Section 125 Of The Constitution Act, 1867

Section 125 of the ''Constitution Act, 1867'' (french: article 125 de la Loi constitutionnelle de 1867) is a provision of the Constitution of Canada relating to taxation immunities of the federal and provincial governments. The section provides that the property of the provincial and federal governments are not subject to taxation.

The ''Constitution Act, 1867'' is the constitutional statute which established Canada. Originally named the ''British North America Act, 1867'', the Act continues to be the foundational statute for the Constitution of Canada, although it has been amended many times since 1867. It is now recognised as part of the supreme law of Canada.

''Constitution Act, 1867''

The ''Constitution Act, 1867'' is part of the Constitution of Canada and thus part of the supreme law of Canada. It was the product of extensive negotiations by the governments of the British North American provinces in the 1860s. The Act sets out the constitutional framework of Canada, including the structure of the federal government and the powers of the federal government and the provinces. Originally enacted in 1867 by the British Parliament under the name the ''British North America Act, 1867'', in 1982 the Act was brought under full Canadian control through the Patriation of the Constitution, and was renamed the ''Constitution Act, 1867''. Since Patriation, the Act can only be amended in Canada, under the amending formula set out in the ''Constitution Act, 1982''.

Text of section 125

Section 125 reads:

Section 125 is found in Part VIII of the ''Constitution Act, 1867'', dealing with revenues, debts, assets, and raxation. It has not been amended since the Act was enacted in 1867.

Nature of the taxation power in Canada

Section 125 affects the taxation powers of both levels of government, and has received a broad interpretation in the Canadian courts.

Since the 1930 Supreme Court of Canada ruling in ''Lawson v. Interior Tree Fruit and Vegetables Committee of Direction'', taxation is held to consist of the following characteristics:

* it is enforceable by law;
* imposed under the authority of the legislature;
* levied by a public body; and
* intended for a public purpose.

In addition, the 1999 SCC ruling in ''Westbank First Nation v. British Columbia Hydro and Power Authority'' has also declared that a government levy would be in pith and substance a tax if it was "unconnected to any form of a regulatory scheme."''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_[1999
/nowiki>_3_SCR_134">999">''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_[1999
/nowiki>_3_SCR_134_paras._43,_44._The_test_for_a_regulatory_fee_set_out_in_''Westbank''_requires:

*_a_complete,_complex_and_detailed_code_of_regulation;_
*_a_regulatory_purpose_which_seeks_to_affect_some_behaviour;
*_the_presence_of_actual_or_properly_estimated_costs_of_the_regulation;_and
*_a_relationship_between_the_person_being_regulated_and_the_regulation,_where_the_person_being_regulated_either_benefits_from,_or_causes_the_need_for,_the_regulation.

This_is_important_to_note,_as_taxation_is_barred_under_s._121,_but_regulatory_fees_are_not,_and_Canadian_jurisprudence_under_s._125_has_turned_on_that_distinction.

_Interpretation_in_the_Canadian_courts

The_nature_of_s._125_has_been_described_as_thus:

Therefore,_its_prohibition_covers_taxation_on_the_holding,_as_well_as_the_acquisition_and_disposal,_of_property._In_addition:

*_the_provision_also_extends_to_property_held_by_''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_[1999
/nowiki>_3_SCR_134">999">''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_[1999
/nowiki>_3_SCR_134_paras._43,_44._The_test_for_a_regulatory_fee_set_out_in_''Westbank''_requires:

*_a_complete,_complex_and_detailed_code_of_regulation;_
*_a_regulatory_purpose_which_seeks_to_affect_some_behaviour;
*_the_presence_of_actual_or_properly_estimated_costs_of_the_regulation;_and
*_a_relationship_between_the_person_being_regulated_and_the_regulation,_where_the_person_being_regulated_either_benefits_from,_or_causes_the_need_for,_the_regulation.

