• CTF Questions Legality of Canada Post (CPC) "Sweetheart" Tax Deal
• CTF Releases Independent Analysis of Purolator's Dismal Performance
• CTF Calls for Privatization of Purolator Courier and Related CPC Activities
• CTF Questions Wisdom of Continued Canada Post Cross-Subsidization Activities
• CTF Demands "Answers and Action" from Revenue and Public Works Ministers

Letter to the Hon. Martin Cauchon

Letter to the Hon. Alfonso Gagliano

CTF Report on Canada Post

Canada Post Revenue Chart

OTTAWA: The Canadian Taxpayers Federation (CTF) today released several documents at a news conference on Parliament Hill which fundamentally question Canada Post Corporation's (CPC) current tax position as well as its ever increasing scope of operations which are competing, in many cases unfairly, with private enterprise.

In addition, CTF federal director Walter Robinson released letters which have been written to the Hon. Martin Cauchon, Minister of Responsible for the Canada Customs and Revenue Agency and the Hon. Alfonso Gagliano, Minister of Public Works and Government Services and Minister Responsible for Canada Post Corporation demanding answers and action with respect to the CTF's concerns.



Tax Loss Carry Forwards

The CTF questions the ability of Canada Post to carry $270 million of tax-loss carry forwards on its books since 1994 effectively reducing Canada Post's income tax obligations by the same amount over the past seven years and placing it in an unfair competitive position vis-à-vis its private sector competitors.

"Canada Post wasn't subject to income taxes until March 27, 1994. But for the year ending March 26, 1994, Canada Post appears to have booked a net loss of $270 million as a tax loss carry forward into the future," stated CTF federal director Walter Robinson. "We are at a loss to understand how a corporation that wasn't subject to income taxes can claim a tax-loss carry forward. This has all the makings of a sweetheart tax deal for Canada Post and we have asked the Revenue Minister to investigate its legality."

Robinson also noted that the whole point of making Canada Post subject to corporate income tax - according to a government regulatory impact assessment statement - was to put "Canada Post - on a more even footing with its private-sector competitors."



Performance of Purolator Courier

The CTF also released an independent analysis of the performance of Purolator Courier by respected accounting firm BDO Dunwoody which was commissioned by the Canadian Courier Association. Canada Post Corporation controls 96% of Purolator Courier.

The analysis reviewed Annual Reports both from Purolator and Canada Post along with related documentation and concluded that:

• In comparing the results of CPC's purchase of the shares of Purolator, the results achieved to date are discouraging. Canada's lettermail service would probably have been better served by less risky investments such as Government of Canada Bonds.
• Insofar as Purolator's performance has lagged behind that of the industry, CPC's investment has not been successful.
• Based on the foregoing, the objectives of the Government of Canada and CPC - have not been met.

"The BDO analysis clearly shows that Canadian taxpayers have been shortchanged by Canada Post. Investing in federal bonds would have been a better strategy for returning dividends back to the Government of Canada", added Robinson. "Clearly it is time for Minister Gagliano to instruct Canada Post to privatize - or if necessary, legislate divestiture of - Purolator Courier."



Cross-Subsidization of Canada Post Non-Core Activities

Canada Post continues to imperil Canadian taxpayers through its subsidization of non-core activities like courier products, special book delivery deals and electronic commerce initiatives. The CTF noted that the Government of Canada is already being sued for $230 million by American courier giant UPS for Canada's failure to regulate the activities of Canada Post and ensure that they conform to the investment, monopoly and competition provisions of NAFTA.

"In spite of the recent lawsuit, Canada Post continues to cross-subsidize its activities. Heck, you can now buy Purolator products at any Canada Post outlet and if you ordered an advance copy of the Harry Potter book, Canada Post used employees from its first-class letter mail monopoly to deliver books for Chapters Online earlier this month," said Robinson. "It's clearly time for Public Works Minister Alfonso Gagliano to put an end to Canada Post's runaway business strategy before taxpayers are exposed to more lawsuits which the Government surely can not win."