Lord
MACMILLAN—The
Attorney-General
of
the
Province
of
Manitoba,
suing
on
behalf
of
His
Majesty
in
right
of
the
Province,
seeks
in
these
proceedings
to
obtain
judgment
against
the
appellant
for
a
sum
of
$20.80,
being
tax
alleged
to
be
due
by
him
under
the
Special
Income
Tax
Act,
1933
(Man),
e.
44.
The
appellant
is
a
civil
servant
of
the
Dominion
of
Canada
and
holds
the
office
of
a
meat
inspector
in
the
Health
of
Animals
Branch
of
the
Dominion
Department
of
Agriculture.
Throughout
the
material
period
he
was
resident
within
the
Province
of
Manitoba
and
performed
his
official
duties
there.
His
remuneration
was
at
the
rate
of
$115.25
per
month
plus
5%
added
and
retained
as
a
contribution
to
a
superannuation
fund.
Payment
was
made
to
him
monthly
by
an
order
on
the
Receiver
General
of
Canada
at
Ottawa
transmitted
to
him
from
Ottawa
and
cashed
by
him
in
Manitoba.
The
sum
sued
for
is
stated
to
represent
a
tax
of
2%
on
the
remuneration
so
received
by
the
appellant
during
the
period
from
May
1
to
December
31,
1933.
The
appellant
received
his
salary
without
any
deduction
of
tax.
The
action
was
initiated
in
the
County
Court
of
Winnipeg
where
judgment
was
given
against
the
appellant.
The
decision
of
the
County
Court
Judge
was
unanimously
affirmed
by
Court
of
Appeal
of
the
Province
of
Manitoba
(ante,
p.
188),
whose
judgment
in
turn
was
upheld
by
a
majority
of
the
Supreme
Court
of
Canada
(Duff,
C.J.C.,
Lamont
and
Davis,
JJ.
;
Cannon
and
Crocket,
JJ.,
dissenting
)
(ante.
p.
193).
The
grounds
of
defence
on
which
the
appellant
relied
before
their
Lordships
were,
broadly
stated,
that
the
Special
Income
Tax
Act
of
1933,
so
far
as
purporting
to
tax
wages,
and
in
particular
the
wages
or
salaries
of
Dominion
civil
servants,
was
unconstitutional
and
ultra
vires
of
the
Provincial
Legislature,
and
that
the
statute
was
in
any
any
event
inapplicable
to
the
appellant
as
a
civil
servant
of
the
Dominion
of
Canada.
In
order
to
deal
with
the
arguments
submitted
on
behalf
of
the
appellant
it
is
necessary
to
set
out
at
length
the
material
provisions
of
the
enactment
in
question.
The
statute
is
entitled
"An
Act
to
Impose
a
Special
Tax
on
Incomes.’’
It
contains
two
main
parts,
the
first
of
which
is
headed
"‘Taxation
of
Wages’’
and
the
second
‘‘Taxation
of
Income
other
than
Wages.’’
The
following
quotations
are
from
Part
I,
on
which
the
action
is
based:
"3(1)
In
addition
to
all
other
taxes
to
which
he
is
liable
under
this
or
any
other
Act,
every
employee
shall
pay
to
His
Majesty
for
the
raising
of
a
revenue
for
provincial
purposes
a
tax
of
two
per
centum
upon
the
amount
of
all
wages
earned
by
or
accruing
due
to
him
on
or
after
the
first
day
of
May,
1933,
which
tax
shall
be
levied
and
collected
at
the
times
and
in
the
manner
prescribed
by
this
part
.
.
.
[Here
follow
certain
exemptions
inapplicable
to
the
present
ease.
I
“4(1)
Every
employer
at
the
time
of
payment
of
wages
to
an
employee
shall
levy
and
collect
the
tax
imposed
on
the
employee
by
this
part
in
respect
of
the
wages
of
the
employee
earned
or
accruing
due
during
the
period
covered
by
the
payment,
and
shall
deduct
and
retain
the
amount
of
the
tax
from
the
wages
payable
to
the
employee,
and
shall,
on
or
before
the
15th
day
of
the
month
next
following
that
in
which
the
payment
of
wages
takes
place,
or
at
such
other
time
as
the
regulations
prescribe,
pay
to
the
administrator
the
full
amount
of
the
tax.
