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NAFTA foes lawsuit validates UPS assertion of Canada Post's abuse of its monopoly position

Author: Walter Robinson 2001/03/28
  • CTF Reacts to CUPW and Council of Canadians NAFTA Challenge
  • CTF Continues to Question Tax Status of Canada Post: Smacks of Cover-Up
  • CTF Releases Letters Showing Federal Disregard and Contempt for Taxpayers
  • CTF Points to European Commission Ruling: Bad Omen for Canada
OTTAWA: The Canadian Taxpayers Federation (CTF) today reacted to reports that the Canadian Union of Postal Workers (CUPW) and the Council of Canadians (COC) have joined forces to challenge provisions of the North American Free Trade Agreement (NAFTA) that allow foreign corporations to sue the Government of Canada.

The action is in response to a $230 million lawsuit filed on April 19, 2000, by United Parcel Service (UPS) of America against the Government of Canada under Chapter 11 of NAFTA alleging that Canada Post uses its first-class letter mail monopoly to unfairly cross subsidize it's private sector courier company, of which it is a 96% majority owner, Purolator Courier.

"In the CUPW and COC news release on Canada Newswire, these organizations basically admit that Canada Post cross subsidizes its monopoly first class letter mail operations through proceeds derived and diverted from its commercial courier business, Purolator, " Robinson noted. "Why else would they state that the UPS $230-million lawsuit against the Government of Canada threatens to, and I quote, 'undermine Canada's public mail delivery service' leaving Canada Post with, I quote again, 'less business, and less money to provide service' "

Last August, the CTF presented evidence clearly demonstrating that Canada Post does subsidize Purolator's activities. In addition, the CTF also questioned the provision of a $270 million tax-loss carry forward for Canada Post since 1994 even though the year in which the tax-loss carry forward appeared on Canada Post's books, it was not subject to pay income tax.

At the time the CTF wrote Minister Alfonso Gagliano (responsible for Canada Post) and Minister Martin Cauchon (National Revenue) detailing these concerns. The CTF states that the responses received (released today along with the original letters) are insufficient.

"It is clear that the government will not address the questions of blatant cross-subsidization or a blatant and potentially illegal sweetheart tax deal for Canada Post," added Robinson. "The responses from government officials were evasive and contemptuous of the legitimate questions we have raised."

Robinson also pointed to a recent decision on March 20th by the European Commission which ruled that Germany's Deutsche Post must pay $21.7 million (US) in fines in response to a suit filed by UPS contending Deutsche Post abused its postal monopoly and cross-subsidized its private courier business and unfairly competed against other private package delivery companies.

"The European decision has ramifications the world over and Canada should take notice," added Robinson. "It is now in the best interests of Canadian taxpayers for the Government of Canada to smarten-up and admit that it perpetuated an illegal tax scheme through Canada Post and violated NAFTA as well. It should settle out of court quickly before taxpayers are dinged with a $230 million bill if not more," concluded Robinson.

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