Constitution Act, 1867

Cases

Air Canada v. A.G. (B.C.), [1984] 3 WWR 353 (BCSC), aff'd [1986] 5 WWR 385 (BCCA), leave granted [1987] 1 WWR IXVIII (SCC)

Where the Legislature has the constitutional power to enact a measure then provided that it is done in proper form (i.e., as direct, rather than indirect, taxation), it may do so by way of retroactive amendment to an ultra vires statute.

However, the right of taxpayers to recover taxes that were paid during the period that the taxing statute was ultra vires cannot be extinguished by a subsequent amendment to that statute providing that:

"Where [during the period that the statute was ultra vires] money was collected or purported to have been collected as taxes ... the money shall by this section be conclusively deemed to have been confiscated by the government without compensation."

Section 53

See Also

Hunt v. The Queen, 2018 TCC 193

CRA’s discretion to waive tax does not render the tax unconstitutional

A taxpayer implemented an estate freeze, subscribed for common shares of the company at a low value and contributed those shares to his TFSA at a low value. CRA assessed him advantage tax under s. 207.05 equalling 100% of the appreciation of the shares within his TFSA before the shares’ sale – and following a Federal Court action by him, proposed to reduce the rate of advantage tax to his marginal federal and provincial tax rate. Pizzitelli J rejected the taxpayer’s position (summarized at para. 16) that s. 207.05 contravened s. 53 of the Constitution Act, 1867 because “the existence of the discretionary relieving provision of section 207.06 following 207.05 gives the Minister the discretion to set the tax rate from anywhere between 0 and 100 percent thus amounting to an implied delegation of the right to set the tax rate.” He also found that s. 207.05 did not infringe on the provincial right to make laws respecting “property and civil rights.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 207.05 - Subsection 207.05(2) discretion under s. 207.06(2) did not render s. 207.05 unconstitutional 357
Tax Topics - Income Tax Act - Section 207.06 - Subsection 207.06(2) Minister must consider the three s. 207.06(2) criteria 149
Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 91 - Subsection 91(3) 100% TFSA advantage tax did not infringe provincial property-and-civil-rights power 212

Section 91

Cases

Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544

federal greenhouse gas (GHG) charges were valid under the POGG power

Strathy, CJO rejected the submissions of Ontario that the fuel charge and excess emissions charges imposed under the Greenhouse Gas Pollution Pricing Act, Part 5 of the Budget Implementation Act, 2018, No. 1 are unconstitutional because they cannot be supported under any federal head of power. He stated (at paras. 76-77):

The purpose of the Act … is to reduce GHG [green-house gas] emissions on a nation-wide basis. It does so by establishing national minimum prices for GHG emissions, through both the fuel charge and the [Output-Based Pricing System (the “OBPS”) excess emissions charge. Its effect is to put a price on carbon pollution, thereby limiting access to a scarce resource: the atmosphere’s capacity to absorb GHGs. The pricing mechanisms also incentivize behavioural changes.

The Act’s purpose and effects demonstrate that the pith and substance of the Act can be distilled as: “establishing minimum national standards to reduce greenhouse gas emissions.”

After noting (at para. 80) that “there is today a greater appreciation that environmental pollution can transcend national and international boundaries and it is no longer thought of as a purely local concern,” and in finding that the charges were within the national concerns branch of the federal peace, order and good government (POGG) power, he stated (at paras. 113-114, 133):

Counsel for the Attorney General of British Columbia proposes a useful summary of the “singleness, distinctiveness and indivisibility” requirements: (1) singleness requires that the matter be characterized as specifically and narrowly as possible, at the lowest level of abstraction consistent with the fundamental purpose and effect of the statute; (2) distinctiveness requires that the matter be one beyond the practical or legal capacity of the provinces because of the constitutional limitation on their jurisdiction to matters “in the Province”; and (3) indivisibility means that the matter must not be an aggregate of matters within provincial competence, but must have its own integrity – this normally occurs where the failure of one province to take action primarily affects extra-provincial interests, including the interests of other provinces, other countries and Indigenous and treaty rights. This summary is a helpful guide.

Establishing minimum national standards to reduce GHG emissions meets these requirements. …

Confining Canada’s jurisdiction to the establishment of minimum national standards to reduce GHG emissions does not result in a massive transfer of broad swaths of provincial jurisdiction to Canada, as Ontario claims.

