Friday, May 05, 2006

Government will collect tax on the softwood refund

Yes, you read that right. After surrendering to the U.S. and only getting a portion of our illegally collected softwood duty back from the Bush Administration, the Harper administration will be TAXING the portion of their own money our forestry companies ARE getting back from this deal. The tax windfall could be worth as much as $1 billion to Harper and the provincial governments.

I really should read the business section more often, because otherwise I would have missed this, I think, huge story in the Globe's Report on Business. And Eddie, why wasn't this in the A section anyway, instead of B5?

We get into corporate tax law here, but as ROB explains it Eastern Canadian forestry companies should actually come out OK but companies in B.C. will be getting hosed. Remember when the Reform Alliance was all about standing-up for the West?

In a nutshell, as I read it companies wrote-off duties paid during the dispute, claiming it as an expense for tax purposes, so now that they're getting the money back they need to pay taxes on it. Eastern companies tend to have poor balance sheets so they can defer the payments to the future, but most B.C. companies have healthier balance sheets and can't.

Take Canfor, David Emerson's former company, and the company he still has financial ties to through his pension plan. After taxes ROB says they'll end up with about 55 cents on the dollar, reducing their appx. US$760 million refund to US$475 million.

My take on the softwood deal itself is basically that it sucks, but I don't think they could have done much better with the Americans. It's a defeat and shouldn't be celebrated, but life sucks sometimes.

But this tax situation is something Harper can do something about, though. He's trying to shore up his strength in B.C., how are they going to react to news of Harper's tax windfall at their expense?

Softwood firms to be taxed on duty refunds
Ottawa, provinces could get $1-billion

OTTAWA, VANCOUVER -- As a final indignity, Canadian softwood producers will have to pay tax on the $4-billion in U.S. timber duties they stand to recoup under a deal between Ottawa and Washington to settle the five-year-dispute.
This would mean a potential revenue windfall for Ottawa and the provinces of $1-billion if all companies end up paying tax on the duties.

Recommend this Post on Progressive Bloggers


ottlib said...

A lousy deal just got much worse.

Loony in LotusLand said...

BCer are you suggesting that Canadian corporations not pay tax on income? One billion out of four billion looks like twenty-five percent not fifty-five percent. How each company structures their profit and loss statements is up to them within legal accounting standards.

Craig said...

Are you suggesting that multi national companies should not pay taxes?

I am curious as to how the taxes will be determined on the $500 million of this money that is being donated to Hurricane Katrina rebuilding will be treated. Maybe as a charitable donation with the accompanying tax deductions.

Also of the remaining $500 million how much of that will be going for research & development by both countries especially on the pine beetle problem. How will that be taxed?

Loony in LotusLand said...

Who is Craig?

To the best of my knowledge corporations do not pay tax on money they never receive. The "missing" billion dollars came out of the pockets of American consumers and would have been destined for the Canadian forest companies before it was diverted by the duties. The bugger factor is that without the duties the price of lumber would not have been as high and that level of profit margin would never have been made. Without a free market it is impossible to calculate what the actual profits and taxes might have been during that period.

A BCer in Toronto said...

The Americans illegally collect duties for years. Harper sells out by letting the U.S. bullies keep $1 billion, there's no interest, and he taxes what he did get back by raking $1 billion off the top. I must say, I find it ironic that the U.S. and Harper both end up with $1 billion they don't deserve here.

Why not do something creative with that $1 billion? Offer grants for economic development activities in forestry towns, or send every laid-off forestry worker to Tahiti for a week.

But it shouldn't just go into general revenues. If the Liberals had done that the Coms would be screaming bloody murder.