Abstract
The Courts of Canada and Australia agree with the United States Supreme Court that “Every tax is in some measure regulatory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed.”1, but where legislative competency is subject to limitations, as in a federal system, the grant of federal power to tax “must be considered not only with reference to other separate and independent grants, such as the power to regulate external and interstate trade and commerce, but also with reference to the powers reserved to the States … We are thus led to the conclusion that the power of taxation, whatever it may include, was intended to be something entirely distinct from a power to directly regulate the domestic affairs of the State. …”2 These latter observations were made in the Australian High Court in regard to a federal Excise Tariff Act which provided for a tax on goods of various classes with exemptions in favour of persons who observed certain labour conditions in their manufacture. The Act was held to be invalid as being in pith and substance a law with respect to labour conditions, a matter for State regulation and outwith the federal taxing power.
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References
Sonzinsky v. United States, 300 U.S. 506, 513 (1937).
R. v. Bar get, 6 Commw. L.R. 41, 68-69 (1908).
A.-G. for British Columbia v. McDonald Murphy Lumber Co., [1930] A.C. 357 (P.C.).
Id. at 363.
Supra, note 2.
28 Commw. L.R. 129 (1920).
65 Commw. L.R. 373 (1942).
New York v. United States, 326 U.S. 572, 584 (1946), per Rutledge J.
Id. at 590, per Stone C.J.
Supra, note 7.
[1932] A.C. 514 (P.C.).
Sawer, The Second Uniform Tax Case, 31 Austl. L.J. 347, 351-52 (1957).
99 Commw. L.R. 575 (1957).
Id. at 614.
1 Commw. L.R. 208, 232 (1904).
99 Commw. L.R. at 645.
99 Commw. L.R. at 661.
[1932] A.C. at 47, 51.
Metcalf v. Mitchell, 269 U.S. 514, 523-24 (1926), quoted with approval in New York v. United States, 326 U.S. 572, 589-90 (1946).
United States Constitution, Article VI; Australian Constitution, Section 109; A.-G. for Canada v. A.-G. for British Columbia (Fish Canneries), [1930] A.C. 111, 118 (P.C.).
The American case of Michigan v. United States, 317 U.S. 338 (1943) does not appear inconsistent with this contention, inasmuch as it does not squarely decide the issue discussed here: “As the federal lien with which we are here concerned attached to private property prior to the acquisition of any interest in that property by the state, we need not consider the extent to which Congress may give, or intended … to give, priority to a federal lien over a previously perfected state lien.” 317 U.S. at 340-41. The cases which preceded it, New York v. Maclay, 288 U.S. 290 (1933) and United States v. Texas, 314 U.S. 480 (1941), are equally inconclusive on this issue inasmuch as they also concerned imperfected state liens. At most then, these three cases sustain the priority of federal over state claims in bankruptcy. The bankrupt taxpayer can pay no one. That is a rather different situation, as a practical matter, from the one postulated by Taylor J. in Victoria v. The Commonwealth, supra, note 17, where the taxpayer is in a position to pay both state and federal taxes. The practical solution in bankruptcy would appear to be that of In re Silver Brothers Ltd., supra, note 18, — that the two claims should rank pari passu — which, in effect, is the same as allowing the solvent taxpayer to pay state and federal taxes simultaneously, where the purposes of federal government do not legitimately demand the imposition of a rate of federal tax so high as to make it impossible, as a practical matter, for a concurrent state tax to be levied at all. If state tax is leviable, why should it not also be payable ?
Supra, note 2.
259 U.S. 20 (1922).
297 U.S. I (1936).
[1933] A.C. 168 (P.C.).
[1941] Can. Sup. Ct. 573.
[1960] Can. Sup. Ct. 346.
60 Commw. L.R. 263, 287 (1938).
Supra, Chapter 6, Page 84.
New Jersey Bell Telephone Co. v. State Board of Taxes, 280 U.S. 338, 351 (1930), per Holmes J., dissenting.
Matthews v. Chicory Marketing Board (Victoria), supra, note 28, 60 Commw. L.R. at 299-300.
City of Halifax v. Fairbank’s Estate, [1928] A.C. 117, 126 (P.C.).
Supra, note 25.
80 Commw. L.R. 229 (1949).
Id. at 259-60.
49 Commw. L.R. 399 (1933).
61 Commw. L.R. 665 (1939).
57 Commw. L.R. 372 (1937).
Id. at 396.
