Evidence of meeting #34 for International Trade in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tax.
A recording is available from Parliament.
Trade Lawyer, Baker Hostetler
No, I appreciate the question, and I did anticipate it, as I'm sure you will also appreciate.
For the purpose of clarity, although I've appeared before this committee as an expert before, I've represented a lot of companies in this dispute over a long period of time. I offer that information because, over the course of this dispute, many companies have asked me for advice as to whether they could take the deposits as a tax deduction.
Conservative
Dick Harris Conservative Cariboo—Prince George, BC
Did you respond to them that that would be having it both ways and that it would create--
Trade Lawyer, Baker Hostetler
It wouldn't be both ways, until your question now. Over the course of the litigation, I was asked that question by many companies, and I first had to stipulate, of course, that I'm not a Canadian tax lawyer. But I offer that information to advise you that I'm aware that some companies did and some companies didn't. Not everyone claimed a tax deduction from those deposits, in part because of the expectation that they would get the deposits back through the course of the litigation.
So you're right, there would be a question raised for those companies that had a tax benefit already, to have an additional tax benefit, as to at least the deduction and possibly the interest earned, but the correction I offer is that it's not true of everybody. Therefore, it would be appropriate to make the adjustment in recognition also, as in my answer to Mr. Temelkovski, of the peculiar circumstance that this money was held hostage while it was losing value.
Conservative
Dick Harris Conservative Cariboo—Prince George, BC
I think we can all agree that since the expiry of the last softwood lumber agreement, a number of years have gone by. The previous Government of Canada, in that four- or five-year period, wasn't able to come to an agreement, and that's a shame. That hurt our industry, there's no doubt about that.
But from purely a tax point of view, I think your suggestion, while it might be a nice thing to do, would throw the current Canadian tax laws into a form of chaos and would set a very tough precedent for the government to have to deal with. While that may make tax lawyers across the country pretty happy with countless hours of billing fees challenging the tax department from that point on, to whenever the world ended--I'm sure it would keep going--it wouldn't be good for our tax law.
Conservative
Dick Harris Conservative Cariboo—Prince George, BC
I want to move to another thing, if I can.
I'm sure that if I had the lawyers representing some of the largest...well, let's just name a few: Canfor, the largest softwood company in Canada, and some of the other ones that have signed on to this deal, West Fraser Timber being probably in the top five in Canada, and some of the other mills that are good business people, such as Lakeland Mills, Carrier Lumber, Dunkley Lumber, Tolko Industries--and I'm talking about B.C. companies because B.C. does supply the majority of softwood lumber to America. If we had their lawyers here, those companies that have seen the benefit of this agreement and have signed on to it, that know there are going to be the bonus points, that they're going to have to eat something but, at the end of the day, get the deal done, if we had them argue, I'm sure this would boil down to an argument between the lawyers.
As you know, 92% of the industry has bought into this deal and the package. We talk about ambiguities in the agreement defining what a softwood product is. Well, the industry has pretty well figured that out over the last 100 years or so. The only ones who seem to have a problem defining softwood lumber and what a product is, what remanufacturing is, what a primary mill is, what primary manufacturing is, appear to be the lawyers, not the industry. They know what they're doing.
Mind you, lawyers are paid to find ambiguities. It's not only what you do, but it's what's good for business.
Conservative
The Chair Conservative Leon Benoit
Mr. Harris, perhaps we could get back to Bill C-24 and the issues surrounding that.
Conservative
Conservative
Dick Harris Conservative Cariboo—Prince George, BC
While your testimony is appreciated, because you do provide another side of it, couldn't it be successfully argued that if we had lawyers representing the major manufacturing companies, softwood lumber, major exporters who have bought in, if we had them sitting here, we would likely get two different stories?
That's all I want to say.
Trade Lawyer, Baker Hostetler
I'd be pleased if I could have a moment to answer this question, Mr. Chair.
I'm not quite sure what Mr. Harris means by “signed on”. West Fraser did not participate in the purchase and sale option and didn't participate in the EDC program. No company in Canada could formally sign on to this agreement. There were only two parties, two capital P parties, to this agreement.
Conservative
Trade Lawyer, Baker Hostetler
And the special charge was not part of that package as you've referred to it. It's not part of the agreement and it was not part of what anyone in the industry endorsed, so--
Conservative
Dick Harris Conservative Cariboo—Prince George, BC
Excuse me, Mr. Chairman, the industry asked for that special charge to level the playing field.