Although it was unnecessary to address any other bases for finding the charges to be intra vires he briefly noted (at para. 148);

I agree with Ontario that, given its pith and substance, the Act does not fall under the federal taxation power enumerated in s. 91(3). As noted, the Act falls under the national concern branch of the POGG power.

Subsection 91(24)

Cases

Rice v. ARQ, 2016 QCCA 666

statutory verification obligations did not represent an ultra vires administrative burden

Status (Mohawk) Indians selling gasoline on the Kahnawake Reserve to non-Indian purchasers were not exempted by s. 87 of the Indian Act from the requirement to collect and remit GST, QST and Quebec fuel tax, given that these taxes were designed to be borne by the ultimate purchasers and the retailers’ obligations were merely those of statutory collection agents.

Hesler CJQ further dismissed the appellants claim that a Quebec regulation requiring retailers to verify, at the time of sale, the identity of a purchaser claiming to be an Indian, undercut the exclusive federal power over Indians, stating (at paras 100 & 112):

…Notwithstanding s. 91(24), provincial laws of general application apply proprio vigore to Indians and Indian lands…

…[T]he appellants’ failure to acknowledge or avail themselves of workable solutions does not render the budget measures unconstitutional… [T[heir refusal to participate more likely flows from a desire to preserve a competitive advantage than an inability to shoulder an excessive administrative burden.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Section 35 - Subsection 35(1) s. 35 did not accord an unfettered right to trade 131
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Section 25 no unfettered right of Indians to trade 151
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 status Indians were required to collect sales tax on sales to non-Indians 283
Tax Topics - Excise Tax Act - Section 221 - Subsection 221(1) status Indians were required to collect sales tax on sales to non-Indians 67

Subsection 91(27)

Cases

Krassman v. The Queen, 79 DTC 5313, [1979] CTC 394 (FCTD)

The prohibition in the Tax Rebate Discounting Act against the acquisition by a discounter of a right to a tax refund for cosideration equal to less than 85% of the refund, is in pith and substance an exercise of the criminal law power.

Subsection 91(3)

Cases

International Pentecostal Ministry Fellowship of Toronto v. Canada (National Revenue), 2010 DTC 5045 [at 6708], 2010 FCA 51

In appealing a revocation of its charitable registration, the taxpayer argued that the registration of charities was ultra vires Parliament, as it fell within s. 92(7). Rejecting the taxpayer's appeal, Sexton J.A. stated for the Court at para. 8:

We have not been persuaded that there is any merit to the Appellant's argument that the provisions of the ITA dealing with the registration and deregistration of charities are an unconstitutional infringement on provincial legislative authority. In our view, these provisions relate, in their pith and substance, to federal taxation, and accordingly they are intra vires the Parliament of Canada under subsection 91(3) of the Constitution Act, 1867. Both the advantages of registration and the drawbacks of revocation relate solely to the tax treatment of charities and their donors. They do not impermissibly affect the affairs of charities in any other way, nor do they impede provinces from otherwise regulating charities.

The Queen v. TransGas Ltd., 93 DTC 5391 (Sask. C.A.), briefly aff'd (1994), 120 DLR (4th) 715, [1994] 3 S.C.R. 753

At a time a construction company ("Mid-Plains") abandoned work on a contract for a Crown agency ("TransGas"), TransGas, in addition to holding "holdback" funds as required under the Builders' Lien Act (which were not at issue in the action), held additional contract funds payable to Mid-Plains for the work done under the abandoned contracts. In finding that the federal Crown had a priority under s. 224(1.2) over builders' lien claimants of Mid-Plains with respect to the additional contract funds, Tallis, J.A. found that s. 224(1.2) had as its purpose the expedient collection of withheld tax monies and, therefore, was intra vires the powers of the federal Crown under s. 91(3) of the Constitution Act, 1967.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 224 - Subsection 224(1.2) 205

Pembina on the Red Development Corp. Ltd. v. Triman Industries Ltd., 92 DTC 6174 (Man. C.A.)

In finding that s. 224(1.2) of the Act was not ultra vires, Scott C.J.M. stated (p. 6177):

"The purpose of the Act is not only to levy tax, but to collect it ... The machinery for collection and enforcement under the Act is part of the very subject matter of sec. 91(3) of the Constitution Act and not merely incidental to the raising of revenue".