Supra, note 34, 80 Commw. L.R. at 263.
Cf. Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd., supra, note 25, with Reference re The Farm Products Marketing Act, R.S.O. 1950 c. 131 as amended, [1957] Can. Sup. Ct. 198 and Murphy v. C.P.R., [1958] Can. Sup. Ct. 626.
Crawford and Hillside Farm Dairy Ltd. v. A.-G. for British Columbia, supra, note 27.
298 U.S. 238 (1936). The doctrine of this holding was “limited in principle” by United States v. Darby, 312 U.S. 100, 123 (1941).
259 U.S. 44 (1922).
[1925] A.C. 561 (P.C.).
262 U.S. 1 (1923).
301 u.s. 548 (1937).
Id. at 580, 581-82.
A.-G. for Canada v. A.-G. for Ontario (Employment Insurance), [1937] A.C. 355 (P.C.).
Id. at 366.
292 U.S. 40, 47 (1934), quoted with approval in United States v. Sanchez, 340 U.S. 42, 44 (1950).
A similar path has had to be travelled in Australia. In A.-G. for Victoria (ex rel. Dale and Others) v. The Commonwealth (The Pharmaceutical Benefits Case), 71 Commw. L.R. 237 (1946), the High Court had under consideration a federal statute providing free of charge out of public funds the costs of medicines prescribed by a physician on an approved form and supplied by an approved pharmaceutical chemist. “[N]o attempt was made on behalf of the defendants to uphold the validity of the Act under any provisions of the Constitution except those contained in s. 81. That section provides that ‘All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.’ … The important words are … those contained in the phrase ‘for the purposes of the Commonwealth.’ They are more specific than the words ‘the general welfare of the United States.’ [in Article I:8:1 of the United States Constitution] … The phrase must have been inserted to have some effect, and if it is to have any effect it must place some constitutional limitation upon the purposes for which the Commonwealth Parliament can pass an appropriation Act … The Parliament of the Commonwealth … has no general power to legislate for social services. This general power is left to the States. The Commonwealth only has power under s. 96 to make grants to the States for such general purposes. The Pharmaceutical Benefits Act cannot, therefore, be supported under s. 81 because it purports to appropriate money for a purpose which is not a purpose of the Commonwealth.” 71 Commw. L.R. at 281-82. A constitutional amendment of the same year as this decision added a new federal power, number (xxiiiA), “The provision of … pharmaceutical sickness and hospital benefits ….” to Section 51.
Graves v. New York ex rel. O’Keefe, 306 U.S. 466, 489 (1939), per Frankfurter J.
Mc Culloch v. Maryland, 4 Wheat. 316, 431 (1819).
Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218, 223 (1928).
Bank of Toronto v. Lambe, (1887) 12 App. Cas. 575, 586 (P.C.).
A.-G. for Alberta v. A.-G. for Canada (Alberta Bank Taxation), [1939] A.C. 117, 132 (P.C.).
New York v. United States, supra, note 8, 326 U.S. at 594 per Douglas J., dissenting.
Supra, note 47, 301 U.S. at 590, 591.
Supra, note 7, 65 Commw. L.R. at 418.
United States v. Sanchez, supra, note 51, loc. cit.
A.-G. for British Columbia v. McDonald Murphy Lumber Co., [1930] A.C. 357, 363 (P.C.).
Sonzinsky v. United States, 300 U.S. 506, 513 (1937).
296 U.S. 287 (1935). Cf. A.-G. for Alberta v. A.-G. for Canada (Alberta Bank Taxation), supra, note 57.
R. v. Barger, 6 Commw. L.R. 41, 98-99 (1908). This was a dissenting opinion, but I submit that it was in effect a dissent more as to result than as to method, i.e. the dissent was really as to whether the statute did or did not “operate as a direct interference” with control of their internal affairs by the States. Vide supra, page 87.
310 U.S. 381, 393 (1940).
247 U.S. 251 (1918).
259 U.S. 20 (1922).
N.L.R.B. v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937).
Steward Machine Co. v. Davis, 301 U.S. 548 (1937).
(1887) 12 App. Cas. 575 (P.C.).
[1939] A.C. 117 (P.C.).
[1940] A.C. 838 (P.C.).
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© 1964 Martinus Nijhoff, The Hague, Netherlands
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Mackinnon, V.S. (1964). Taxation? — or Regulation?. In: Comparative Federalism. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-8910-1_7
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