Posted on September 5, 2009 - by J Lane

Is the PST legal (and can there legally be an HST in BC)?

I’m not a lawyer, but I can read.  Please don’t take this post as formal legal advice or something that is set in stone.  Think of it more as “I’m thinking out loud, and I’d like to hear your thoughts”.

A friend of mine recently shared a link with me on Facebook about whether federal income tax is legal in Canada.  It’s an interesting read, but I think that the argument is wrong.  If you go back to the Canadian Constitution, the sections that this person references say entirely different things from what the author alleges.  For example, section 91 which talks about the Powers of Parliament states:

…it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,

…

2. The Regulation of Trade and Commerce.

3. The raising of Money by any Mode or System of Taxation.

…

And section 92 which discusses the Powers of Provincial Legislatures says:

In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,

…

2. Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.

…

Based off of the generality of point 3 in section 91 and the specificity of point 2 in section 92, I’d wager that it is indeed constitutional for the Government of Canada to collect income tax.  But that took me to the next step in my thinking — based on the Canadian Constitution, provinces are only allowed to collect direct taxes.  Additionally, because the regulation of trade and commerce fall under the federal government’s jurisdiction, shouldn’t any type of sales tax or value added tax only be payable to the Canadian Government?

Another point made in the original article, that I’ve actually been able to verify as true, is that the Supreme Court (case ref [1951] S.C.R. 31, [1950], 4 D.L.R. 369) has ruled that the various levels of government are limited in their ability to transfer their various powers between them.  So it’s not okay for the federal government to just give permission to the provinces to start printing their own currency (as an example).  I’d think that it also wouldn’t be okay for one level of government to assign their tax collection to another level of government, as is proposed by the HST.

I’d love to get some actual legal opinions on this.