What Should B.C. Premier Clark & Minister Falcon Do Now?
British Columbia Premier Christy Clark and Finance Minister Kevin Falcon should act like the Chairman and Chief Financial Officer of a publicly listed corporation. What would the Chairman and CFO of a publicly listed corporation do if the federal government issued a harmonized sales tax ("HST") assessment for $1.6 Billion? They would hire the best lawyers in the area of commodity tax and the best litigators to review all relevant documents, all relevant law and see if there is any valid argument to object to paying the assessment. The Chairman and CFO of a publicly listed corporation would attempt to preserve shareholder value if at all possible. The Chairman and CFO would not give up immediately and write a big cheque without considering all legal options.
Yesterday on the Lang & O'Leary Exchange on CBC, I discussed the need to review carefully the Comprehensive Integrated Tax Coordination Agreement between Canada and B.C.. Annex C addresses the issue of the transitional payment of $1.599 Billion and what happens if the CITCA is terminated before the 5 year anniversary date. Sections 9-17 of Annex C are the most relevant to consider. The key question will be whether British Columbia has committed a "material breach" under the CITCA?
The answer to this question needs to be considered carefully given the fact that the people of British Columbia have spoken in the referendum and the Government of Canada cannot demand the Government of B.C. to ignore the will of the people in the very unique circumstances. This is not a case where the politicians have unilaterally decided to back out of the CITCA. In fact, Premier Clark does not want to terminate the CITCA and may hope to try again in the future to implement the HST. The Government of B.C. has followed the law in holding the referendum and has spent significant resources to educate the public about how they should vote. How do these facts interact with the CITCA wording?
I am not saying that this is the answer to the $1.599 Billion question. I am saying that a lot of questions need to be asked of really smart people who are not ex-political aides. It is time to ask HST lawyers and contracts lawyers and litigators to canvass all the legal arguments. In the end, the $1.599 Billion may be payable. Let's not start with that conclusion and give up on asking more questions.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
