This paper examines how the tax exempt status afforded Crown corporations in Canada offends fundamental principles of tax equity and fairness. It describes the legal and constitutional basis for this exemption as well as its interpretation and application by the courts in Canada. It also contrasts it with the different legal and constitutional treatments of similar state entities in the United States. This is followed by a brief description of how, to some extent, this legal regime has been modifi ed in Canada, at least at the federal level. A prescription for eliminating this fundamental disconnect between the legal and constitutional regime in Canada and the principle of a fair and equitable tax system is then suggested using an example from British Columbia.
In 2003, the BC legislature passed new legislation regarding the British Columbia Ferry Corporation. That legislation provided that this Crown corporation was no longer to be considered an agent of the Crown. This automatically made it subject to all provincial and federal taxation resulting in full tax equity and fairness. This is a model that all other governments in Canada could follow. All that is required is the necessary political will.