CBC wins on transponder tax as Supreme Court nixes Saskatchewan’s leave to appeal

The Supreme Court of Canada has denied the Saskatchewan government’s leave to appeal a court decision denying the province the right to tax satellite transponders. The decision, released Sept-ember 5, is good news for the Canadian Broadcasting Corp., which has been locked in a six-year battle over whether the province has the right to tax transponders. With the highest court dismissing the request for a leave to appeal and awarding costs to the CBC, a Dec. 4, 2001 ruling made by the Saskatchewan Court of Appeal will stand (CCR, March 15/02). The Saskatchewan Court of Appeal ruled that 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. "What it means at this point is that the Saskatchewan Court of Appeal decision remains in force, which basically said that under the Saskatchewan legislation at this point, the transponders – or the space segment of leasing transponders – is not taxable," Normand Nault, the CBC’s senior manager of technical policy and planning, tells Canadian Communications Reports. "We won the big bout. We didn’t win on the Qu’Appelle earth station lease, which was a smaller issue." But Nault cautions that the Saskatchewan government may try to amend its Education and Health Tax Act to allow the taxing of transponders. "Now, they could always go back and change their legislation," he points out. "After six years, I’m waiting for the next shoe to drop. I just don’t know if there are any shoes left. The fact that they fought it all the way through the court system shows their tenacity," he adds. "Their legislation could be changed, but this will not be easy for them to change. I don’t know if they will be able to come out with a formula that will allow fair taxation of satellite transponders. It’s not an easy issue. They’re out there in space." Following an audit of CBC operations in Saskatchewan, the provincial 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. It levied the tax under the Education and Health Tax Act, which gives Saskatchewan the right to tax telecommunications services within the province. Saskatchewan also charged a tax on an earth station in Qu’Appelle that the CBC was leasing from Telesat. The tax on the earth station was calculated by multiplying the monthly cost of leasing the facility ($21,102) by the tax rate to determine the tax owed by month. Nault says that the CBC no longer leases the Qu’Appelle earth station, and instead has built its own facilities inside its production centre in Regina. "It is more efficient for us to bring the earth station into downtown Regina. We paid taxes on the materials we used to build it, but since we are not leasing it, we aren’t subject to any more taxes," he notes. Before the Supreme Court dismissal, the Saskatchewan Court of Appeal ruling was the first win by the CBC. In May 1997, responding to a CBC appeal, the province’s Board of Revenue Commissioners upheld Saskatchewan’s assessment of the taxes. A Regina court subsequently ruled in July 1998 that appeals of the tax filed by the CBC and Telesat be dismissed with costs. Nault says with the Saskatchewan Court of Appeal decision standing, the case for other provinces to tax transponders has been weakened. British Columbia, for example, has a similar tax, but it is applied on a voluntary basis. Thus, the CBC has considered itself exempt from the B.C. legislation. "The B.C. auditors were in auditing us, but that’s not unusual," Nault says. "They’ve asked a whole series of questions, some of them relating to satellites. I think this (court decision) will weaken their case, if they think they have one (for taxing transponders). We had been assessing ourselves at zero in terms of B.C., so there would have been some question to whether that was accurate if we had lost to Saskatchewan."

CBC wins on transponder tax as Supreme Court nixes Saskatchewan’s leave to appeal

Broadcast | September 12, 2002

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