The Pithlord confronts some fundamental marketing decisions. There is already emerging in Canada a partisan blogosphere, and branch plants of Instapundit and Eschaton are easily located. The Pithlord recognizes the inevitability of this development, but has neither the inclination nor capacity to compete. Also, as an addict of the American blogosphere, I have noticed how formerly-reasonable and interesting people become screeching partisans fairly easily when they seek that particular route to blog traffic. I have instead been using this blog primarily as a place to dump first drafts of thoughts I often wouldn't want to peruse much further. I will continue to do this, but I need to be a source of news somebody, however specialized, can use.
All by way of motivating my new feature: I am going to try to do case comments on (nearly) all the Supreme Court of Canada cases that come down, however boring they may be. It will help me keep up on the case law, and will probably improve my hit count from desperate law students googling a few years down the road (Hi!).
Of course, I'm actually quite ignorant of vast areas of law, so my comments may be a bit idiosyncratic. I will start each such post with the words "Case Comment", so the literatus can skip them easily. To encourage user-friendliness, and my delusions of grandeur, I will also include a "Thumbs Up" or "Thumbs Down" in the subject heading, depending on whether I agree with the red nine in each particular instance.
Today, we have a mining tax case, Ontario (Minister of Finance) v. Placer Dome Canada Limited. The key issue is one of statutory construction: what transactions count as "hedging" under Ontario's Mining Tax Act.
(Hey, I didn't promise it was going to be pretty! If you stick around, there is a quasi-political issue here. If you don't, well, I can't really blame you.)
Hedging, in the broad sense, is the use of transactions designed to reduce exposure to risks inherent in a particular business. Even a lawyer can figure out that if you are producing gold, and the price of gold falls, it will be bad for profits. If, though, you simultaneously sell gold short, then if the price of gold goes down, the loss won't be so bad. Of course, that means that if gold goes up, profits won't be as good either, but everyone would like to reduce the variance in their profitability.
Ontario had special tax rules for what its mining tax statute defined as "hedging". However, if you look at the definition, it arguably doesn't encompass purely financial hedging transactions unless they involved ouput from an Ontario mine. At least that's how Ontario's tax bureaucrats interpreted it for many years, and they ought to know.
But at some point, the Ontario tax people changed their mind, and tried to nail Placer Dome for some purely financial transactions done by a subsidiary. Placer Dome was pissed at what it saw as a change in the rules, and it all ends up in front of the red nine.
Too bad for Placer Dome. After winning in the Ontario Court of Appeal, the SCC says that if the old interpretation was followed, there wouldn't be a distinction between "proceeds" and "hedging." Since we expect that different terms in a statute will mean different things, the new, broader interpretation must be correct.
Bad news for your mining stocks; good news for the Ontario treasury. But is there anything of broader interest here? Well, yeah. Everybody agreed that the statute could have been clearer. The old interpretation wasn't crazy or anything. So why shouldn't the tax authority be stuck with its original interpretation, especially since it went against its own interests?
The Court accepts that there is something to this argument. At para. 10, it says that administrative interpretations of ambiguous provisions can be given weight. But it nonetheless holds to a Platonically "correct" interpretation and goes with that.
The Pithlord gives the thumbs down because he thinks that taxpayers should generally be allowed to rely on the taxman's administrative practices. If the Man wants to change the ways of the past, the Man's got easy access to a legislature of voting cattle. It is hard to see what the benefits are of losing this level of certainty, given the lack of an exact science of tax statute interpretation. So, the Pithlord wouldn't do what the Court did except in the clearest of cases, which this one was not.