See Also

Hunt v. The Queen, 2018 TCC 193

100% TFSA advantage tax did not infringe provincial property-and-civil-rights power

A taxpayer implemented an estate freeze, subscribed for common shares of the company at a low value and contributed those shares to his TFSA at a low value. CRA assessed him advantage tax under s. 207.05 equalling 100% of the appreciation of the shares within his TFSA before the shares’ sale – and following a Federal Court action by him, proposed to reduce the rate of advantage tax to his marginal federal and provincial tax rate. Pizzitelli J rejected the taxpayer’s position (summarized at para. 16) that s. 207.05 was in contravened s. 53 of the Constitution Act, 1867 because “the existence of the discretionary relieving provision of section 207.06 following 207.05 gives the Minister the discretion to set the tax rate from anywhere between 0 and 100 percent thus amounting to an implied delegation of the right to set the tax rate.” He also found that s. 207.05 did not infringe on the provincial right to make laws respecting “Property and Civil Rights”, stating (at paras 85, 91):

The Appellant, in my opinion, wrongly conflates the severity or high rate of taxation with legal confiscation or seizure. …

… [T]he anti-avoidance element the Appellant refers to … is …part of or entwined in the raising of revenue by a system of taxation contemplated by subsection 91(3) of the Constitution and thus is, in pith and substance, taxation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 207.05 - Subsection 207.05(2) discretion under s. 207.06(2) did not render s. 207.05 unconstitutional 357
Tax Topics - Income Tax Act - Section 207.06 - Subsection 207.06(2) Minister must consider the three s. 207.06(2) criteria 149
Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 53 CRA’s discretion to waive tax does not render the tax unconstitutional 151

Subsection 92(2)

Cases

1068754 Alberta Ltd. v. Québec (Agence du revenu), 2019 SCC 37

ARQ could issue requirement on Alberta branch of bank with Quebec operations

The ARQ, which was seeking to determine whether a supposed Alberta trust was resident in Quebec, issued a requirement to a Calgary branch of the National Bank of Canada for various bank records respecting the trust under the Quebec equivalent of ITA s. 231.2(1). The requirement was sent directly to the branch rather than to the bank’s head office in Quebec because this was required under s. 462(2) of the Bank Act. Before concluding that the ARQ had not exceeded its territorial competence in making this requirement, Rowe J found that the sending of the requirement to the Calgary branch (which was deemed to be a separate entity only for the limited purposes of s. 462)) did not detract from the fact that it was sent to a person (the bank) that operated in Quebec, stating (at para. 88):

It would be absurd if the procedural requirements imposed by s. 462(2) … were understood to affect the ARQ’s authority to issue a formal demand to a bank that operates within its territorial jurisdiction.

He added (at para. 90):

[I]f a corporate entity had no operations in Quebec, it is not clear whether the ARQ would have the authority to issue a formal demand to that entity.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 231.2 - Subsection 231.2(1) the ARQ could issue a requirement to a Calgary branch of a Quebec bank 414

Sga'nisim Sim'augit (Chief Mountain) v. Canada, 2013 DTC 5060 [at 5836] (BCCA)

The Nisga'a Tribal Council negotiated a treaty which was ratified by Parliament and the BC Legislature. The treaty authorized the Nisga'a government to "make laws in respect of direct taxation of Nisga'a citizens on Nisga'a Lands in order to raise revenue for Nisga'a Nation or Nisga'a Village purposes." In rejecting arguments that these powers were inconsistent with ss. 53, 54 and 90 and the exclusive allocation of taxing authority under ss. 91 and 92 of the Constitution Act. 1867, Harris JA stated (at para. 127):

[O]nly Parliament (or the Legislature) may impose a tax ab initio, but that taxing authority may be delegated if Parliament or the Legislature does so clearly and unambiguously. Once that condition is met, the delegate may establish the details and mechanisms of the taxation. All that has occurred here.

Dunne v. Quebec (Deputy Minister of Revenue), 2007 DTC 5248, 2007 SCC 19, [2007] 1 S.C.R. 853

Provisions of the Taxation Act (Quebec) which subjected the taxpayer to Quebec income tax on retiring allowances received by him from a professional partnership of which he had been a member and which carried on business in Quebec were intra vires given that the partnership agreement itself established that the amounts received by him represented a share of profits of the partnership. Accordingly, the assessment was not based on a legal fiction and the deeming provisions operated to determine the portion of the taxpayer's income that could be allocated to the partnership's Quebec activities.

