The Legislative Process / Senate Public Bills

Admissibility: taxation

June 12, 2001

Debates, pp. 5024-7

On May 30, 2001, Don Boudria (Leader of the Government in the House of Commons) rose on a point of order with respect to the admissibility of Bill S-15, Tobacco Youth Protection Act. The Government House Leader argued that the purpose of the Bill was to impose a new tax and that it should not, therefore, have been introduced in the Senate. Even had it been introduced in the House, he maintained that it would have to have been preceded by a ways and means motion which could be proposed only by a Minister of the Crown. The Government House Leader further argued that the Bill was the same in purpose and operation as Bill S-13, which had been introduced in the First Session of the Thirty-Sixth Parliament and ruled out of order by Mr. Speaker Parent on the grounds that it was a tax bill, which, constitutionally and procedurally, could be initiated by the House only.^[1] In response to André Bachand (Richmond–Arthabasca), who argued that the point of order should have been raised before the introduction of the Bill, the Speaker replied that a Member may challenge the admissibility of a bill at any time before third reading. After hearing from other Members that day^[2] and the next,^[3] the Speaker took the matter under advisement.

On June 12, 2001, the Speaker delivered his ruling. He quoted different procedural and constitutional authorities on the primacy of the House of Commons in taxation matters, a central issue of the ruling, as well as the need, in the present case, to establish a distinction between a levy and a tax. He declared that it was essential to determine whether or not the charge imposed was for a purpose beneficial to the tobacco industry. He found that the Bill sought primarily to attain a public policy end and only secondarily sought to benefit the industry. He thus remained unable to regard Bill S-15 as anything other than a bill which sought to attain its principal aim by imposing a tax on the industry. He mentioned that he had not been able to identify dispositions in the Bill that provided for the alleged benefits to the industry. He concluded, accordingly, that the levy provided for in Part IV of Bill S-15 in fact constituted a tax, and, on both procedural and constitutional grounds, ordered that the first reading proceedings be declared null and void, and that the Bill be withdrawn from the Order Paper.^[4]

Decision of the Chair

The Speaker: I am now prepared to rule on the point of order raised by the hon. Leader of the Government in the House on May 30, 2001, concerning the procedural acceptability of Bill S-15, An Act to enable and assist the Canadian tobacco industry in attaining its objective of preventing the use of tobacco products by young people in Canada.

I wish to thank the hon. Government House Leader, the hon. Member for Hochelaga–Maisonneuve, the hon. Member for Richmond–Arthabaska, the hon. Member for Winnipeg North Centre, the hon. Member for Lac-Saint-Louis, the hon. Member for Notre-Dame-de-Grâce–Lachine and the hon. Member for Calgary West, as well as the hon. Opposition House Leader and the hon. Member for Pictou–Antigonish–Guysborough for their interventions.

I would also like to thank hon. Members for the additional material they submitted for my consideration.

Let me first set the stage for this ruling. As your Speaker, it is my duty to examine each case on which I must rule in light of our practice and procedure and to make my decision, mindful that each ruling adds to that body of precedent.

Marleau and Montpetit, in House of Commons Procedure and Practice, at page 261, phrase this simply, stating:

It is the responsibility of the Speaker to act as the guardian of the rights and privileges of Members and of the House as an institution.

Chapter 18 of Marleau and Montpetit provides a comprehensive history of our financial procedures and I would commend to hon. Members reading pages 701 to 714, if they have not read the whole book already, as being particularly helpful.

Before I address the arguments presented for and against Bill S-15 proceeding in the House, I want to provide the procedural context against which I have to consider this point of order. I ask hon. Members to bear with me as I present the following extracts from pages 701 to 703 of Marleau and Montpetit so as to situate the issues raised by Bill S-15 in the larger context:

The manner in which Canada deals with public finance derives from British parliamentary procedure, as practised at the time of Confederation—

That is on page 701. It continues:

The whole law of finance, and consequently the whole British constitution is grounded upon one fundamental principle, laid down at the very outset of English parliamentary history and secured by three hundred years of mingled conflict with the Crown and peaceful growth. All taxes and public burdens imposed upon the nation for purposes of state, whatsoever their nature, must be granted by the representatives of the citizens and taxpayers—

