Most Canadians long ago forgot that income tax was introduced in 1917 as a temporary measure to finance the First World War. The country’s pacifist Hutterites have a longer memory. The fundamentalist, communalist, Christian farmers have neither forgotten the origins of income tax nor become reconciled, as they put it, to “appearing before our creator with bloody hands.” As a result, a historic religionversus-taxes battle is moving through its 17th year, with millions of tax dollars hanging in the balance.
In the latest round of the legal marathon, the Federal Court of Canada last week rejected the appeal of about 80 Darius-Leut Hutterite colonies against $37 million in back corporate income tax. But the Hutterites are determined to carry their appeal to the Supreme Court of Canada because, if they lose, the 400-year-old Hutterite sect could be wiped out. As one leader sees it: “The wider society has tried with every means at their disposal to dislodge us and our way of life. It may be the income tax department that will finally do the trick.” But the case has much wider implications than that. It could eventually involve the whole question of churches and taxes. The explosive problem of whether the Hutterites as a reli-
gious group should be taxed could lead to an appraisal of which other nowuntaxed church profits should be shared by the government.
The battle has pitted a 74-year-old Edmonton lawyer with 47 years’ practice in civil and criminal law against the best talent Canada’s department of justice can offer the department of national revenue. In 1972, the DariusLeut, the most orthodox of three Hutterite groups each named for its founder, approached Jack Matheson to have him handle the incorporation of an accounting service used by the sect. That chore led to Matheson’s taking on the Hutterites’ battle.
The origins of the dispute go back to the Hutterites’ refusal, since their founding in the Middle Ages, to fight in anyone’s army, a stance that drove them through half a dozen European countries and the U.S. before they came to rest in Canada in 1918. Canada needed skilled farmers then and a deal was made: the government wouldn’t interfere with the newcomers’ religious beliefs, including their pacifism, if the Hutterites would farm the Prairies and never become a burden to their adopted country. The Hutterites kept their end of the bargain—they still do not accept welfare, government allowances, pensions or unemployment insurance. But the government reneged on its promise, as the Hutterites see it, when it started
collecting income taxes from the colonies in 1961. The two smaller Hutterite groups, the Schmied-Leut and the Lehrer-Leut, eventually reached an agreement with the government that they would pay personal income tax but the Darius-Leut objected and began its battle to regain some $1.6 million paid by members of its 66 colonies between 1961 and 1966. Lawyer Matheson saw that case through the Federal Court, the Federal Court of Appeal and the Supreme Court of Canada, which ruled in 1976 that the tax money had been wrongfully obtained because the government was taxing individuals—who had no personal income—instead of the trustees of the colonies.
For the Hutterites, the victory was a Pyrrhic one. Ottawa promptly turned around and assessed the colonies anew on a higher corporate basis, which has upped the Darius-Leut’s bill to $37 million between 1967 and 1975. Last year, an eleventh-hour Vancouver court order stopped the tax department from seizing Hutterite holdings and income to pay the back taxes and the case is now wending its way through the courts again. The Hutterites are arguing that they’re exempt from corporation taxes because they’ve been incorporated as a church since 1951 and other churches
don’t have to pay. Even if they were a commercial corporation, Matheson also argues, the government isn’t allowing them to deduct the cost of their labor.
For the Hutterites themselves, the case is simpler. Bishop John Wurz, whose Wilson colony near Lethbridge has been billed for $1.2 million, says flatly that income tax is “war money.” The 78-year-old leader testified to the Federal Court that his group will never pay the “war” tax “even if they take our land and drive our children out into the snow.” The government has long argued that the colony’s profits come from farming, and farming itself is not a religion, but the black-garbed, bearded Hutterites at the trial refused to separate the two, to the frustration of government lawyers. When Crown counsel Philip Ketchum, for instance, asked who controlled the expenditures of the group, Bishop Wurz replied: “Jesus, the power of the Holy Spirit, is controlling the money.”
The income tax case is seen by the Hutterites as one more example of the persecution that has plagued them throughout their existence. Until 1972, legislation prevented Alberta Hutterites from buying land without government approval; the revoking of that decades-old law stirred non-Hutterite
fears that the sect would take over the province and there were marches on the legislature, fiery meetings and bitter legislative debates. The fears proved baseless—Hutterites control only about one per cent of the province’s arable land —but other farmers still resent, envy and fear the sect, partly because its frugal, communal lifestyle finances efficient, modern, prosperous, expansionist agri-corporations. Therefore Hutterites find themselves derided on the one hand for their home-made, traditional clothing, their German dialect and their strict morals, and on the other for their large-scale wholesale purchases of farming equipment (the Wilson colony alone boasts nine combines, six of them two-year-old, top-of-theline machines worth $45,000each). The Hutterites have grown accustomed to being spat at—literally—on the street and long ago adopted a total turn-theother-cheek philosophy. “We would like everyone to become followers of Christ,” Bishop Wurz told the Federal Court. “Even our dear friend, Mr. Ketchum there,” he added with a twinkle, nodding to the smiling federal prosecutor. But when the $37-million tax bill is settled finally, the affable smiles will surely be erased on one side or the other.
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