 3 S.C.R. 1, where Parliament
conferred a duty upon provincial superior courts in a federal matter. It also
has some affinity to cases like Coughlin v. Ontario Highway Transport Board,
[1968] S.C.R. 569, where Parliament conferred upon provincial boards the duty
to administer laws which it had incorporated by reference, although it may not
be irrelevant that schemes of this kind result from federal-provincial
cooperation.
Nor do I see
anything in Regional Municipality of Peel v. MacKenzie, [1982] 2 S.C.R.
9, that assists the province here. The provision there impugned directed a
municipality to which a delinquent child belonged to contribute to the child's
support. The provision was held not to fall within the criminal power nor to
be truly necessary for its effective exercise. Rather, it fell within
provincial power to regulate municipal institutions. In such a case, it would
be surprising if Parliament could impose such financial duty on the province.
In the present case, there is not only a link with federal legislative power,
as Martland J. seems to suggest (at p. 22) might have been acceptable; the tax
and the collecting mechanism, we saw, fall squarely within the ambit of the
relevant legislative power, s. 91(3) .
6.Having
regard to ss. 125 and 126 of the Constitution Act, 1867 ,
(a)is
the purchase of taxable supplies by provincial authorities, or any of them, in
the course of their exercising a delegated constitutional power of the
Government of Alberta exempt from tax under the GST Act ,
(b)is
the purchase of taxable supplies by provincial authorities, or any of them,
designated as agents of the Government of Alberta, in the course of their
exercising a delegated constitutional power of the Government of Alberta,
exempt from tax under the GST Act ,
(c)is
the acquisition of taxable supplies by the Crown Purchase Agency referred to in
section 2(k) of the Appendix exempt from tax under the GST Act , and
(d)is
the acquisition or use by provincial authorities, or any of them, in the course
of their exercising a delegated constitutional power of the Government of
Alberta, of taxable supplies that are provided by the Crown Purchase Agency to
the provincial authorities exempt from tax under the GST Act ?
I agree with the
Chief Justice that this question should not be answered. Let me simply add a
few words to what he says about the importance of the issues we are being asked
to answer in the abstract. The argument of counsel for Alberta seems at times
to suggest that any federal tax imposed against the province would be ultra
vires by virtue of ss. 125 and 126 . I would not be prepared to go that
far. If that result had been intended, it is not easy to understand why the
prohibition in s. 125 was limited to property taxes. And if s. 126 was
intended to prevent such taxation, then one wonders why it was thought
necessary to enact s. 125 .
I am not unmindful,
however, of the fact that the power to tax involves the power to destroy and
that, accordingly, the fiscal independence of the provinces and the protection
of their sources of revenue must be maintained. A complete prohibition of
federal taxation against the provinces (apart from being anything but obvious
from the constitutional text) might, however, frustrate the development of
legitimate fiscal initiatives as well as deprive Parliament of the power to
prevent serious economic imbalances in the conduct of many activities both
within and outside the province arising out of the tax owing to differences in
the extent that the provinces engaged in such activities. These are daunting
questions to which the Court may need to respond if and when they arise. If
they do, it would be better for the Court to be in a position to undertake the
task uninhibited by statements made in the absence of appropriate contexts.
These questions do not arise here. Parliament has seen fit not to impose
duties and taxes of the kind addressed in question 6. I think the Court would
ill serve the nation if it attempted to respond to questions raising such
fundamental issues in the abstract.
I also agree with
the Chief Justice's reasons concerning the arguments of the Attorney General
for Ontario.
Accordingly, I
would dispose of these appeals and answer the constitutional questions in the
manner proposed by the Chief Justice.
Appeal of the
Attorney General of Canada allowed. Appeal of the Attorney General for Alberta
dismissed.
Solicitors for the
appellant/respondent: Stikeman, Elliott, Ottawa.
Solicitors for the
respondent/appellant: Burnet Duckworth & Palmer, Calgary.
Solicitor for the
intervener the Attorney General for Ontario: The Ministry of the
Attorney General of Ontario, Toronto.
Solicitor for the
intervener the Attorney General of British Columbia: The Deputy
Attorney General of British Columbia, Victoria.
Solicitor for the
intervener the Attorney General for Saskatchewan: The Deputy
Attorney General of Saskatchewan, Regina.
Solicitors for the
intervener the Canadian Federation of Independent Business: Borden
& Elliot, Toronto.