Emergency Taxation Legislation: The Constitutional Framework

The Globe and Mail reported this evening that the federal government has proposed draft legislation which would give it the power to modify taxes through regulations:

The Globe and Mail has reviewed a copy of the draft bill.

One section of the bill grants cabinet the power to change taxation levels through regulation, rather than through legislation approved by Parliament. It states that cabinet will have this power during the period “before 2022.”

“For greater certainty, a regulation made under this section may contain provisions that have the effect of repealing or imposing a tax, decreasing or increasing a rate or an amount of tax or otherwise changing the incidence of tax,” the bill states.

More recent reporting — this is a fast-moving story — suggests that this clause has been removed.

Nonetheless, it is worth considering Canada’s constitutional framework for taxation, with a view to assessing how much room for manoeuvre Parliament and the government have in the current circumstances, where Covid-19 is upending our lives and institutions.

We can begin with the principle set out in Article 4 of the Bill of Rights, 1689: “That levying money for or to the use of the Crown by pretence of prerogative, without grant of Parliament, for longer time, or in other manner than the same is or shall be granted, is illegal”. This constitutional fundamental has an important place in the common law tradition, given famous expression for instance in the Wilts United Dairies interpretive principle “that taxes or charges may not be levied by the State or public authorities in the absence of express words. The courts will not permit the imposition of a tax or other fiscal measure through the use of slack or oblique language” (Hogan, Morgan and Daly, Administrative Law in Ireland, 5th ed., at para. 12-40).

In Canada, this constitutional fundamental is memorialized in s. 53 of the Constitution Act, 1867:

53. Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons.

Section 53 “gives effect to the basic democratic principle that the Crown may levy taxes only with the consent of elected representatives” (Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40, at para. 99). Indeed, “[t]he provision codifies the principle of no taxation without representation, by requiring any bill that imposes a tax to originate with the legislature” (Re Eurig Estate, [1998] 2 SCR 565 , at para. 30). As Professor Driedger observed, in a passage quoted with approval by the Supreme Court of Canada:

Through the centuries, the principle was maintained that taxation required representation and consent. The only body in Canada that meets this test is the Commons. The elected representatives of the people sit in the Commons, and not in the Senate, and, consistently with history and tradition, they may well insist that they alone have the right to decide to the last cent what money is to be granted and what taxes are to be imposed.

“Money Bills and the Senate” (1968), 3 Ottawa L. Rev. 25, at p. 41, quoted in Re Eurig Estate at para. 32.

In a similar vein, Gonthier J commented, for the Court, in Westbank First Nation v. British Columbia Hydro and Power Authority, [1999] 3 S.C.R. 134 at para. 19, that: “individuals being taxed in a democracy have the right to have their elected representatives debate whether their money should be appropriated, and determine how it should be spent”.

Whether a sweeping delegation of authority to set taxes would comport with s. 53 of the Constitution Act, as it has been interpreted by the Supreme Court of Canada, is open to serious question.

However, the Wilts United Dairies principle is primarily about the use of clear language in legislation. As Iacobucci J put it, writing for the Court in Ontario English Catholic Teachers’ Assn. v. Ontario (Attorney General), [2001] 1 SCR 470, at para. 74:

The delegation of the imposition of a tax is constitutional if express and unambiguous language is used in making the delegation.  The animating principle is that only the legislature can impose a new tax ab initio.  But if the legislature expressly and clearly authorizes the imposition of a tax by a delegated body or individual, then the requirements of the principle of “no taxation without representation” will be met.  In such a situation, the delegated authority is not being used to impose a completely new tax, but only to impose a tax that has been approved by the legislature.  The democratic principle is thereby preserved in two ways.  First, the legislation expressly delegating the imposition of a tax must be approved by the legislature.  Second, the government enacting the delegating legislation remains ultimately accountable to the electorate at the next general election (my emphasis).

On the one hand, if the delegation of authority is express and unambiguous, the requirements of s.53 are met and, of course, the normal accountability mechanisms continue to apply. On the other hand, it is doubtful whether it could be said that Parliament has “approved” a “tax” where the fundamental features of the tax, such as its existence, rate and imposition are left to the discretion of ministers. This would go far beyond Parliament’s undoubted power of “vesting any control over the details and mechanism of taxation in statutory delegates” (Re Eurig Estate, at para. 30).

Here, the devil is surely in the detail. The clause quoted in the Globe and Mail story may in any event only have been a catch-all provision which, when read in context, might well have been unobjectionable. And, in any event, the clause now seems unlikely to form part of the legislation which will be tabled tomorrow.

What would happen, hypothetically, if legislation were enacted which went beyond vesting “control over the details and mechanism of taxation” in ministers? First, regulations made under such a provision may be ultra vires and of no effect (Greenhouse Gas Reference, at para. 108). This, I think, is uncontroversial and entirely orthodox.

Second, the provision itself may be unlawful as a violation of s. 53 of the Constitution Act, 1867. No such challenge has, as far as I am aware, succeeded before. And there are certainly precedents which recognize that Parliament has, in general, significant authority to pass legislation with broad delegations of power. But in these cases, the legislation did not rub up against s. 53. It is trite law that legislation passed by Parliament or a provincial legislature, although within a head of power set out in ss. 91-92 of the Constitution Act, 1867, may be unlawful, for example because it breaches s. 96 of the Constitution Act, 1867. There is no reason in principle why legislation could not be invalidated for breaching s. 53, regardless of the precedents recognizing that Parliament may, in general, create broad delegations of authority.

Although it looks as if the legislation to be tabled tomorrow will, ultimately, be constitutionally unobjectionable, I fear that we have not seen the last extraordinary legislative measure to deal with the current pandemic. It is important, even in these trying times, to keep constitutional fundamentals in mind.

This content has been updated on March 24, 2020 at 03:05.