That is on pages 701 to 702. It continues:

Initially, the Commons were content simply to have grants of Supply originate in their House. However, over time the Lords began “tacking on” additional legislative provisions to Commons “money bills”, by way of amendments. This was viewed by the House as a breach of its prerogative to originate all legislation which imposed a charge either on the public or the public purse, and led the Commons in 1678, to resolve that:

All aids and supplies, and aids to his Majesty in Parliament, are the sole gift of the Commons; and all Bills for the granting of any such aids and supplies ought to begin with the Commons; and that it is the undoubted and sole right of the Commons to direct, limit, and appoint, in such Bills, the ends, purposes, considerations, conditions, limitations, and qualifications of such grants; which ought not to be changed or altered by the House of Lords.

It is striking that over 300 years later a virtually identical formulation is found in our own House of Commons Standing Order 80(1) which reads:

All aids and supplies granted to the Sovereign by the Parliament of Canada are the sole gift of the House of Commons, and all bills for granting such aids and supplies ought to begin with the House, as it is the undoubted right of the House to direct, limit and appoint in all such bills, the ends, purposes, considerations, conditions, limitations and qualifications of such grants, which are not alterable by the Senate.

This same principle is captured in an early source on Canadian procedure, Bourinot, 4th ed., at page 491, which states, and this is a translation:

As a general rule, public bills may originate in either house; but whenever they grant supplies of any kind, or involve directly or indirectly the levying or appropriation of any tax upon the people, they must be initiated in the popular branch, in accordance with law and English constitutional practice.

In Canada, the Constitution itself enshrines the ancient English practice whereby the elected representatives of those who will be affected by any tax measure should be the first to examine such a measure and accept or reject it.

In matters of taxation, the House is provided with priority over the Senate. The Constitution Act, 1867 provides, in section 53: “Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons.” The Standing Orders provide that the House may only consider taxation measures that have been initiated by a Minister through the usual ways and means procedures.

I have judged it necessary to offer this rather lengthy, but by no means comprehensive, review of the history of our financial procedures because I believe that the question of the primacy of the House of Commons in taxation matters lies at the very heart of our parliamentary practice and is, of course, central to a ruling on this point of order.

I fully appreciate the frustration exhibited by passionate proponents of the aims of this Bill who want to give the House an opportunity to debate the merits of the Bill. They may balk at arguments about procedure, calling them obtuse or arcane, or technicalities irrelevant to debate on public policy in the twenty-first century.

Whatever sympathy I as a Member or a citizen may have for those views, as your Speaker I am bound to be the guardian of the parliamentary rules and precedents that guide our deliberations and it is against that standard that my ruling must be made.

Now let us return to consider the specifics of the matter at hand.

The Government House Leader’s complaint is twofold: first, that Bill S-15 originated in the Senate rather than the House and so violates the priority of the House in matter of taxation; secondly, that Bill S-15 was not preceded by a ways and means motion, an essential preliminary to the introduction of a tax bill.

Those who spoke in defence of the Bill claim that the Bill does not in fact seek to impose a tax but rather a levy desired by the tobacco industry for a purpose which the industry considers as beneficial to itself. If this argument is accepted then the major impediment to the Bill has been overcome, for as Erskine May, 22nd edition at page 781, states:

Levies upon employers in a particular industry for the purpose of forming a fund used to finance activities beneficial to the industry are not normally regarded as charges—

That is, taxes. It is this issue, the distinction between a levy and a tax, which will provide the key to the ruling.

I have re-examined with care previous cases where levies were imposed. As the House knows, there have been very few bills involving levies, and fewer still which gave rise to procedural discussion. I have studied the examples cited by the hon. Member for Lac-St-Louis, namely: the 1997 Act to amend the Copyright Act imposing a levy on blank tapes in favour of performers and recording artists; the 1987 Canada Shipping Act imposing a levy against shipowners to deal with oil spills caused by tankers and other ships; and the 1985 Canada Petroleum Resources Act imposing a levy to support an environmental studies research fund.

It is true that none of these Bills gave rise to any challenge regarding financial procedure, but it is also true that all these Bills originated in this House, a point I would ask hon. Members to keep in mind.

