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Section 125 of the Constitution Act, 1867

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Title: Section 125 of the Constitution Act, 1867  
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Subject: Constitution Act, 1867, Constitution of Canada, Section 92 of the Constitution Act, 1867, Equal authenticity rule, Alberta Act
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Section 125 of the Constitution Act, 1867

Section 125 of the Constitution Act, 1867 provides that:

This affects the taxation powers of both levels of government, and has received a broad interpretation in the Canadian courts.

Contents

  • Nature of the taxation power in Canada 1
  • Interpretation in the Canadian courts 2
  • Notes 3
  • References 4

Nature of the taxation power in Canada

Since the 1930 Supreme Court of Canada ruling in Lawson v. Interior Tree Fruit and Vegetables Committee of Direction, taxation is held to consist of the following characteristics:[1]

  • it is enforceable by law;
  • imposed under the authority of the legislature;
  • levied by a public body; and
  • intended for a public purpose.

In addition, the 1999 SCC ruling in Westbank First Nation v. British Columbia Hydro and Power Authority has also declared that a government levy would be in pith and substance a tax if it was "unconnected to any form of a regulatory scheme."[2] The test for a regulatory fee set out in Westbank requires:

  • a complete, complex and detailed code of regulation;
  • a regulatory purpose which seeks to affect some behaviour;
  • the presence of actual or properly estimated costs of the regulation; and
  • a relationship between the person being regulated and the regulation, where the person being regulated either benefits from, or causes the need for, the regulation.[3]

This is important to note, as taxation is barred under s. 121, but regulatory fees are not, and Canadian jurisprudence under s. 125 has turned on that distinction.

Interpretation in the Canadian courts

The nature of s. 125 has been described as thus:

Therefore, its prohibition covers taxation on the holding, as well as the acquisition and disposal, of property. In addition:

  • the provision also extends to property held by Crown corporations,[5] and
  • the prohibition on levying such taxation also extends to local governments levying taxes on federal property, as well as to First nations levying taxes on provincial property, [6] although measures have been taken to mitigate the impact[7]

However, provinces must collect and remit sales taxes on any commercial sales they make, since the obligation when it acts as supplier does not amount to a taxation of the province's property.[8]

In addition, provincial authorities must still pay customs duties, because such charges are not strictly based on the taxation power. As noted in the Johnnie Walker case:

Because of that, as noted in Re Exported Natural Gas Tax:

Notes

  1. ^ 1930Lawson, p. 363
  2. ^ 1999Westbank First Nation, par. 43
  3. ^ 1999Westbank First Nation, par. 44
  4. ^ 1982Re Exported Natural Gas Tax, p. 1078
  5. ^ Donison 2009, p. 6
  6. ^ 1999Westbank First Nation
  7. ^ at the federal level, see (R.S.C., 1985, c. M-13)"Payments in Lieu of Taxes Act". Retrieved 7 September 2012. 
  8. ^ 1992Re GST
  9. ^ 1922Johnnie Walker, p. 387
  10. ^ 1982Re Exported Natural Gas Tax, p. 1070

References

The Attorney-General of the Province of British Columbia v. The Attorney-General for Canada ("the Johnnie Walker case"), [1922] 64 SCR 377 (SCC). Full text of Supreme Court of Canada decision at LexUM
Lawson v. Interior Tree Fruit and Vegetables Committee of Direction, [1931] SCR 357 (SCC). 1930 CanLII 2 (SCC) Full text of Supreme Court of Canada decision at LexUM and CanLII
Re: Exported Natural Gas Tax, [1982] 1 SCR 1004 (SCC). 1982 CanLII 189 (SCC) Full text of Supreme Court of Canada decision at LexUM and CanLII
Reference re Goods and Services Tax, [1992] 2 SCR 445 (SCC). 1992 CanLII 69 (SCC); 94 DLR (4th) 51; [1992] 4 WWR 673; 2 Alta LR (3d) 289 Full text of Supreme Court of Canada decision at LexUM and CanLII
Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 SCR 134 (SCC). 1999 CanLII 655 (SCC); 176 DLR (4th) 276; [1999] 9 WWR 517; 67 BCLR (3d) 1 Full text of Supreme Court of Canada decision at LexUM and CanLII
Michael D. Donison (April 2009). "Knee-Capping the Competition: The Tax Exempt Status of Crown Corporations in Canada". Frontier Centre for Public Policy. Retrieved 7 September 2012. 
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