No
employee
shall
have
any
right
of
action
against
his
employer
in
respect
of
any
moneys
deducted
from
his
wages
and
paid
over
to
the
administrator
by
the
employer
in
compliance
or
intended
compliance
with
this
section.
“(2)
Every
employer
shall,
with
each
payment
made
by
him
to
the
administrator
under
this
section,
furnish
to
the
administrator
a
return
showing
all
taxes
imposed
by
this
part
on
the
employees
of
the
employer
in
respect
of
wages
during
the
period
covered
by
the
return,
which
shall
be
in
the
form
and
verified
in
the
manner
prescribed
by
the
administrator.
"(3)
Every
employer
who
deducts
or
retains
the
amount
of
any
tax
under
this
part
from
the
wages
of
his
employee
shall
be
deemed
to
hold
the
same
in
trust
for
His
Majesty
and
for
the
payment
over
of
the
same
in
the
manner
and
at
the
time
provided
under
this
part.
"5(1)
Every
employer
shall
keep
at
some
place
in
the
province,
of
the
location
of
which
he
shall
inform
the
administrator
when
requested
to
do
so,
a
true
and
correct
record
of
the
names
and
residential
addresses
of
all
his
employees,
and
of
the
dates
upon
which
each
of
them
worked,
the
wages
paid
to
each,
and
such
other
matters
as
the
administrator
requires.
"
(2)
Every
employer
shall,
on
request
of
the
administrator
or
any
person
authorised
by
him
in
writing,
produce
for
inspection
all
records
kept
by
the
employer
relating
to
his
employees.
"6(1)
If
an
employer,
in
violation
of
the
provisions
of
this
part
fail
to
collect
and
pay
over
any
tax
imposed
by
this
part,
the
administrator
may
demand
and
collect
from
him
as
a
penalty
ten
per
cent
of
the
tax
payable,
and
he
shall
in
addition
be
liable
to
a
fine
of
10
dollars
for
each
day
of
default,
but
not
to
more
than
200
dollars.
"‘(2)
Every
person,
who
contravenes
any
provision
of
this
part
in
respect
of
which
no
penalty
is
otherwise
provided,
shall
be
liable
to
a
fine
not
exceeding
500
dollars,
and
each
day’s
continuance
of
the
act
or
default
out
of
which
the
offence
arises
shall
constitute
a
separate
offence;
but
nothing
contained
in
this
section
nor
the
enforcement
of
any
penalty
thereunder
shall
suspend
or
affect
any
remedy
for
the
recovery
of
any
tax
payable
under
this
part
or
of
any
moneys
in
the
hands
of
an
employer
belonging
to
His
Majesty.
"7.
In
ease
the
wages
earned
or
accruing
due
to
an
employee
are
paid
to
him
without
the
tax
imposed
thereon
being
deducted
therefrom
by
his
employer,
it
shall
be
the
duty
of
the
employee
to
forthwith
pay
the
tax,
and
all
the
provisions
of
sections
23,
23A,
24
and
25
of
‘The
Income
Tax
Act’
shall,
mutatis
mutandis,
apply
to
the
collection
and
recovery
of
the
tax
so
imposed
from
the
employer
and
employee,
or
either
of
them.”
See.
2(1)
of
the
Act
provides
the
following
interpretations:
(b)
‘Employee’
means
any
person
who
is
in
receipt
of
or
entitled
to
any
wages.
"
(c)
‘Employer’
includes
every
person,
manager
or
representative
having
control
or
direction
of
or
responsible,
directly
or
indirectly,
for
the
wages
of
any
employee
and
in
case
the
employer
resides
outside
the
province,
the
person
in
control
within
the
province
shall
be
deemed
to
be
the
employer.
"(d)
‘Wages’
includes
all
wages,
salaries
and
emoluments
from
any
source
whatsoever,
including—
dé
(i)
any
compensation
for
labour
or
services,
measured
by
time,
piece
or
otherwise;
(ii)
the
salaries,
indemnities
or
other
remuneration
of
members
of
the
Senate
and
House
of
Commons
of
the
Dominion
and
officers
thereof,
members
of
the
Provincial
Legislative
Councils
and
Assemblies,
members
of
municipal
councils,
commissions
or
boards
of
management
and
of
any
Judge
of
any
Dominion
or
provincial
Court
and
of
all
persons
whatsoever,
whether
such
salaries,
indemnities
or
other
remuneration
are
paid
out
of
the
revenues
of
His
Majesty
in
right
of
the
Dominion
or
in
right
of
any
province
thereof,
or
any
person.”
