Path: utzoo!dciem!nrcaer!sunray!jimp
From: jimp@sunray.UUCP (Jim Patterson)
Newsgroups: can.general
Subject: Reichmann tax ruling (was Re: Tax Revolt Now!!)
Message-ID: <6856@sunray.UUCP>
Date: 17 Aug 89 02:01:17 GMT
References: <2713.24E6443D@isishq.FIDONET.ORG> <1989Aug14.231027.11461@lsuc.on.ca>
Reply-To: jimp@cognos.UUCP (Jim Patterson)
Organization: Cognos Inc., Ottawa, Canada
Lines: 32

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