Opinion Number. 55



Key Legislation

CONSTITUTION, ss. 51 (ii), (xxxi), 53, 55, 85, 93, 106, 107, 114 : INCOME TAX ACT 1842 (IMP.) : BRITISH NORTH AMERICA ACT 1867 (IMP.), s. 125 : CUSTOMS TARIFF ACT 1897 (CAN.)


The question is whether the Commonwealth can constitutionally impose import duties on goods belonging to and imported by the Government of a State.

Section 114 of the Constitution provides as follows:
A State shall not, without the consent of the Parliament of the Commonwealth . . . impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State.

The question resolves itself into this: Is an import duty a tax on property within the meaning of this section?

For the solution of this question, it is necessary not only to look at the words of the section itself, and to compare them with the same words used in other parts of the Constitution, but also to take a broad view of the general intention of the Constitution, as gathered from a survey of its provisions as a whole, and to examine how far any interpretation which the words are capable of bearing conforms with that general intention. See passage from judgment of Strong J., Legal Tender Cases 12 Wall. 531, cited Quick & Garran, p. 794.

'Tax' is a generic word which includes every kind of imposition by a Government, on persons, property, privileges, occupations, or enjoyment: Cooley, Constitutional Law, p. 55; Hylton v. The United States 3 Dall. 175. The word 'tax' is of itself wide enough to cover import duties.

The word 'tax' is not used elsewhere in the Constitution. 'Taxation' occurs several times. The Parliament has power to make laws in respect to taxation-which clearly includes customs duties (section 51 (ii) ). Proposed laws imposing taxation may not originate in the Senate (section 53). Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only (section 55). From the word 'tax', taken by itself, no inference can be drawn that import duties are not included.

'Property' means (1) ownership, or (2) things regarded in relation to rights of ownership. The phrase 'property of any kind belonging to a State' has a parallel in section 85, which deals with the vesting in, or acquisition by, the Commonwealth of 'property of the State of any kind', used in connection with a transferred department. Section 51 (xxxi) empowers the Parliament to make laws with regard to the acquisition of property from any State or person. 'Property' in these sections is clearly, used to include both real and personal property; and the words 'of any kind' are apparently intended to emphasise the fact that both real and personal property are included. See Quick & Garran, pp. 820,948.

The words a 'tax on property of any kind belonging to a State' therefore mean a tax on land or other 'property' belonging to a State.

The provision is therefore practically identical with section 125 of the British North America Act 1867, which provides that 'no lands or property belonging to Canada or any Province shall be liable to taxation'. It does not seem to have ever been contended in Canada that this exempted imports by a Province from customs duties. The Canadian Tariff, 1897(1) includes in the free list (Schedule B) 'Articles for the use of the Governor-General', and 'Articles when imported by or for the use of the Dominion Government, or of any of the Departments thereof, or by and for the Senate or House of Commons', but contains no exemption of articles imported by or for a Provincial Government.

The effect sought to be given, in support of the exemption, to the words 'property of any kind', is as if the section read 'shall not impose any tax upon a State', omitting all reference to property. This would be a stronger form of expression than that of the section, in which the words relating to property really operate as a limitation. Yet even taking the section as prohibiting all taxation whatever by the Commonwealth upon a State or by a State upon the Commonwealth, this only attains the United States doctrine, evolved by implication from the Constitution, which contains no express prohibition corresponding to section 114. Yet even in the United States the right of Congress to tax State imports has never been questioned. See the United States Tariff of 1897 (Chapter 11) in which the mention in the free list of certain special articles imported by or for a State (paragraphs 702,703) clearly indicates that the Tariff applies to State imports generally.

In this view the United States cases on the doctrine of the exemption of State instrumentaUties from Federal taxation are opposed to the exemption sought to be established on behalf of the States.

I am of opinion that the section must be construed to refer only to a tax on property as property; e.g. a land tax or a property tax; and that it does not extend to a tax on the importation of goods into the Commonwealth by a State. A 'property tax' has a well known meaning, in popular language and in politics, and also technically, as a direct tax on the ownership or possession of property, quite distinct from indirect taxation through the customs. See Seligman, Shifting and Incidence of Taxation, Chapter V; (Imperial) Income Tax Act 1842, Schedule A.

Import duties would not be correctly described as a 'tax on property'. They are primarily taxes on the importation of goods or commodities; and though they may be described as being also taxes or duties on the goods or commodities imported (see Constitution, section 93; Brown v. Maryland 12 Wheat. 433), they are levied on the goods not as subjects of proprietary rights, but as subjects of importation (see Sidgwick, Elements of Politics, p. 170; Encyclopaedia Britannica, 'Taxation'). In other words, the subject of taxation is not the property in the goods, but the importation of the goods; the duty is levied on the goods not as property but as imports.

This interpretation is borne out by a survey of the purpose of the section and the general objects of the Constitution.