Taking
the
contentions
of
the
appellant
in
the
order
in
which
they
were
advanced
their
Lordships
deal
first
with
his
submission
that
the
tax
on
wages
which
the
Act
imposes
is
not
‘‘
Direct
Taxation
within
the
Province
in
order
to
the
raising
of
a
Revenue
for
provincial
Purposes’’
within
the
meaning
of
sec.
92(2)
of
the
B.N.A.
Act,
and
is
consequently
invalid.
This
argument,
it
will
be
observed,
would,
if
sustained,
invalidate
the
tax
as
regards
all
wage-earners
in
Manitoba
and
not
merely
in
the
case
of
Dominion
civil
servants.
While
in
the
heading
of
this
Part
of
the
Act
the
tax
is
described
as
a
“Tax
on
Wages”
it
would
be
more
accurate
to
describe
it
as
a
tax
on
employees
in
respect
of,
or
measured
by,
their
wages,
and
indeed
it
is
described
in
sec.
4
as
‘‘the
tax
imposed
on.
the
employees
by
this
part.”
Now
all
are
agreed
that
an
income
tax
is
the
most
typical
form
of
direct
taxation.
“The
imposition
of
taxes
on
property
and
income,
of
death
duties
and
of
municipal
and
local
rates
is,
according
to
the
common
understanding
of
the
term,
direct
taxation”
(per
Viscount
Cave,
L.C.,
in
Halifox
v.
Fairbanks
[1927]
4
D.L.R.
945,
at
pp.
949-50).
If
then
the
tax
in
question
is
an
income
tax
there
is
an
end
of
the
matter.
Prima
facie
the
tax
is
an
income
tax.
The
statute
imposing
it
is
entitled
‘‘An
Act
to
Impose
a
Special
Tax
on
Incomes.’’
It
invokes
the
aid
of
provisions
of
the
Manitoba
Income
Tax
Act
(C.A.M.
1924,
c.
91
and
amending
Acts)
and
in
see.
16
the
Lieutenant-Governor
in
Council
is
empowered
to
make
regulations
for
the
joint
administration
of
the
Act
and
the
Manitoba
Income
Tax
Act.
The
Act
as
a
whole
covers
all
taxable
income,
Part
I
dealing
with
one
form
of
income,
namely
income
from
wages
and
Part
II
dealing
with
income
other
than
wages.
Wages
are
undeniably
income
and
the
tax
is
by
see.
2
imposed
on
employees
in.
respect
of
the
wages.
earned
by
them.
A
tax
is
not
the
less
a
tax
on
income
because
it
is
imposed
on
a
particular
component
of
the
taxpayers’
income.
It
may
be
convenient
to
tax
one
part
of
the
taxpayers’
income
in
one
way,
another
part
in
another
way.
Moreover
the
tax
is
not
in
any
way
discriminatory
for
it
is
imposed
on
all
wage-earners
indiscriminately.
To
all
this
the
appellant
answers
that
while
the
statute
may
profess
to
charge
the
tax
on
the
wage-earner
in
respect
of
his
wages
it
enacts
that
it
is
to
‘‘be
levied
and
collected
.
.
.
in
the
manner
prescribed
by
this
part,”
and
the
manner
prescribed
is
that
the
employer
is
to
deduct
the
amount
of
the
tax
from
the
wages
which
he
pays
to
his
employees
and
account
for
it
to
the
Crown.
The
tax,
he
says,
is
thus
really
imposed
on
the
employer;
it
is
not
a
tax
on
any
income
which
the
employee
receives
but
a
tax
on
the
wage
found
in
the
hands
of
the
employer,
and
the
tax
is
thus
only
indirectly
imposed
on
the
employee.
Their
Lordships
cannot
accept
this
argument.
In
their
view
sec.
3
is
what
it
professes
to
be,
a
section
charging
the
tax
on
the
employee.
The
following
sections
which
provide
for
the
deduction
of
the
amount
of
the
tax
by
the
employer
before
he
pays
over
his
employee’s
wages
are
mere
machinery
and
machinery
of
a
very
familiar
type
in
income
tax
legislation.