This_is_important_to_note,_as_taxation_is_barred_under_s._121,_but_regulatory_fees_are_not,_and_Canadian_jurisprudence_under_s._125_has_turned_on_that_distinction.

_Interpretation_in_the_Canadian_courts

The_nature_of_s._125_has_been_described_as_thus:

Therefore,_its_prohibition_covers_taxation_on_the_holding,_as_well_as_the_acquisition_and_disposal,_of_property._In_addition:

*_the_provision_also_extends_to_property_held_by_Crown_corporations_of_Canada">Crown_corporation_

A_state-owned_enterprise_(SOE)_is_a__government_entity_which_is_established_or_nationalised_by_the_''national_government''_or_''provincial_government''_by_an_executive_order__or_an_act_of_legislation_in_order_to_earn__profit_for_the_governmen_...
s,_and
*_the_prohibition_on_levying_such_taxation_also_extends_to_''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_[1999
/nowiki>_3_SCR_134">999">''Westbank_First_Nation_v._British_Columbia_Hydro_and_Power_Authority'',_[1999
/nowiki>_3_SCR_134_paras._43,_44._The_test_for_a_regulatory_fee_set_out_in_''Westbank''_requires:

*_a_complete,_complex_and_detailed_code_of_regulation;_
*_a_regulatory_purpose_which_seeks_to_affect_some_behaviour;
*_the_presence_of_actual_or_properly_estimated_costs_of_the_regulation;_and
*_a_relationship_between_the_person_being_regulated_and_the_regulation,_where_the_person_being_regulated_either_benefits_from,_or_causes_the_need_for,_the_regulation.

This_is_important_to_note,_as_taxation_is_barred_under_s._121,_but_regulatory_fees_are_not,_and_Canadian_jurisprudence_under_s._125_has_turned_on_that_distinction.

_Interpretation_in_the_Canadian_courts

The_nature_of_s._125_has_been_described_as_thus:

Therefore,_its_prohibition_covers_taxation_on_the_holding,_as_well_as_the_acquisition_and_disposal,_of_property._In_addition:

*_the_provision_also_extends_to_property_held_by_Crown_corporations_of_Canada">Crown_corporation_

A_state-owned_enterprise_(SOE)_is_a__government_entity_which_is_established_or_nationalised_by_the_''national_government''_or_''provincial_government''_by_an_executive_order__or_an_act_of_legislation_in_order_to_earn__profit_for_the_governmen_...
s,_and
*_the_prohibition_on_levying_such_taxation_also_extends_to_Local_government_in_Canada">local_government_

Local_government_is_a_generic_term_for_the_lowest_tiers_of_public_administration_within_a_particular_sovereign_state._This_particular_usage_of_the_word_government_refers_specifically_to_a_level_of_administration_that_is_both_geographically-loca_...
s_levying_taxes_on_federal_property,_as_well_as_to_First_Nations_in_Canada.html" "title="Local_government_in_Canada.html" "title="Crown_corporations_of_Canada.html" "title="999
/nowiki>_3_SCR_134.html" ;"title="999">''Westbank First Nation v. British Columbia Hydro and Power Authority'', [1999
/nowiki> 3 SCR 134">999">''Westbank First Nation v. British Columbia Hydro and Power Authority'', [1999
/nowiki> 3 SCR 134 paras. 43, 44. The test for a regulatory fee set out in ''Westbank'' requires:

* a complete, complex and detailed code of regulation;
* a regulatory purpose which seeks to affect some behaviour;
* the presence of actual or properly estimated costs of the regulation; and
* a relationship between the person being regulated and the regulation, where the person being regulated either benefits from, or causes the need for, the regulation.

This is important to note, as taxation is barred under s. 121, but regulatory fees are not, and Canadian jurisprudence under s. 125 has turned on that distinction.

Interpretation in the Canadian courts

The nature of s. 125 has been described as thus:

Therefore, its prohibition covers taxation on the holding, as well as the acquisition and disposal, of property. In addition:

* the provision also extends to property held by Crown corporations of Canada">Crown corporation