jimp@sunray.UUCP (Jim Patterson) (08/17/89)
In article <1989Aug14.231027.11461@lsuc.on.ca> dave@lsuc.on.ca (David Sherman) writes: >Steve.Kannon@f71.n221.z1.FIDONET.ORG (Steve Kannon) writes: >>As you can see, the government was quick to jump all over the lower >>ranks, but spared the "poor, hard-pressed" business community, with most >>of the breaks going to the wealthiest companies (eg. a $500 million tax >>concession to the Reichmanns ... to help them buy Gulf in 1985). > >This is COMPLETELY misleading ... most importantly, the Reichmanns made use of >an EXISTING provision in the Income Tax Act, one which allows deferral >of tax on certain kinds of reorganizations. The government's "concession" >was to have Revenue Canada grant an advance ruling on the transaction. >Other taxpayers had engaged in this transaction before, and it likely >would have stood up in court anyway; the advance ruling simply >confirmed that the government would not attempt to reassess adversely. While it's nice that the revenue department provided an advanced ruling, the fact that there was a question of legality at all demonstrates that this case was not black and white. After all, this was a takeover of another company, making the use of this "reorganization" provision a bit dubious. So, they could have ruled the other way and possibly gained a half a billion dollars in tax revenue. (Of course, they could have ended up scuttling the deal as well). Also, as I recall, in the following budget this provision was sufficiently tightened up that the Reichmann manoever is no longer permitted. This seems to indicate that the government no longer considers that particular allowance in the public interest. -- Jim Patterson Cognos Incorporated UUCP:decvax!utzoo!dciem!nrcaer!cognos!jimp P.O. BOX 9707 PHONE:(613)738-1440 3755 Riverside Drive Ottawa, Ont K1G 3Z4
dave@lsuc.on.ca (David Sherman) (08/20/89)
In article <6856@sunray.UUCP> jimp@cognos.UUCP (Jim Patterson) writes: >In article <1989Aug14.231027.11461@lsuc.on.ca> dave@lsuc.on.ca (David Sherman) writes: >>Steve.Kannon@f71.n221.z1.FIDONET.ORG (Steve Kannon) writes: >>>As you can see, the government was quick to jump all over the lower >>>ranks, but spared the "poor, hard-pressed" business community, with most >>>of the breaks going to the wealthiest companies (eg. a $500 million tax >>>concession to the Reichmanns ... to help them buy Gulf in 1985). >> >>This is COMPLETELY misleading ... most importantly, the Reichmanns made use of >>an EXISTING provision in the Income Tax Act, one which allows deferral >>of tax on certain kinds of reorganizations. The government's "concession" >>was to have Revenue Canada grant an advance ruling on the transaction. >>Other taxpayers had engaged in this transaction before, and it likely >>would have stood up in court anyway; the advance ruling simply >>confirmed that the government would not attempt to reassess adversely. > >While it's nice that the revenue department provided an advanced >ruling, the fact that there was a question of legality at all >demonstrates that this case was not black and white. After all, this >was a takeover of another company, making the use of this "reorganization" >provision a bit dubious. So, they could have ruled the other way and >possibly gained a half a billion dollars in tax revenue. (Of course, >they could have ended up scuttling the deal as well). "Ruling the other way" might indeed have scuttled the deal, which was perceived as a deal that was to Canada's benefit (keeping ownership of oil resources Canadian, and all that). Had the deal proceeded, however, a lengthy court battle would have resulted from an adverse assessment. Revenue Canada doesn't make the law, it only administers and enforces it. If other taxpayers had successfully proceeded with this transaction on the basis of existing corporate reorganization rules, there's no indication that Revenue Canada would have won in this case. (Unfortunately I can't be more specific, because I haven't examined the details of the transaction.) >Also, as I recall, in the following budget this provision was >sufficiently tightened up that the Reichmann manoever is no longer >permitted. This seems to indicate that the government no longer >considers that particular allowance in the public interest. Certainly. But every taxpayer is (or certainly was before GAAR) entitled to make use of existing law. Revenue Canada's granting of an advance ruling would be entirely consistent with a recognition that existing law didn't result in tax being paid on that particular transaction -- and entirely consistent with the Department of Finance concluding that that was not an ideal state of affairs and that the law should be amended. But such amendments are not made retroactive to before the date of a public announcement of them. David Sherman -- Moderator, mail.yiddish { uunet!attcan att utzoo }!lsuc!dave dave@lsuc.on.ca