The
expedient
of
requiring
deduction
of
tax
at
the
source,
as
it
is
called,
is
one
which
has
long
been
in
effective
use
in
the
United
Kingdom.
A
taxpayer
is
said
either
to
pay
or
to
bear
income
tax
according
as
he
pays
it
himself
or
suffers
deduction
of
it
from
moneys
due
to
him,
but
in
either
case
he
is
the
taxpayer
and
on
him
the
burden
of
the
tax
is
imposed.
In
their
Lordships’
opinion
the
present
tax
is
a
direct
tax
on
employees
in
respect
of
that
portion
of
their
income
which
consists
of
wages.
The
appellant’s
second
contention
was
that
it
is
incompetent
for
the
Provincial
Legislature
to
tax
the
income
of
a
Dominion
civil
servant.
Why
so?
Any
person
found
within
the
province
may
be
legally
taxed
there
if
taxed
directly’’
(per
Lord
Hobhouse
in
Bank
of
Toronto
v.
Lambe
(1887)
12
App.
Cas.
575,
at
p.
084).
The
appellant’s
argument
is
that
the
tax
offends
against
the
exclusive
legislative
authority
cf
the
Dominion
Parliament
in
"‘The
fixing
and
providing
for
the
Salaries
and
Allowances
of
Civil
and
other
Officers
of
the
Government
of
Canada‘‘
under
see.
91(8)
of
the
B.N.A.
Act.
If,
he
says,
the
Provincial
authorities
can
tax
at
the
rate
of
2%
the
salary
which
he
receives
from
the
Dominion
to
enable
him
to
live
in
the
Province
and
discharge
his
duties
there,
they
can
tax
his
salary
to
such
an
extent
as
to
render
it
impossible
for
him
to
live
and
perform
his
duties.
A
similar
argument
in
terrorem
was
advanced
and
rejected
in
the
case
of
the
Bank
of
Toronto
v.
Lambe
(p.
986).
"‘It
is
suggested,’’
says
Lord
Hobhouse,
‘‘that
the
legislature
may
lay
on
taxes
so
heavy
as
to
crush
a
bank
out
of
existence,
and
so
to
nullify
the
power
of
parliament
to
erect
banks.
But
their
Lordships
cannot
conceive
that
when
the
Imperial
Parliament
conferred
wide
powers
of
local
self-government
on
great
countries
such
as
Quebec,
it
intended
to
limit
them
on
the
speculation
that
they
would
be
used
in
an
injurious
manner.
People
who
are
trusted
with
the
great
power
of
making
laws
for
property
and
civil
rights,
may
well
be
trusted
to
levy
taxes.
‘
‘
The
validity
of
imposing
direct
taxation
by
provincial
legislation
on
a
Dominion
official
has
been
expressly
established
by
authority
of
the
case
of
Abbott
v.
St.
John
(1908)
40
8.C.R.
579,
which
was
approved
by
this
Board
in
Caron
v.
The
King
[1924]
A.C.
999.
Lord
Phillimore,
in
delivering
the
judgment
of
the
Board,
quoted
this
passage
from
the
judgment
of
Davies,
J.
in
Abbott^s
case
(pp.
606-7):
""
‘The
province
does
not
attempt
to
interfere
directly
with
the
exercise
of
the
Dominion
power,
but
merely
says
that,
when
exercised,
the
recipients
of
the
salaries
shall
be
amenable
to
provincial
legislation
in
like
manner
as
all
other
residents/
”
Dealing
with
the
suggestion
that
provincial
taxation
might
paralyse
the
Dominion
civil
service,
Davies,
J.,
adds
that
‘‘if,
under
the
guise
of
exercising
power
of
taxation,
confiscation
of
a
substantial
part
of
official
or
other
salaries
were
attempted,
it
would
be
then
time
enough
to
consider
the
question
and
not
to
assume
beforehand
such
a
suggested
misuse
of
the
power.
‘
‘
It
should
perhaps
be
explained
that
in
Caron’s
case
the
validity
of
the
Dominion
Income
War
Tax
Act,
1917
(Can.),
e.
28
(now
R.S.C.
1927,
c.
97),
as
affecting
the
salary
of
a
minister
of
a
Provincial
Government
was
upheld.