October 31st, 2006 / 10:05 a.m.
Conservative
Trade Lawyer, Baker Hostetler
You asked whether you had lawyers representing any of the major companies. I've been representing Tembec and Domtar for five years--they're considered major companies--and a host of other companies within the associations I represent, some of whom you'd also regard as major companies, I'm sure. And I talk with the counsel of the companies to whom you're making reference almost every day.
So would we have a large debate about some of these questions? I think there'd be consensus that the special charge is not appropriate as to the refunds, and I emphasize that point because your previous statement seemed to focus on the issue of the income tax--and I've referred to different taxes here--because this bill contains an implied income tax, the special charge, and the export tax. This has become a large revenue bill, even though my understanding was that it was supposed to be the implementation of the softwood lumber agreement, and there are elements here that are not implementation of the softwood lumber agreement. That's the main point I'm making.
So when you say there were companies who supported or endorsed or agreed to reaching an agreement in some fashion, the special charge and the tax arrangements weren't part of anything about which they were saying yes, let's get on with it.
Conservative
Senior Partner, Gottlieb & Pearson, International Trade & Customs Lawyers, As an Individual
Excuse me, Mr. Chairman, may I have 60 seconds to reply to Mr. Harris? I believe he addressed me as well. I think he did. He certainly was looking at me.
Senior Partner, Gottlieb & Pearson, International Trade & Customs Lawyers, As an Individual
I want to make sure it's understood, Mr. Harris, that like you, I'm here as a public servant. I'm not here representing clients. And as to your comment respecting the industry understanding these terms, I think as a parliamentarian you would appreciate that much of the legislation that's promulgated by the House is not understood, even by the business people whom it's intended to cover, because it's legalistic, and my comments were addressed to the legalisms of the statute, not to policy.
Also, as to the role of the courts, it wasn't my intention to suggest that this was all going to be about wasting a lot of time in litigation. My comments are addressing the needs of supporting the industry, to provide them with clarity--and not just the big boys, but all the boys...and girls.
So my intended purpose here was not only to clarify that, but also to make sure that it's not just the people who are invested in this industry today who have clarity, but those who may wish to invest in our industries in the future.
Thank you.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Pearson.
Mr. Harris, if you have a short question.
Conservative
Dick Harris Conservative Cariboo—Prince George, BC
I have a question for Mr. Feldman.
You know the industry wanted a means of levelling the playing field between those who made use of the EDC provisions and those who chose not to, and the industry, in consultation with the government, came up with the special charge of 18% to level the playing field, as the industry put it itself.
Industry had an option either to use 100% of the EDC provisions or not, and those who didn't had reasons. They felt it would be of better interest to their business not to use it, and those that did use it did so for reasons they felt would be of benefit to their business. That's a free choice they had. They weren't bullied into it by any means.
So I don't understand your argument that those that freely chose not to use the provisions of EDC are in some way being penalized when they knew up front they had two choices, and they knew what those choices were.
Trade Lawyer, Baker Hostetler
It's frustrating when there's reference to the industry, because there has not been, in the last five years, a single organization representing the industry of Canada. The consultations with the industry have been inconsistent and were sometimes narrowed to select CEOs. The trade associations frequently have been bypassed.
In the so-called consultation about levelling the playing field on the special charge, neither the industry nor the government ever revealed who was part of those conversations. There was no association or organization of industry that participated in those discussions. And I can certainly say that many of the clients I represent had nothing to do with those conversations and weren't consulted.
In addition, although you say that there was no bullying about the EDC, I can testify that I have clients who were pressured considerably by officials of the government to participate in the EDC program to enable the government to reach its 95% target as a condition precedent. That target, as we know, wasn't met, and the agreement was amended on October 12 accordingly.
So it's not true that there was no pressure about using the EDC facility. But my remarks today are focused on the bill in terms of the bargain that was reached. The bargain that was reached was that those who participated in the EDC received an advance payment, and those who didn't participate did not receive an advance payment.
And the evidence is what happened yesterday, and I applaud the EDC's performance yesterday. They made their payment within two weeks. They said they wouldn't do it in less than six to eight weeks. I congratulate them, but that only proves the point, because those who were not participating in the EDC process have not received payments yet.
Conservative