Eurig Estate (Re), [1998] 2 S.C.R. 565

Probate fees imposed by Ontario constituted taxes rather than fees given that they were enforceable by law (there being a practical and legal necessity for executors in most instances to obtain letters of probate), levied by a public body (the Ontario Court (General Division)), intended for public purposes (the defraying of costs of court administration in general, and not simply the costs of granting probate) and no nexus existed between the amount of the levy (which was calculated on an ad valorem basis) and the cost of the service for granting letters probate. Moreover, a probate fee was a direct tax because payment of the tax by executors was only made in their representative capacity with the intention that the estate would bear in the burden of the tax. However, the fees were ultra vires under s. 53 of the Constitution Act given that they were not imposed pursuant to a bill that originated in the Ontario legislator and, instead, had only been authorized by the Lieutenant Governor in Council.

Words and Phrases
tax

Progressive Packaging Ltd. v. Minister of Finance (Ontario), [1998] OJ No. 4798 (Ct. J. (GD)), briefly aff'd [1999] OJ No. 3613 (CA)

The appellant, which was an Ontario resident corporation with an Ontario head office and an Ontario permanent establishment and no permanent establishment in the United States paid the remuneration of U.S. employees who provided services to it exclusively in the United States. LaForme J. found that the position of employee health tax on the remuneration paid to the U.S. employees qualified as a tax imposed within the province given that the tax was assessed against an employer "found" in the province as measured by the total amount of remuneration paid to its employees (i.e., the economic activity of an employment contract), and that it was irrelevant that the work was not carried out within the province because that was not the subject matter of the tax. The subject matter was the contract of employment and the obligations that flowed from it, including the payment of remuneration.

Winterhaven Stables Ltd. v. A.-G. Canada, [1989] 1 CTC 16 (Alta. C.A.)

The main object of the Income Tax Act is not to raise money by direct taxation for provincial purposes, but to raise money by taxation, and Parliament is not prohibited from raising money in order to make payments to the provinces for provincial purposes.

Air Canada v. A.G. (B.C.) (1989), 59 DLR (4th) 161 (SCC)

The Gasoline Tax Act (B.C.), which levied a per-gallon tax on "any person who, within the Province, purchases or receives delivery of gasoline for his own use or consumption" was intra vires, and it was irrelevant that the purchasing airlines consumed 99% of the fuel during interprovincial or international flights. "Since the tax is imposed in the province in respect of the purchase of gasoline, it does not matter where the gasoline is consumed, whether it is in the airspace or in another province."

Marine Petrobulk Ltd. v. A.G. (B.C.), [1984] 4 WWR 155 (BCSC), aff'd [1985] 4 WWR 663 (BCCA)

An amendment to the Gasoline (Coloured) Tax Act (B.C.), which subjected to tax net bunker fuel which was imported into B.C. from the U.S. by the petitioner as agent for the operators of foreign ships, then delivered by it by barge to the ships in Vancouver, was held to be intra vires. The tax imposed by this amendment was direct because it was intended to be borne by the ship operator taking delivery of the fuel (notwithstanding that the ship operators would pay the world market price for the fuel regardless of the level of the tax). Furthermore the subject matter of the tax - bunker fuel taken by barge to the Port of Vancouver - was "within the Province."

Newfoundland and Labrador Corporation Ltd. et al. v. Attorney General of Newfoundland, 138 DLR (3d) 577, [1982] 2 S.C.R. 260

In finding that a tax on the net royalty income from the grant of rights to engage in mining operations was an income tax, Martland J. stated (p. 591):

"[T]he tax ... is demanded from the very person who is intended should pay it. It was not imposed in the expectation or with the intention that it should be passed on to another."

Minister of Finance of New Brunswick v. Simpsons-Sears Ltd. (1982), 130 DLR (3d) 385 (SCC)

In finding that New Brunswick legislation imposing retail sales tax on a retail merchandising company with respect to the value of catalogues distributed by it free to customers and potential customers was intra vires, Laskin C.J. stated (p. 399):

"Where, as in the present case, the tax imposed in respect of the free distribution of catalogues takes no account of what ultimately happens to the catalogues, whether they are used or discarded, and is unrelated to any purchases made from the catalogues, it is manifest to me that the tax is so diffused in its impact that it cannot be said that there is any clearly traceable way in which the tax can be passed on. Moreover ... the tax in the present case is not 'related or relateable' to any unit of a commodity or its price, indeed, no commodity is involved."