The
present
case
is
the
converse.
In
their
Lordships’
opinion
the
appellant’s
second
contention
must
share
the
fate
of
the
first.
Next
the
appellant
submits
that
he
is
not
an
“employee”
at
all
within
the
meaning
of
the
Act
and
further
that
the
Dominion
is
not
his
employer.
Cannon,
J.,
in
the
distressing
picture
which
he
draws
of
the
civil
servant’s
lot,
seems
to
share
this
view.
It
is
not,
however,
the
view
of
the
Dominion
Legislature,
which
in
the
Civil
Service
Act,
1927,
R.S.C.
c.
22
uses
the
word
"‘employees''
in
speaking
of
civil
servants
and
indeed
in
sec.
2
interprets
"‘employees''
to
mean
and
include
‘‘officers,
clerks,
and
employees
in
the
civil
service.
’
’
But
the
Act
is
quite
explicit,
and
the
appellant
clearly
falls
within
the
definition
of
“employee”
in
sec.
2(1)(b),
for
he
‘‘is
in
receipt
of
.
.
.
wages”
and
“wages”
by
sec.
2(1)
(d)
includes
‘‘all
wages,
salaries,
and
emoluments
from
any
source
whatsoever’’
and
in
particular
“
(ii)
the
salaries
of
all
persons
whatsoever
whether
such
salaries
.
..
are
paid
out
of
the
revenues
of
His
Majesty
in
right
of
the
Dominion
or
in
right
of
any
province
thereof
or
any
person.’’
To
this
there
can
really
be
no
answer.
The
appellant,
however,
seeks
to
extricate
himself
by
arguing
that
even
if
he
is
an
employee,
the
Dominion
Government
is
not
his
employer
within
the
meaning
of
the
Act.
If
the
Dominion
is
his
employer
the
combined
effect
of
sec.
3
of
the
Act
imposing
the
tax
on
him
as
an
employee
and
sec.
7
requiring
him
‘‘to
forthwith
pay
the
tax’’
if
his
wages
are
paid
to
him
‘‘without
the
tax
imposed
thereon
being
deducted
by
his
employer”—which
is
the
case
with
the
appellant—leads
inevitably
to
judgment
against
him.
If
the
Dominion
is
not
his
employer
then
he
maintains
that
the
condition
of
the
tax
not
having
been
deducted
by
his
employer
has
not
been
fulfilled,
and
he
escapes
from
the
conditional
obligation
to
pay
imposed
by
sec.
7.
In
support
of
the
submission
that
the
Dominion
is
not
an
“employer”
within
the
meaning
of
the
Act,
the
appellant
refers
to
sees.
4,
5
and
6
of
the
Act,
where
the
duties
of
deduction,
of
accounting,
of
making
returns
and
of
keeping
records
are
imposed
upon
‘‘every
employer’’
under
penalties.
This
cannot,
he
says,
apply
to
the
Dominion,
for
it
would
be
ultra
vires
of
the
Provincial
Legislature
to
impose
duties
and
corresponding
penalties
on
the
Dominion
Government;
if
the
Provincial
Legislature
has
done
so,
the
legislation
is
invalid.
Their
Lordships
agree
that
in
these
sections
the
term
‘‘employer’’
does
not
on
a
sound
construction
apply
to
the
Dominion
Government.
But
equally
it
does
not
apply
to
all
other
employers
outside
the
Province.
And
this
for
the
very
good
reason
that
the
revenue
laws
of
a
country
are
addressed
to
the
inhabitants
of
that
country
and
are
ineffectual
to
reach
or
affect
persons
beyond
its
borders.
Indeed
‘‘it
may
be
accepted
as
a
general
principle
that
States
can
legislate
effectively
only
for
their
own
territories’’
(Croft
v.
Dunphy
[1933]
1
D.L.R.
225,
at
p.
227).
Therefore
when
a
revenue
statute
of
Manitoba
addresses
‘‘every
employer”
and
requires
him
under
penalties
to
discharge
certain
duties
in
relation
to
the
collection
of
the
revenue
of
the
Province,
the
order
must
be
construed
as
addressed
to
‘
‘every
employer
‘
’
who
is
subject
to
the
Legislature
and
is
inapplicable
to
employers
beyond
its
jurisdiction,
notwithstanding
that
the
language
in
which
the
term
^employer”
is
defined
in
the
Act
is
sufficiently
wide
to
include
persons
beyond
its
jurisdiction.
