The Legacy of UK Tax Concepts in Canadian Income Tax Law

This article examines a specific category of legal transfers between the United Kingdom and Canada, considering the legacy of UK tax concepts in Canadian income tax law. Two main areas are considered where, in our view, this influence has been most profound: (i) the concept of income deployed for Canadian tax purposes; and (ii) judicial approaches to statutory interpretation and tax avoidance. Although the rules and concepts that Canadian courts and legislatures have adopted in each of these areas have necessarily evolved over time, the path of this evolution as well as current approaches reflect the enduring influence of UK tax concepts on Canadian income tax law. The first substantive section examines the structure and concept of income in Canadian tax law, linking its origins and development to the global and schedular taxes that were adopted in the United Kingdom in 1799 and 1803, and to the source and trust concepts that UK courts have employed to interpret the meaning of income for tax purposes. The next section considers judicial approaches to the interpretation of tax statutes and tax avoidance in Canada, tracing the origins of a strict construction approach to interpretation and a formalistic approach to the characterisation of transactions and relationships to early judicial decisions in the UK, and explaining the influence of this traditional approach on subsequent legislative and judicial developments. The final section concludes that the traditional approach endures, albeit uneasily, in Canadian income tax law in the continuing emphasis on textual interpretation of tax legislation and in the formalist application of the general anti-avoidance rule by the Supreme Court of Canada.The British Tax Review is available on Westlaw