Doing the Right Thing

Doing the Right Thing
Christopher C. Goodfellow
January 12 1999

The news today that Bell is selling off the operator assistance business to Excell Global Services of Tempe Arizona no doubt will be a turning point in Canadian labour relations. Let's just gut some more stable jobs for the sake of saving 40% on hourly wages. It's easy to do when you're an executive earning millions a year and you like to take the corporate jet down to Scottsdale for the weekend to play golf.

But c'mon folks what we are doing here is just gutting the very people who make a consumer society work. If management continues to approach business as simply achieving the lowest cost labour input, let's move the operator assistance division to India or China at $1.00 a day. It's quite feasible over satellites. Bill Gates has done it with software engineers writing code in third world countries for vastly lower salaries than they would be paid in Seattle.

Frankly, I'd want all my employees to be well paid and happy. That's how you build a company because a company is only as good as its people. It's also how you build a healthy society. My former brother-in-law, Steve Ross, who built the Time-Warner empire had a personal dictum "spread it around"... he was once the most highly paid executive in the U.S. but he certainly spread it around and he understood the importance of it. All employees flourish under generosity. Spread it around and you'll grow, concentrate wealth and you risk a revolution either in a company or in a society. Just keep up this trend a little longer and there will be more "home invasions" and more bank employees will be shot dead in due course as so tragically happened yesterday in Toronto. You'll walk by more homeless people on the street.

If you gut the spending power of the very consumer society you are trying to grow, you are only defeating yourself in the long run.

The executives that walk tall in the long run are those that build all their stakeholders' wealth: employees, customers and shareholders. There are too few of them these days even though "collaboration" is a commonly used business theme today.

Anyway I think Bell has bitten off more than they can chew on this one and if the government did in the Big Banks' Big Dream , Big Bell better get ready for the backlash. It's coming.

But that's not what I wanted to write about just got in the way and I couldn't leave it alone.

Something else has been bothering me since the first whiffs started leaking out of Ottawa a few years ago.

Buried on the A9 page of last Friday's Montreal Gazette was an article about a very courageous Canadian who has taken the task upon himself to see that a certain trust that had transferred its assets to the United States (with a very convenient ruling by Revenue Canada to avoid paying capital gains taxes) do the right thing and pony up the money like all other good Canadians are required to do when exiting out from under the Canadian taxman.

For those of you who haven't followed this now 4 year old story it is really quite simple. Canada requires any company or individual who may be ceasing Canadian residency to pay an "exit" tax on the assets being transferred outside of Canadian jurisdiction. In fact this exit tax has actually kept many a Canadian entrepreneur at home but we've lost many over the years like the Irvings, E.P. Taylor and tens of thousands of others. All of them I presume ponied up to the table and paid the exit tax before saying goodbye to Canadian taxation.

The taxation is basically a deemed realization of the capital gains on the assets even though you might not have sold them but you are just moving them outside the country. Suppose you started with $100 twenty years ago. and today as you decide to leave the asset is worth $1,000. You have a deemed capital gain of $900, 75% of which should be included in your income for that year and taxed at the respective marginal rate.

It is alleged in this case the approximate bill conveniently avoided amounts to some $700 million. That's a lot of loonies to keep in a purple velvet sack tied up with gold thread. It would buy a hospital or two for Canadians. Spread around it might generate seven or eight times that amount in economic activity in Canada applying a simple economic multiplier effect.

George Harris, this courageous Canadian who is determined to see the right thing done here along with his lawyer Arne Peltz have passed one hurdle and that was a decision by Federal Justice Francis Muldoon who ruled the court case could go ahead to open up the books, deserves every Canadian's support. He has appealed to the owners of this particular trust to step up and do the right thing and avoid protracted litigation.

What's really aggravating to all of us who pay our taxes is not only that this trust is alleged to have avoided this deemed capital gains realization by a favorable ruling from Revenue Canada but that the reasons for the exemption are not public by virtue of the income tax act. It smacks of something....

We shouldn't infer any wrongdoing here before it is proved but it makes one wonder if there isn't another level of service for certain people who have political connections. It certainly does not speak to the transparency of the tax system. You or I would never have been treated this way.

If it bother's you as much as it bothers me and until the right thing is done or the situation and circumstances clarified, each and every dutiful tax paying Canadian can do one thing. We can all avoid certain brands of wines and liquor and movies and cd's. It's quite simple, the Canadian people deserve clarification as to what went on here. Canada gave this particular family a pretty good start in life and any other family that has moved its assets out of Canada has not been treated in the same way.

The internet is a pretty powerful tool and we can all help Mr. Harris by circulating this story and encouraging all Canadians to simply stop consuming until the whole matter is clarified.

An open and transparent tax system is essential in Canada. This case should stick to the end. Write the taxman a cheque and spread it around.

Good for you Mr. Harris.

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