On
the
other
hand
their
Lordships
are
equally
clear
that
there
is
no
such
obstacle
in
the
way
of
construing
the
word
"
"
employer
‘
‘
where
it
occurs
in
sec.
7
in
the
phrase
‘‘
without
the
tax
imposed
thereon
being
deducted
therefrom
by
his
employer
‘
‘
as
including
the
Dominion
Government
or
any
other
employer
outside
Manitoba.
The
comprehensive
meaning
of
the
term
‘‘employer’’
is
here
free
to
operate,
for
the
provision
in
question
does
not
seek
to
impose
any
duty
on
persons
outside
the
Province;
it
merely
refers
to
a
question
of
fact,
the
fact
of
the
employer,
wherever
or
whoever
he
may
be,
not
having
deducted
the
tax
in
paying
wages
to
a
person
within
the
Province.
It
is
not
ultra
vires
of
the
Provincial
Legislature
to
provide
that
if
a
wage-earner
within
the
Province
receives
his
wages
from
an
employer
outside
the
Province
without
deduction
of
tax,
the
wage-earner
shall
himself
pay
the
tax,
whether
the
outside
employer
be
the
Dominion
Government
or
anyone
else.
Such
legislation
is
not
legislation
affecting
persons
outside
the
Province
with
any
duty
or
liability.
The
last
ground
on
which
the
appellant
took
his
stand
is
even
less
tenable.
He
submitted
that
the
Dominion
Parliament
by
enacting
a
general
Dominion
Income
Tax
in
1917
had
already
so
occupied
the
field
of
this
form
of
taxation
as
to
preclude
the
Manitoba
Legislature
from
enacting
any
income
tax
legislation.
In
their
Lordship’s
opinion
this
submission,
which,
if
well-
founded,
would
invalidate
the
whole
Act
and
not
merely
Part
I,
is
based
on
a
misconception
of
the
doctrine
of
the
‘‘occupied
field’’
evolved
in
the
interpretation
of
the
B.N.A.
Act.
The
Dominion
Parliament
has
exclusive
authority
under
sec.
91(3)
to
make
laws
for
‘‘
The
raising
of
Money
by
any
Mode
or
System
of
Taxation’’
and
each
Province
under
sec.
92(2)
has
the
exclusive
right
to
make
laws
for
‘‘Direct
Taxation
within
the
Province
in
order
to
the
raising
of
a
Revenue
for
Provincial
Purposes.”
It
was
pointed
out
in
Citizens
Ins.
Co.
of
Canada
v.
Parsons
(1881)
7
App.
Cas.
96,
at
p.
108,
that
though
the
description
‘‘the
raising
of
money
by
any
mode
or
system
of
taxation”
is
"sufficiently
large
and
general
to
include
‘direct
taxation
within
the
province,
in
order
to
the
raising
of
a
revenue
for
provincial
purposes,’
assigned
to
the
provincial
legislatures
by
sect.
92,
it
obviously
could
not
have
been
intended
that,
.
.
.
the
general
power
should
override
the
particular
one.’’
This
statement
is
quoted
and
approved
in
Bank
of
Toronto
v.
Lambe
(12
App.
Cas.,
at
p.
585).
The
doctrine
of
the
"‘occupied
field’’
applies
only
where
there
is
a
clash
between
Dominion
legislation
and
provincial
legislation
within
an
area
common
to
both.
Here
there
is
no
conflict:
Both
income
taxes
may
co-exist
and
be
enforced
without
clashing.
The
Dominion
reaps
part
of
the
field
of
the
Manitoba
citizen
‘s
income.
The
Province
reaps
another
part
of
it.
This
argument
therefore
also
fails.
Their
Lordships
have
now
disposed
adversely
to
the
appellant
of
all
the
grounds
on
which
the
validity
of
the
tax
in
question
was
challenged
before
them
and
they
will
accordingly
humbly
advise
His
Majesty
that
the
appeal
be
dismissed.
As
their
Lordships
were
informed
that
it
had
been
agreed
between
the
parties
that
they
should
each
bear
their
own
costs
throughout
these
proceedings
there
will
be
no
order
as
to
costs.
Appeal
dismissed.
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