Attorney General of British Columbia v. Canada Trust Co. et al., [1980] 2 S.C.R. 466, [1980] CTC 338

S.6A of the Succession Duty Act (BC), which provided that "where property of a deceased was situated outside the Province at the time of the death of the deceased, and the beneficiary of any of the property of the deceased was a resident at the time of the death of the deceased, duty under this Act shall be paid by the beneficiary in respect of that property of which he is the beneficiary", was intra vires the Province in that it imposed a tax on persons within the Province (i.e., resident beneficiaries), rather than being a tax on property or on the transmission of property (notwithstanding that s. 6A did not expressly state that the beneficiary is "subject to duty"). Dickson J. stated (at p. 352):

"I read the wording 'duty under this Act shall be paid by the beneficiary' in s. 6A as designating the beneficiary as the subject-matter, as well as the payer, of the tax, and the words 'in respect of that property' in the sense of 'as related to', or 'on the basis of', the property of which he is the beneficiary."

Words and Phrases
in respect of

The Queen (Man.) v. Air Canada, [1980] 2 S.C.R. 303

The taxpayer, which had offices and maintenance and service facilities in Manitoba and whose aircraft landed and took off from Manitoba, was assessed under The Retail Sales Tax Act (Manitoba) in respect of depreciation on its aircraft, the use of parts and in respect of liquor service to passengers on through-flights in the air space over Manitoba, and also in respect of flights that landed in Manitoba.

Merely going through the air space over Manitoba did not give the aircraft a situs that would support a tax which constitutionally must be "within the Province", nor did temporarily landing in Manitoba. A substantial, or at least more than a nominal, presence in the Province was required to provide a basis for imposing tax in respect of the entry of aircraft into the Province. Respecting an argument that a tax on Air Canada in respect of its airplanes, parts and services on over flights was validated by regarding these facilities as merely the means of measuring a tax in personam, Laskin C.J. first noted that this was not the way the tax was imposed (it was exacted upon the bringing of tangible personal property to the Province, and this had not been shown to occur), and second, the principle expressed in Bank of Toronto v. Lamb could not be extended to make inter provincial and trans national aircraft operations as measuring standards to determine the amount of tax imposed upon an air carrier which had a business office in the taxing province.

Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan et al., 80 DLR (3d) 449, [1978] 2 S.C.R. 545

In order to divert to itself the increase in the price of oil that occurred after 1973, the Legislature of Saskatchewan enacted a "mineral income tax" approximately equal to 100% of the difference between the price received at the well-head and the price formerly received by the producers. Virtually all the oil produced in Saskatchewan was exported to other parts of Canada or the United States.

Martland J. found (p. 461) that "the tax under consideration is essentially an export tax imposed upon oil production" and therefore was in substance an indirect tax which was beyond the competence of the Saskatchewan Legislature.

Alworth v. Minister of Finance (1977), 76 DLR (3d) 99 (SCC)

The taxpayers, who were trustees (principally foreign trustees) of foreign trusts, submirrws that the Logging Tax Act (BC), which levied a tax on income derived from logging operations carried on within the province, was a tax on persons, so that the appellants, who were not within the province could not be subject to tax under that Act. In rejecting this submission, Laskin C.J. found (at p. 101) that "it is the income derived from those operations, which themselves are limited to the Province, that, in my view, carries the burden of the tax", so that the tax was intra vires

Kerr v. Canada (Superintendent of Income Tax), [1942] S.C.R. 435

The taxpayer submitted that the tax imposed by the Income Tax Act (Alberta) was a tax on income rather than a tax on persons, so that the Province was precluded from imposing tax on the taxpayer's foreign source income. Kerwin J. stated (at p. 444) that he was of the opinion "that the Act, taken as a whole, imposes a tax on a person such as the appellant who was found in the province with respect to his income, including that derived from sources outside the province".

The King v. National Trust Co., [1933] S.C.R. 670

Bonds of two Canadian railway companies that were guaranteed by the government of Canada were specialties. Furthermore, the situs of intangible property, for purposes of the constitutional requirement that the province of Quebec could only impose a tax upon property transmitted owing to death in respect of subjects having a situs within the province, was to be determined on common law principles. Accordingly, a provision of the Quebec Succession Duties Act that purported to impose succession duties in respect of the bonds on the basis that the debtors were domiciled within Quebec were, to that extent, ultra vires the Province given that the instruments constituting those specialities were, at the time of the testator's death in New York City, physically situate in Toronto. Duff C.J. noted (at p. 673) that:

"A provincial legislator is not competent to prescribe the conditions fixing the situs of intangible property for the purpose of defining the subjects [of taxation] in respect of which its powers of taxation under s. 92(2) may be put into effect."

