Posted Tuesday, August 8, 2000

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"When asked by the auditor for details, the [Canadian tax] department said it was unable to reveal the names of civil servants who met secretly on several occasions to permit this dramatic loss of tax revenue. The department also told the auditor there were no minutes kept of the meetings." Diane Francis, the Financial Post, August 5, 2000

The Financial Post

Ottawa, August 5, 2000

Ottawa tries to cover up who's behind the $800M tax waiver

Revenue Canada manoeuvre may nix a trial



Ottawa's latest legal action involving a citizen's attempt to force Revenue Canada to collect taxes from a wealthy family smacks of a cover-up.

Just a few days ago, Ottawa used its legal muscle to postpone a trial into the merits, and players, involved in the controversial tax-free transfer in 1991 of a mysterious $2.2-billion trust to the United States on behalf of a wealthy and unknown family [the Bronfman family]. A tax waiver was granted, saving the family up to $800-million in taxes.

"This is terribly unfair to other Canadians paying substantial taxes," said George Harris, a Winnipeg office manager who is suing the government over this matter.

Unfortunately, time is running out because the waiver cannot be reversed after the end of 2001, or just 17 months from now. And the latest manoeuvre by Revenue Canada's hired legal guns is to postpone the trial and ask the Supreme Court of Canada to rule on whether a taxpayer citizen can sue over somebody's else's tax dodge.

Already two courts -- a lower and an appeal -- have ruled that a trial should be held into the merits of this questionable transfer. If the Supreme Court agrees to take the case, the trial will probably never be held before the deadline, no matter who wins.

And no trial means a cover-up, because the identities of the people involved -- both the family and the civil servants -- will never be known or have to answer for their decision.

The citizen involved is George Harris, a Winnipeg office manager, who became upset when he read about the transfer in the 1996 auditor-general's report. He and his friends collected money to sue.

The auditor-general was clear that this was a breach.

"In our view, the transactions ruled on may have circumvented the intent of the law regarding the taxation of capital gains. We are concerned about the lack of documentation and analysis of key decisions made by the department and the potential impact of those decisions," the auditor-general's report said.

Equally outraged by what happened was the first judge who heard the case and wrote:

"Mr. Harris brings this action on behalf of his fellow taxpayers, except the favoured few, for the few will never be heard of to complain of the official favouritism. The fair-minded, objective observer must surely smell grave maladministration."

The transfer permission was granted in 1991 during the tenure of Prime Minister Brian Mulroney and speculation is that it involves a branch of the Bronfman family. Such decisions are usually published in tax journals, but not in this case.


The Liberals, also close to Bronfman (picture), are not blameless either. The transfer was not made public until 1996, three years after the election of Prime Minister Jean Chretien. Even more interesting is that the so-called loophole in the law, through which this family drove its fortune out of the country tax-free, was not closed by Paul Martin, the Finance Minister, until October, 1996 -- four months after the federal auditor-general cited the transfer as irregular.

"It doesn't matter who the family is," said Mr. Harris in an interview with me last year. "I'm suing Revenue Canada over the issue and there may be other incidences and families we don't know about."

What does matter is that Revenue Canada is covering up itself, with our tax dollars spent on legal fees. This is strange behaviour for a government department whose job it is to maximize tax-collection and who should also not be frightened of transparency in a democracy with the rule of law.

The auditor-general also noted in his 1996 report that Revenue Canada did a flip-flop on this transfer. It had already refused to let the trust be transferred tax-free and then reversed its decision the same day without explanation. When asked by the auditor for details, the department said it was unable to reveal the names of civil servants who met secretly on several occasions to permit this dramatic loss of tax revenue. The department also told the auditor there were no minutes kept of the meetings.

This is unacceptable in a democracy and we may never know what went on and who's responsible if the latest legal manoeuvre works.

As Mr. Harris has observed: "Mystery individuals are making these decisions. Estimates vary up to $700-million or more in forgone taxes. We don't know for sure. And the federal government has done nothing about this. If there was several hundred million of federal money squandered on building a road between two communities there would be issues raised by Ottawa if it involved federal funding."

"Who was in the meetings will come out in court," said Mr. Harris. "The auditor-general pointed out that this [decision] was suspicious because the meetings took place and the decision was completely opposite at the end of the day. Once we find out who was in the meetings, the court could ask them for a statement. These were Revenue Canada officials, senior bureaucrats, not politicians per se. We want to know who was there on the Revenue side."

Mr. Harris is fighting the stalling technique in court.

And he's right to do so. Taxpayers deserve answers. Revenue Canada must be scrutinized. Parliament should conduct hearings if the trial is never held.

Related file on this website:


"Jews and Justice" -- A 1998 Talk by Edgar M. Bronfman
Website note: Edgar Bronfman is President of the World Jewish Congress, Chairman of the International Board of Governors of Hillel, and Chairman of Seagram Company Ltd. He is one of the architects of a $1.25 Billion settlement with Swiss banks and other institutions throughout Europe that were depositories of Jewish wealth during the 1939-45 period and whose owners perished in the Holocaust. He works to preserve and foster the worldwide unity of the Jewish people.
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