CBC aims to block Saskatchewan’s bid for leave to appeal on transponder tax decision

The Canadian Broadcasting Corp. is asking Canada’s highest court to block an attempt by the Saskatchewan government to appeal a recent court decision denying the province the right to tax satellite transponders. The public broadcaster refutes the provincial government’s contention in its application for leave to appeal that the court’s decision "unduly frustrated its right to estimate tax", which it considers to "be essential and of national importance". The provincial government is seeking to overturn a December 4, 2001 ruling by the Saskatchewan Court of Appeal that stated the province’s tax assessment on the CBC "is not authorized by the legislation and is null and void and must be set aside on this basis". The court ruled that the tax assessment formula was invalid because it did not come from legislation, but rather from the provincial finance minister, who, it argues, "in effect crafted the tax himself". In its February 26 response to the government’s leave to appeal application, the CBC urges the Supreme Court of Canada to reject the request. It points out that rather than limiting the Saskatchewan government’s power to estimate tax, the Saskatchewan Court of Appeal "found the assessment was illegal as not being based on law". "…A fundamental distinction must be made between the power of a tax administration to estimate tax, and its power to write new law where existing law does not support taxation," writes Michel Coderre, lawyer for the CBC. Following an audit of CBC operations in the province, the Saskatchewan government presented the public broadcaster with a bill for $150,264.77, the amount of tax it estimated was due on satellite transponders leased by the CBC from Telesat Canada between 1992 and 1995. The tax was levied under the province’s Education and Health Tax Act (EHTA), which the provincial government states gives it the right to tax telecommunications services within the province. In its February submission, the CBC further argues that "there is no relevance to having the Supreme Court of Canada hear the present issues" because the Saskatchewan government amended the EHTA in 2000. "Among these amendments is new subsection 5(10), which provides the minister with the power to prescribe, by regulation, the portion of a telecommunication service which relates to Saskatchewan. Hence, the new regulations, once adopted, should likely provide precise rules on the computation of the tax liabilities attaching to national services," the CBC notes. However, Normand Nault, CBC senior manager of technical policy and planning who has been overseeing this file, tells CCR that the public broadcaster remains opposed to a provincial authority taxing transponders whose footprints covers the whole country, and even parts of the United States. The Saskatchewan Court of Appeal ruling was the first win by the CBC in a long fight with the provincial government. In May 1997, responding to a CBC appeal, the province’s Board of Revenue Commissioners upheld Saskatchewan’s assessment of the tax. A subsequent July 10, 1998 decision by a Regina court ruled that the appeals of the tax by the CBC and Telesat be dismissed with costs. In determining the taxes owed, the government devised a formula that took into consideration the cost of leasing a transponder, the number of transponders serving Saskatchewan, the tax rate that varied over the years in question, and Saskatchewan’s percentage of Canada’s population since the transponders served all of Canada. The province estimated that the CBC owed it just over $1,800 per month in taxes on the lease of the transponders (CCR, April 11/01). The CBC also contested Saskatchewan’s decision to levy taxes on an earth station in Qu’Appelle that it leased from Telesat. The tax on the earth station was calculated by multiplying the monthly cost of leasing the facility ($21,102) from Telesat by the tax rate to determine the tax owed by month. While dismissing the tax against the transponders, the Saskatchewan Court of Appeal upheld the tax on the earth station. The CBC had contended that the earth station it leased was not real estate, and hence was not subject to tax. "It is clear…that this is purely fiction. The essence of what is paid for is services as found below and this being the only objection to the tax it must stand," ruled the court in relation to the Qu’Appelle facility. Nault points out that the main issue wasn’t the earth station. "What we were really fighting over were the transponders in space. It’s a jurisdictional issue – does Saskatchewan have jurisdiction on a piece of space?" he asks. In its ruling, however, the Saskatchewan Court of Appeal, did not address the issue of jurisdiction, but whether the tax was authorized under existing legislation. Assuming the Supreme Court grants the Saskatchewan government’s request for leave to appeal, the battle appears poised to continue for months if not years.

CBC aims to block Saskatchewan’s bid for leave to appeal on transponder tax decision

Broadcast | March 15, 2002

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