Provincial Treasurer of Alberta v. Kerr, [1933] AC 710

The Succession Duties Act (Alberta) made the executors of the respondent estate of an Alberta domiciled executor personally liable for the duties, with the consequence that the tax was ultra vires as an indirect tax. In addition, respecting the question whether the tax was "within the province" with respect to property of the testator which was situate outside the province of Alberta, the Court, in applying the principle (stated at p. 718) that:

"the Province, on the death of a person domiciled within the Province, is not entitled to impose taxation in respect of personal property locally situate outside the Province but ... is entitled to impose taxation on persons domiciled or resident within the Province in respect of the transmission to them under the Provincial law of personal property locally situate outside the Province"

found that under the terms of the statute "the subject-matter of the taxation is the property and not the transmission of the property", with the result that the "within the Province" requirement was not satisfied.

Brassard v. Smith, [1925] AC 371

At the time of the death of the testator, who was domiciled in Nova Scotia, he held in Nova Scotia shares of the Royal Bank of Canada whose constating statute provided that the Bank could maintain in any province in which it had branches a share registry office at which shares could be validly transferred. There was such an office in Nova Scotia. In finding that those shares were situate within Nova Scotia rather than Quebec, so that they were not subject to Quebec succession duty, the Court stated that the true test was "where could the shares be effectively dealt with?" and went on (at p. 376) to say that "the answer in the case of these shares is in Nova Scotia only, and that answer solves the question."

Woodruff v. Attorney General for Ontario, [1908] AC 508

The deceased, before his death while domiciled in Ontario, transferred in New York securities including U.S. municipal debentures to his sons. His estate was assessed for succession duty, apparently on the basis that the transfers had occurred with intent that they take effect after his death. The Court held (at p. 513) that "any attempt to levy a tax on property locally situate outside the province is beyond their competence."

Bank of Toronto v. Lambe (1887), 12 AC 575 (PC)

A capital tax imposed by Quebec on the appellant bank, which was incorporated in Canada, had its principal place of business in Toronto but had an agency in Montreal, was intra vires given that the tax was a direct tax under the definition of that term by John Stuart Mill and given that the appellant was found within the province (it carried on business there).

See Also

Minister of National Revenue v. Fitzgerald, [1949] CTC 101, [1949] S.C.R. 453 (SCC)

A testator (A) domiciled and resident in British Columbia, who died in 1921, bequeathed his property to his surviving wife (B), with the assets of the estate not being administered until beyond the year 1944. B died, while domiciled in British Columbia in 1924, leaving her estate to an individual (C), who was domiciled and resident in California. In 1941 C died leaving her estate to her husband (D) who, in turn died in August 1944 leaving his estate to a nephew (E), of California, who lost his life in December 1944. Administration with the will annexed was granted in California to the respondent in the estates of D and E.

What devolved upon the death of D was a right to have the estate of his deceased wife administered; and that right was a chose in action properly enforceable and therefore situate in California and not in Canada. Accordingly, Dominion succession duty did not apply to that succession.

Subsection 92(10)

Cases

City of Medicine Hat v. A.G. (Canada), 85 DTC 5365 (Alta. C.A.)

The fact that the Natural Gas and Liquids Tax and the Petroleum and Gas Revenue Tax may have inhibited the City of Medicine Hat to some extent in exercising the powers granted to it did not support the conclusion that those taxes were aimed at that result, i.e., the impairment of an instrumentality of the Province.

Section 101

Cases

Stephens Estate v. The Queen, 82 DTC 6132, [1982] CTC 138 (FCA)

The Federal Court had no jurisdiction to entertain a claim against Department officials for collecting taxes in a fashion not authorized by the Income Tax Act, because such an action was in tort, which was a matter of provincial law, rather than being an action for damages provided for by federal law. On the other hand, an action against the Crown for vicarious liability in tort for the acts of its servants is founded on federal law, namely, s. 3(a) of the Crown Liability Act, and thus can be entertained.