A brief review of the history of Bill S-15 may be helpful here since it was mentioned by many hon. Members rising to present the case for the Bill going forward.

The predecessor to this Bill is Bill S-13, introduced in the Thirty-Sixth Parliament where much the same objection was raised to that Bill. On December 2, 1998, Mr. Speaker Parent ruled that since the Bill proposed a tax, did not originate in the House of Commons and was not preceded by a ways and means motion, it was not properly before the House. He declared first reading proceedings null and void and ordered the item withdrawn from the Order paper.

Basically the same issue, that is, the establishment through an industry levy of a foundation to prevent the use of tobacco products and actively promote non-smoking by Canadian youth, is now before us, though in significantly modified form.

The original Bill has been redrafted with a view to addressing the procedural difficulties identified in Mr. Speaker Parent’s ruling and so make the new Bill, Bill S-15, conform with House of Commons practice and procedure. Supporters of Bill S-15, led by its Commons sponsor, the hon. Member for Lac-St-Louis, argue that the modifications made to the text of the Bill are sufficient to ensure that it is now properly before the House and may proceed. Let us now examine the arguments.

It is not my intention to deal with all aspects of the distinction between a tax and a levy, or the various ways in which the two may be confused. For instance, while a levy may not raise funds that find their way into the consolidated revenue fund, that is not an issue in the present case, and we will therefore set it aside.

As well, it is admitted that the Bill provides benefits to others besides those in the industry, but benefits of this kind are not prohibited in a bill which imposes a levy, and that question need not detain us here.

The central issue in the case before us is whether or not the levy contained in Bill S-15 is imposed for purposes beneficial to the tobacco industry.

In order to make this determination it is necessary to turn to the Bill itself. Indeed several Members have enjoined the Chair not to go beyond the text of the Bill or to engage in speculation concerning matters not dealt with directly in the clauses of the Bill. The Chair has accepted this advice in the spirit in which it is given. I intend to confine myself solely and exclusively to a consideration of the procedural issue which is before us.

The Bill’s supporters contend that the moneys raised to finance the work of the foundation constitute a levy, not a tax, because the creation of this foundation is beneficial to the tobacco industry. Pointing to the preamble of the Bill as well as to part III, clause 34, which states the specific industry benefits of the Bill, they argue that these declaratory statements constitute compelling evidence of a levy.

If such is the case then there would be no problem with the Bill originating in the other place. As Mr. Speaker Parent said in his ruling on Bill S-13, and this applies equally to Bill S-15, the central issue is whether or not the charge imposed is imposed for a purpose beneficial to the tobacco industry.

In Bill S-13 no industry benefits were indicated in the text of the Bill as they now are in clause 34 of Bill S-15. However a recitation of benefits in the text of the Bill does not necessarily resolve this issue, particularly where it is clear from clause 3 that the Bill also has a purpose that is beneficial to the public which would support the view that the charge imposed by the Bill is a tax and not a levy. In that case significant impediments would remain, for as Erskine May, 22nd edition, explains at page 779:

Modern legislation, however, frequently makes provision for the imposition of other types of fees or payment which, although not taxes in a strict sense, have enough of the characteristics of taxation to require to be treated as “charges upon the people”.

I think any reader of the terms of Bill S-15 would agree that it serves two purposes. One is a public purpose, that is protecting young persons against possible adverse health effects derived from the use of tobacco products. The other is an industry purpose, namely attracting the benefits indicated in the Bill derived from the industry supporting and being seen to support its public purpose.

In ruling on this point of order, the Chair must determine which of these two purposes is the primary purpose of the Bill so that it can decide whether the charge imposed by the Bill can be seen as a levy or must be considered as having “enough of the characteristics of taxation” to be considered a tax.

The summary that accompanies Bill S-15 reads as follows:

This enactment incorporates the Canadian Tobacco Youth Protection Foundation, a non-profit corporation established on behalf of the tobacco industry, whose mandate is to prevent the use of tobacco products by young persons in Canada. A levy would be imposed on tobacco manufacturers in order to provide the Foundation with the necessary funds to carry out its objects and activities.

