Constitutional Conference, Briefing Paper, Agenda Item 5(b) (7 September 1970)
By: Secretariat of the Conference
Citation: Constitutional Conference, Briefing Paper, Agenda Item 5(b), (7 September 1970).
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THIS DOCUMENT IS THE PROPERTY OF THE GOVERNMENT OF CANADA
Second Working Session, Constitutional Conference
September 7, 1970
Agenda Item 5(b)
Report from the Continuing Committee of Officials (Document 266)
(b) Taxing Power – Death Duties
A. Federal Objectives in the Discussion of this Subject
1. To maintain the federal power to levy death duties
(i.e. to maintain the principle of access so that there
will be a continued concurrent federal-provincial
jurisdiction rather than a change to exclusive provin-
cial jurisdiction) without asking the provinces at this
stage to agree to continued federal access to this
2. To seek to reach agreement on a means of avoiding dupli-
cation in the taxation of the same property on the same
death by two or more provinces, preferably by securing
their agreement to have access to an indirect tax on
all property in the estates of persons dying while
domiciled in the province.
3. To maintain the federal position that it is possible
in the federal estate tax law to take into account the
institutions of both civil and common legal systems and
to express the law in terms comprehensible to those
trained in either system, but to have discussion of this
question proceed on a bilateral basis between legal
officers of the governments of Quebec and Canada.
4. To maintain the federal ability to share death duty
revenues with provinces that do not wish to collect
5. To develop the possibility of negotiating with all ten
provinces an agreement to collect tax on property in
Canada of foreign domiciliaries.
B. Discussion Guide (References are to specified paragraphs
of Document 266) (Tab 7, Secretariat Briefing Book)
Objectives 1 & 2
The possibilities of an exclusive federal power to
levy death duties and exclusive provincial power to levy
them were examined by officials, but, as expected, there is
clearly no consensus for either. Most provinces favour the
third possibility examined – concurrent jurisdiction –
although some of these merely want to be able to “rent”
their own power in return for a share of federal revenues.
But other provinces – Quebec, B.C. and Alberta – feel strongly
that they should have exclusive jurisdiction, with the
possible exception of the tax on property in Canada of
persons domiciled outside Canada (paragraphs 2 and 14).
Therefore, provincial agreement to a continued federal
presence should not be sought.
The only likely possibility for agreeent on this
subject is a change from the present form of concurrent
jurisdiction (which results in some double or multiple
taxation where federal and provincial rules conflict, and
some requirements for filing multiple provincial returns)
to a concurrent jurisdiction where provincial access to
this type of tax is limited to avoid multiple taxation
(paragraphs 5 and 9). Although Ontario seems interested
in concurrent jurisdiction and Quebec is not, Quebec appears
more interested than Ontario in avoiding multiple taxation.
The limitation could be in the form proposed by
the federal government, of a provincial access only to use
of an indirect tax on the estates of persons domiciled in
the province but applicable to all the assets in such
estates no matter where situated. This would result in
at most two taxes (one federal and one provincial) and
would be simpler for the taxpayer. Also such a form would
enable Canada to collect the provincial tax, if the same
tax base were used (paragraphs 5 and 8). The main disad-
vantage of this domicile basis is that, unless the federal
government were collecting the tax, there would be cases
where tax owing by persons outside the taxing province
would be difficult to collect because the property is also
outside the province; this might require having each prov-
ince enforce the others’ death duty laws (paragraph 12).
The limitation could also be in the alternative
form of a right to levy an indirect tax on the sole basis
of situs of assets in the province. This form is generally
regarded as being less satisfactory than an indirect tax
on the sole basis of domicile, but some provinces, such as
Ontario, are not as convinced as the federal government
that it is a much worse choice. The federal view is: it
is less satisfactory because it involves multiple returns
and is, therefore, more complex for taxpayers; the existence
and degree of multiple taxation would depend on agreements
between provinces (and between the federal government and
the provinces); it would not be possible for Canada to
collect this direct tax (paragraph 8); taxation on the
bases of situs is much more open to artificial arrangements
made to avoid or reduce taxes.
Opinions differ on the need, kind and extent of
the limitation and on whether to achieve it by agreement
or by constitutional change (paragraph 10). Ontario, for
example, seems to feel that a system whereby provincial
taxation would be limited only to domicile or only to situs,
might be worked out in practice byt is averse in principle
to having the constitution changed to impose such a restric-
tion on provincial access to taxing powers.
On the subject of relating the federal estate tax
law to the civil code of Quebec, Canada agreed with Quebec
that this should be so relate,d but Quebec did not agree
with Canada’s contention that it could be effectively done.
The other provinces represented seemed indifferent to this,
except Ontario, which had some concern about the effect of
any such change on a common law province. With a view to
proving the federal contention that the Estate Tax Act can
accommodate both legal systems, work has been done by federal
officials on revising certain sections of the Estate Tax Act.
This work is still in process. The fact that this work is
being undertaken has been made known informally to some
members of the Canadian Bar Association, including some
members of the Quebec Bar Association, who are members of
a sub-committee concerned with looking into this problem.
Their co-operation has been sought, and their encouragement
obtained. It is suggested that Canada propose that this
matter be discussed between specialized legal officers of
Canada and Quebec, with any other province being represented
if it wished.
As long as the federal government remains in the
field it can share its revenues with those provinces that
do not wish to levy a tax. The federal ability to share
death duty revenues with such provinces would not only be
maintained, but enhanced, if the proposal for an indirect
provincial tax based exclusively on domicile was adopted,
because the federal government could then, providing the
same base was used, collect the tax imposed by the provin-
cial governments rather than merely share federal estate
tax revenue with them, or give an abatement from its tax.
It would not be feasible to collect for the provinces
where the provincial tax was a direct tax based on situs,
because the whole basis of the federal estate tax and the
provincial death duties would be different (paragraphs 5,
The present provincial powers to tax the Canadian
property of deceased foreign domiciliaries (based on situs
of assets as determined by non-statutory rules) are much
more limited than the federal powers which, for example,
are used to declare by statute that shares of companies
incorporated in Canada are situated in Canada. A provin-
cial death duty levied exclusively on the basis of domicile
in the province would leave no provincial jurisdiction at
all over property of foreigners. There appears to be a
considerable chance of succesfully negotiating with the
provinces, possibly including Quebec, an agreement for
Canada alone to levy tax on such property and to share it
with the provinces on an agreed basis (paragraph 6).