Section 125

Cases

British Columbia Investment Management Corp. v. Canada (A. G.), 2018 BCCA 47, leave to appeal to SCC granted on 11 October 2018

imposition of GST on investment assets held by a provincial Crown agent would have been prohibited by its governmental immunity but for the reciprocal taxation agreement

The petitioner (“bcIMC”) was created as a provincial Crown corporation by special Act (the “PSPPA”) to manage and hold investments for B.C.’s public sector pension plans as Crown agent. A Regulation made under the PSPA provided that bcIMC was to hold various investment assets in its pooled investment portfolios, the (pension plan) investors in a pooled portfolio were to be issued units of the portfolio in proportion to their interests, that "All the assets of a portfolio are held in trust by the [bcIMC]” and that “ownership in any asset in a portfolio must not be attributed to a participating fund.” The PSPPA stated that bcIMC “is not liable for taxation except as the government is liable for taxation.” The Province and Canada signed a reciprocal taxation agreement (“RTA”) which provided that the Province and its agents would pay any tax imposed under Part IX of the ETA. Following a GST audit, bcIMC brought an application for a declaration that it was not subject to tax under the ETA. CRA subsequently assessed bcIMC for HST on fees which bcIMC took out of the funds under its administration, on the basis inter alia that ETA s. 267.1(5)(a) deemed the statutory trust impressed on bcIMC’s investments to be a separate (non-Crown) person who thus was not exempt from federal tax – and also on the basis that the investment funds did not belong to bcIMC or the province but, rather, to the pension fund members.

The Court below found that bcIMC as a provincial Crown agent was immune from taxation under s. 125 of the Constitution Act, 1867, but found that the RTA together with a second agreement between Canada and the Province (the “CITCA”) was legislatively binding on bcIMC.

Willcock JA found (at para. 113) that ETA s. 267.1(5)(a) and related rules effected “a change in the identity of the recipient of the services from the trustee, here the exempt Province, to the trust, a third party” and thereby “had the effect of separating the Crown from its assets” and that instead “bcIMC is immune from Canada’s taxation” (para. 114).

However, in also affirming the finding below as to the binding effect of the RTA and the CITCA on the Province’ agent (bcIMC), he stated (at para. 142):

[T]here is no doubt that agreements between the federal and provincial governments may be mere political agreements or legally enforceable. As noted in South Australia [(1962), 108 C.L.R. 130], where any particular agreement falls on this spectrum will depend on the circumstances of the case and whether the parties intended to be legally bound. In my opinion, the RTA and the CITCA bear the hallmarks of agreements that were intended to create legally binding obligations.

He further stated (at paras. 148-150) that “enforcement of the [Agreement] is possible” pursuant to s. 19 of the Federal Courts Act (Canada) and s. 1(1)(a) of the Federal Courts Jurisdiction Act (B.C.).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 122 deeming services provided by B.C. Crown agent in managing assets held in trust trenched on B.C. crown immunity 237
Tax Topics - Excise Tax Act - Section 267.1 - Subsection 267.1(5) - Paragraph 267.1(5)(a) services of trustees of managing assets held in trust would not be supply in absence of s. 267.1(5)(a) 164
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) arrangement under which the beneficiaries only had rights to units and no ownership of underlying assets was treated as a trust 164
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 19 enforcement of a reciprocal taxation agreement was possible pursuant to the Federal Courts Act 232

British Columbia Investment Management Corp. v. Canada (A. G.), 2016 BCSC 1803

BC Crown agent immune from HST otherwise imposed on investments held by it in a statutory trust, but bound to such HST based on intergovernmental agreement

The petitioner (“bcIMC”) was created as a provincial Crown corporation by special Act (the “PSPPA”) to manage, and hold investments in trust for, B.C.’s public sector pension plans as Crown agent. The PSPPA stated that bcIMC is not liable for taxation except as the government is liable for taxation.” The Province and Canada signed a reciprocal taxation agreement (“RTA”), effective July 1, 2010, in which the Province committed itself and its agents to pay any tax imposed under Part IX of the ETA. On November 30, 2009, Canada and the Province entered into the Comprehensive Integrated Tax Coordination Agreement (“CITCA,” and with the RTA, the “Agreements”), where the Province agreed to implement the Harmonized Sales Tax. Well after bcIMC brought this application for a declaration that it was not subject to tax under the ETA, CRA assessed bcIMC for HST on fees which bcIMC took out of the funds under its administration, on the basis inter alia that ETA s. 267.1(5) deemed the statutory trust impressed on bcIMC’s investments to be a separate (non-Crown) person who thus was not exempt from federal tax – and also on the basis that the investment funds did not belong to bcIMC or the province but, rather, to the pension fund members.

In agreeing that bcIMC as a provincial Crown agent was immune from taxation under s. 125 of the Constitution Act, 1867 and s. 17 of the Interpretation Act, Weatherill J stated (at paras 131-132):

… Canada cannot, under the guise of the deemed trust provisions of the ETA or otherwise, defeat the Province’s immunity from taxation. Because bcIMC is statutorily mandated by the Province to provide investment management services to the Portfolios, bcIMC constitutionally enjoys the same tax immunity as the Province….