An examination of the provisions of the Bill has satisfied me that this summary is in general an accurate account of the purpose of the Bill. This aim is, in the words of the hon. Member for Lac-Saint-Louis, a public policy objective, a conclusion further supported by material submitted by the hon. House Leader of the Official Opposition, that is, advertisements by tobacco manufacturers in support of Bill S-15 which state:

The sole purpose of Bill S-15 is to protect the health of Canadian children.

Based upon my reading of the text of Bill S-15, I am satisfied that the Bill seeks primarily to attain a public policy end and only secondarily seeks to attain benefits to the industry. The hon. Member for Lac-Saint-Louis has asked:

Is a foundation created by an industry under suspicion because it carries out objectives that are completely different from those of the industry itself?

My reply is that the foundation to be created is in no way suspect, but the fact that legislation is required to establish that body and to provide it with funds remains profoundly troubling if I am to be persuaded that this Bill is primarily an initiative that is of benefit to the industry.

The question could be asked: What prevents the industry itself from simply raising prices on its products so that it can fund the work of such a foundation? Why is legislation required to achieve that end?

While it is not my role to comment on such measures one way or the other, I must recognize that there is very broad public support for measures to reduce and even eliminate youth smoking. This is, in my view, germane to the issue of distinguishing between public purpose and industry purpose.

I accept on their face the statements in the preamble and in clause 34 spelling out the benefits to the tobacco industry of the enactment of this Bill. Neither am I judging what has been called “the substance of (the Bill) or the moral or ethical considerations of why the foundation is being created”. Nevertheless, I remain unable to regard Bill S-15 as anything other than a bill which seeks to attain, as its principal aim, a reduction in youth smoking by the imposition of a tax on the tobacco industry.

The declared benefits to the tobacco industry in Bill S-15 are expressly set out in clause 34 but it still causes the Chair considerable difficulty, for while it states the benefits which the proposed act seeks for the tobacco industry, clause 34 does not actually provide any of those benefits. It is purely declaratory in nature. In fact I have not been able to identify in the Bill any dispositions that provide for the alleged benefits to the industry other than those which provide support exclusively to what is acknowledged as being a public policy objective.

Let me give the House an example of what I mean. Among the declared benefits listed in clause 34 is the claim in section (i) that in the Bill:

—the basis is laid for

(i) a greater tolerance of the industry to the extent that its products are used in a legal market, and

(ii) reasonable limits on regulation of the industry.

Even accepting at face value that these two items would be beneficial to the tobacco industry, I can find no measures in the Bill to promote greater tolerance or to touch in any way the current regulatory regime or limit the Government in any manner with respect to the regulation of the industry.

Simply stated, I can find no indication that the declared benefits in clause 34, insofar as they are benefits to the industry, are provided for in the operative clauses of Bill S-15. The use of a levy must be one where the industry benefits sought are, if not direct, at least clear to a reasonable person. I do not speculate on whether or not these benefits would or would not accrue to the industry subsequent to the adoption of this Bill, but in my view the Bill itself does not provide for them.

What I have sought to do in this ruling is not to innovate or set a new standard, but only to make explicit those factors that, in my view, have always formed the basis of our practice when distinguishing levies from taxes.

As your Speaker, I have to be concerned with where the Bill originates, for I am charged with defending the privileges of this House, particularly in a case such as Bill S-15 involving the constitutional primacy of this House vis-à-vis the other place in respect of the imposition of taxes.

And, in my judgment, the strict standard for accepting as legitimate a proposed levy has not been met.

As your Speaker, I am not blind to the irony of my position. In judging Bill S-15 to be imposing what amounts to a tax to fund an initiative with a worthy public policy objective, I will, in effect, be blocking that initiative. However to do otherwise, to give Bill S-15 the benefit of the doubt and turn a blind eye to the public purpose for which the levy on the industry is being imposed, would be to shirk my duty as Speaker of this House. It would be to leave open the possibility that the primacy of this House in respect of taxation, as well as the financial initiative of the Crown in this House, would be compromised to where they had meaning in form only.

Accordingly, I must conclude that the levy provided for in part IV of Bill S-15 constitutes a tax. I am therefore obliged on both procedural and constitutional grounds to order that the first reading proceedings on Bill S-15 be declared null and void and that the Bill be withdrawn from the Order paper.