  1. The purpose of the provision is to prevent the Commonwealth from levying taxes on the State through the medium of its property. That purpose is sufficiently effected by a prohibition of direct taxation-i.e. taxation which is intended to fall upon the person from whom it is collected.
  2. The provision is the converse and counterpart of the immediately preceding provision that a State shall not, without the consent of the Commonwealth, impose any tax on property of any kind belonging to the Commonwealth. The prohibition against a State can clearly not apply to indirect duties through the customs; it is aimed against a direct tax on Commonwealth property. The prohibition against the Commonwealth, in precisely the same words, ought not to be given a wider application.
  3. The prohibition-'the Commonwealth shall not impose any tax'-is clearly intended as a limitation of the taxing power only. Import duties are taxes, but they are also-and often primarily-regulations of commerce. The Commonwealth has power to legislate as to trade and commerce with other countries; and as it has (after the imposition of uniform duties) exclusive power to impose duties of customs, its trade and commerce power is also to this extent exclusive. There is no indication of an intention to impose, by this section, a limitation on that exclusive power-a limitation which would place the commercial policy of the Commonwealth in the hands of the States, by allowing them the right of free importation of dutiable goods. A State might enter into the importing business to any extent, and then-owing to the provision for interstate trade-be the means of supplying the whole Commonwealth, and thus rendering a tariff nugatory. It cannot have been intended that this power should have been placed in the hands of the States. In McCulloch v. Maryland 4 Wheat. 426, Marshall C.J. deduces, from the principle of the supremacy of the Federal Constitution and laws, the corollaries:
    (1) That a power to create implies a power to preserve: (2) That a power to destroy, if wielded by a different hand, is hostile to, and incompatible with these powers to create and to preserve: (3) That where this repugnancy exists, that authority which is supreme must control, not yield to that over which it is supreme.
    But all inconsistencies are to be reconciled by the magic of the word confidence. Taxation, it is said, does not necessarily and unavoidably destroy. To carry it to the excess of destruction, would be an abuse, to presume which, would banish that confidence which is essential to all government. But is this a case of confidence? Would the people of any one state trust those of another with a power to control the most insignificant operations of their state government? We know they would not. Why, then, should we suppose, that the people of any one state should be willing to trust those of another with a power to control the operations of a government to which they have confided their most important and most valuable interests? (per Marshall C.J., ibid. p. 431).
  4. Again, the Commonwealth power of taxation is subject to the limitation that there must be no discrimination between States or parts of States (section 51 (ii)); and the duties of customs imposed by the Commonwealth are to be 'uniform'. If the customs duties were subject to an unlimited right on the part of each State to free imports, uniformity would be impossible. There is no limit to the extent to which each State might claim to undertake the importation of goods for itself or its citizens. It cannot be supposed that the Constitution, which forbids the Commonwealth to discriminate between States in taxation, would reserve to the States a power of discriminating in their own behalf.
  5. The States have reserved to them the right to own property, under the general provisions of sections 106 and 107 of the Constitution. That right has been safeguarded by section 114. The Commonwealth is forbidden to tax State property because the power to tax involves the power to destroy (McCulloch v. Maryland above). But the States have not reserved to them a right to import. The Commonwealth, in the exercise of its trade and commerce power, may if it likes assume to itself a monopoly of the right of importation, and m ay forbid importation by individuals or States absolutely. It can therefore forbid importation by a State, except upon conditions; and it would be absurd to suppose that what it can forbid absolutely it cannot forbid conditionally. An import duty, though it is a tax within the widest sense of that word, is not strictly a tax in the sense of a 'compulsory payment'; it is a condition of importation (Sidgwick, Elements of Politics, p. 170).

It has already been pointed out that the dictum of Marshall C.J. in Brown v. Maryland (above) that 'a duty on imports ... is not merely a duty on the act of importation, but is a duty on the thing imported', is no authority for the proposition that a duty on imports is a 'tax on property'. But as the case is likely to be relied on in support of that contention, a statement of the principle there decided will not be out of place.

The State of Maryland had passed an Act providing that all importers of foreign goods, and persons selling the same wholesale, should take out a licence for which they should pay fifty dollars. It was held that this Act was repugnant to the constitutional provisions (1) that 'no State shall ... lay any imposts or duties on imports', and (2) that Congress shall have power 'to regulate commerce with foreign Nations, and among the several States' etc. In the judgment of the Court, delivered by Marshall C.J., it was pointed out that the licence fee was to all intents and purposes a duty on importation; and that no object could be accomplished by a duty on importation which could not be equally accomplished by a duty on the thing imported, in the hands of the importer. 'It is obvious', it was said, 'that the same power which imposes a light duty, can impose a very heavy one-one which amounts to a prohibition. Questions of power do not depend on the degree to which it may be exercised. If it may be exercised at all, it must be exercised at the will of those in whose hands it is placed. If the tax may be levied in this form by a state, it may be levied to an extent which will defeat the revenue by impost, so far as it is drawn from importations into the particular state.' (12 Wheat. 439). And the conclusion was drawn that the construction contended for by the State of Maryland would enable that State in effect to levy a duty on imports, and to control foreign commerce.

Though the facts are different, precisely the same considerations apply in this case and Brown v. Maryland (above) is a strong authority against a construction which would enable a State (1) to control the exclusive power of the Commonwealth to impose customs duties, (2) to interfere with the uniform incidence of taxation, (3) to control the regulation of foreign commerce and destroy that equality of trade which it was one of the main objects of the Constitution to establish.

[Vol. 1, p. 487]

(1) Customs Tariff Act 1897 (Can.).