22 April 1981 Income Tax Severed Letter

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

XXXX

April 22, 1981

XXXX

Sir:

No department of the civil service protests more loudly than the Inland Revenue that it does not make policy but merely executes the policy decisions of its political masters. That nonsense is as credible as the pretence that as a prelude to the attack on a tiny group of Canadian pensioners the Chancellor of the Exchequer borrowed the Lord Chancellor's bicycle and trouser clips to ride to the Commonwealth Minister's office to plan the operation with him. Perhaps other departments do not need to protest their innocence because their policies are usually based on reason, on law, on equity, on justice or on other sound principles of good government that merit public acceptance if not always public approval. None of these bases can be claimed for the Revenue's assault on a scattered handful of defenceless pensioners living in Canada and drawing pensions of more than £5,000 a year from private sources in Britain. The motive would have been a little more obvious had the attack been on blue eyed, red headed, left handed, Canadian, bearded, presbyterian plumbers.

The only possible reason for the attack was that, in the Revenue's warped mind, the pensioners had committed a capital crime that merited exemplary retribution. They had had the temerity, openly and lawfully, to defy the department's wishes. They had emigrated to Canada and thus removed themselves from its jurisdiction and its grasping clutches. To allow that to go unpunished was unthinkable. If equity or justice or any other ethical principle stood in the way, that was too bad for principle. After all, the proposed victims were pensioners and therefore old. They had no votes in the U.K., and therefore no MP to represent them in parliament or to ask awkward questions about the legality of the attack on them. They could not demonstrate to attract publicity through the television cameras because they were thousands of miles away. They had no union to frighten the cabinet. And above all, the whole operation against them could be conducted under wraps and completed in secrecy save for an obscure line in a parliamentary order paper. Even the fact that the scheme was negatively cost effective, to borrow current jargon, was in its favour. Although the paltry amount of tax to be collected was less than the cost of the additional civil servants needed to monitor and collect it, the extra bodies would inevitably involve promotions within the department.

Revenue thinking does not seem to have progressed much in two centuries. It was the department's predecessors who persuaded Lord North to accept and have passed by parliament the fatal Stamp Act of 1765. The folly of that senseless Act, which was also aimed at taxing a handful of Britons living in North America, produced incalculable and calamitous consequences for Britain that are with us yet. It left one legacy, however, in a lesson that the present Revenue, if it ever learned it, has forgotten. That is the monumental stupidity of ignoring those, however small the band, who rally to the battle cry, 'No taxation without representation'. To repeat the folly of 1765 is no more just nor less stupid today than it was then.

The Revenue is well aware that in a democracy the state's right to tax the citizen is not absolute, but rests fundamentally on its provision for him of defence, welfare and other government services the cost of which can be met only out of his pocket. If the government does not provide these services for the citizen its right to tax him disappears. When the hapless pensioners emigrated from U.K. to Canada, they lost their right to claim anything of the services provided by Westminster, but at the same time and for that very reason Westminster lost its right to tax them. That simple truth was accepted by successive governments involved, however unpalatable it was to the Revenue. The pensioners had passed from its jurisdiction, but did not escape taxation. They paid their just dues to the government of Canada which provided for them the services that the British government did not. What infuriated the Revenue was that the Canadian dues were more civilised and less punitive than its own. But that does not affect the fact that the system was just, equitable, fair and right. That was why it produced the general international rule that pensions are taxable in the country of residence. What stuck in the Revenue's gullet was that nothing stuck to its itchy palm.

To upset a system that was working justly and fairly, the Revenue required the involvement of another government. In 1980 the political climate in Ottawa was ideal for its fell purpose. With the need to accommodate a British government that would shortly have to vote on Trudeau's ill starred constitutional package, Ottawa could be relied on not to object too vigorously even to the Revenue's most outrageous demands. As expected, Ottawa bowed meekly to them instead of delivering the forthright and scornful rebuff they would have received from Lester Pearson's government or the governments of, say, Australia or New Zealand. Hence the U.K. - Canada Double Taxation Convention, 1980. It is more than doubtful if that document created for the Revenue any right of taxation that it did not previously possess, or if Ottawa had the power to confer such a right. Were the Revenue's case to be that the words 'may also' in the second sentence of Section 17 confer a right to tax, would they not be more properly construed as implying after 'State' the words, 'provided it has the right to do so'? The pensioner's right not to be taxed by Westminster could not be abrogated by Ottawa, nor could it be denied by the Revenue's arrogant arrogation of the right to tax them, since they were outside its jurisdiction.

Doubtless the author of the department's strategy will expect a 'K' rather than a 'C' in the next honours list. If the ordinary right minded Briton knew what had been done in his name, he would not reward the bureaucrat with honours but would demand his head on a charger. He would not see the Revenue's attack as the courageous chase of legitimate prey by a noble predator but as the vicious harrying of old and feeble stragglers by a scavenging jackal. It is certain that the department's mandarins would have been terrified of persecuting the pensioners with such blatant discrimination had they been coloured. Public outrage would have had them out of office and in the courts in hours. It is a tragic reflection of present day Britain that the mother of parliaments herself should stoop to the despicable level of denying British subjects any means of relief from or appeal against injustice if they are white, voteless, unionless and far away. John Hampden must be turning in his grave. When 'The Decline and Fall of the British Empire' comes to be written several chapters will be needed to cover the Revenue's massive contribution to the decay of public standards. Its contempt for the principles of fairness, justice and legality as evidenced by its subordination of them to its own greed has been responsible for much of the contempt in which the citizen holds the department and the government it is supposed to serve.

That is a restrained comment on your letter of 2nd April. I shall say nothing in the meantime about your illegal proposal to tax even the exempt £5,000 of my pension and to