Canada…says that the Province and bcIMC do not own the Portfolios because the ultimate destination of the assets within the Portfolios is those individuals entitled to pension benefits. However, the PSPPA states that bcIMC holds the Portfolios as a statutory trustee and as such is the Portfolio’s legal owner.

However, Weatherill J found that the Agreements were legislatively binding on bcIMC, stating (at para 166):

… [I]n my view there is specific legislation that creates the obligation on bcIMC to pay the Tax. Section 16 of the PSPPA states that bcIMC “…is not liable for taxation except as the government is liable for taxation”. That language, in my view, is the specific legislative authority required to bind bcIMC to the Agreements and should be interpreted accordingly. Expressed another way, this section means that if the Province is liable for taxation (as it is because it signed the Agreements), so too is bcIMC. It is specific statutory language that cannot be ignored.

Accordingly, Weatherill J declared (at para 173) that notwithstanding bcIMC’s Crown immunity, it was bound by the provisions of the RTA and CITCA respecting the managed assets.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 122 BC Crown agent bound by agreement only to pay tax on fees chargeable against the investments held by it 194

City of Medicine Hat v. A.G. (Canada), 85 DTC 5365 (Alta. C.A.)

In producing and distributing natural gas the City of Medicine Hat was acting at its own discretion rather than carrying out duties imposed by the Provincial Crown, and the revenues which it earned accrued to it rather than the Province. The City in acting as it did accordingly was not acting as an agent of the Provincial Crown and the Natural Gas and Liquids Tax and the Petroleum and Gas Revenue Tax were not ultra vires in their application to the City.

See Also

Surrey City Centre Mall Ltd. v. The Queen, 2012 TCC 619

A settlement payment received by the grandparent company of a project company as a result of the termination of contracts for the construction of a B.C university facility otherwise likely would have been subject to GST under s. 182 of the Excise Tax Act both in its hands (in light of the impairment of its indirect investment in the project company and its various direct contractual rights and obligations under the project agreements) and to the project company (given that its debt to its parent was written down following the settlement - so that under s. 182 it had enjoyed a debt reduction "as a consequence" of the settlement.)

In fact, there was no GST payble on the settlement payment as the only relevant assessment was of the project company, and the deemed supply made by it enjoyed the Crown immunity of the province as the primary recipient- and furthermore (viewing the university as the deemed recipient), the university was stated in its governing Act to "not be liable to taxation except to the extent the government is liable," which effectively was "the voice of the province claiming immunity for [the university]" (para. 112). Hershfield J noted (at para. 112) that although the province did not provide the usual certification of Crown immunity, "any failure to comply with such evidentiary requirements cannot deny a province that [exemption] right where in fact it, a province, has been found by this Court to be the recipient of the supply in respect of the payment."

Section 133

Cases

Mazraani v. Industrial Alliance Insurance and Financial Services Inc., 2018 SCC 50

language rights are substantive

A laid-off “independent contractor” (Mazraani) appealed to the Tax Court on the basis that he had instead been employed in insurable employment for EI purposes. At the hearing, his alleged employer (Industrial) was an intervenor and called witnesses whose testimony in French would not have been understood by Mazraani. Rather than providing Mazraani with an interpreter, the Tax Court Judge exerted pressure on Industrial's witnesses to testify in English, which counsel for Industrial communicated was problematic. The Judge also required Industrial’s counsel to make his legal arguments in English, even though this was difficult for him.

Before affirming the decision of the Federal Court of Appeal ordering a new hearing before a different judge in response to these violations of the witness’s and counsel’s language rights under s. 133 of the Constitution Act, 1867, s. 19 of the Charter and ss. 14 and 15 of the Official Languages Act, Gascon and Côté JJ stated (at paras. 46, 48, 64 and 78):

[E]ven if there was no error in the decision on the merits, the language rights in question would be compromised if no remedy was granted

… [A] new hearing will generally be an appropriate remedy for most language rights violations. …

The judge’s insistence that [Industrial’s counsel] speak English during most of his argument constitutes a flagrant violation of the lawyer’s language rights.

… [T]he order for a new hearing was fully justified. … The violations were numerous and, in some cases, serious and repeated, and they brought the administration of justice into disrepute.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Section 19 Tax Court’s pressuring witnesses to speak in English, not French, required a new hearing 422