Significance of this week’s in-and-out decision

On Monday, the federal court decided in favour of the Conservatives against Elections Canada when the regulator’s chief electoral officer (CEO) Marc Mayrand decided to withhold reimbursements to two candidates because they similar ads used by other candidates with the “tagline” of the ads changed.

Justice Martineau decided that Mayrand was wrong to do so and ordered Elections Canada to reimburse. This litigation only involved two candidates out of dozens because it was a test case for the Conservatives. It was decided Mayrand cannot withhold from all since the judge has decided in favour of the two. Paragraph 178 of the decision explicitly states this,

[178] For the reasons below, having considered the totality of the evidence on record, the Court finds that the claimed advertising expenses were actually incurred by the applicants. That said, the amounts reported by each applicant must be corrected to have the difference between the commercial value of the claimed advertising expenses and the amount actually invoiced by the Fund reported as a non-monetary contribution. Ultimately however, the Court finds that the impugned decisions are unreasonable and must be set aside.

Most significantly, this decision should deflate any investigation by Elections Canada into Conservative Party expenses regarding the in-and-out scheme.

Also significant, Martineau decided how it is that a campaign incurs an expense. The CEO and commissioner were of the opinion that the Conservative Regional Media Buy was a sham. The CEO had argued that it didn’t see a contract for the regional media buy and therefore costs were not incurred by the campaigns. However, as the judge indicated, incurring an expense simply means to take liability upon oneself, therefore no written contract would be required. Paragraphs 121-124 of the decision reflect this. Further, Martineau decided that,

“[124] Accordingly, the Court finds that the respondent, or Elections Canada’s representatives, erred in law in requiring that there be actual written contracts between the candidates or their official agents and the supplier of the advertising services that were provided in December 2005 and January 2006. Payment for these advertising services in January 2006, by the official agents of participating candidates, is proof that these services were duly authorized. Moreover, as illustrated below, the requirement to have actual written contracts appears to be contrary to Elections Canada’s and the CEO’s past practices with regard to RMBs.”

It appears that the CEO has misinterpreted the statute.

Furthermore, the court accepts evidence provided by the party that describes how expenses are incurred in paragraph 151 as it describes the Donald Affidavit,

[151] Moreover, the evidence on record, including the practices of other registered parties as set out in the exhibits to Geoff Donald’s affidavit (a political operations officer with the Conservative Party), illustrates that there is a presumption that a candidate has incurred an advertising expense if said expense has been paid from the candidate’s campaign account.

The Chief Electoral Officer changed the Elections Handbook in 2007 for candidates and official agents. The handbook is the CEO’s interpretation of the Elections Act distilled in a more readable form. Paragraph 142 of the decision describes this concept,

[142] Over the years, the CEO has published various handbooks that articulate his interpretation of the Act. Among these publications is the “Election Handbook for Candidates, their Official Agents and Auditors” (the handbook). While this handbook provides insight as to how the CEO and Elections Canada have understood certain provisions in the Act at various points in time, it is in no way binding on the Court. Nevertheless, from a practical point of view, candidates and their official agents are strongly advised by the CEO to seek independent legal counsel if they wish to depart from the interpretation adopted by the CEO in the handbook.

A key point of contention between the Conservative Party and Elections Canada was that the CEO changed the handbook in 2007 from the 2005-2006 version and applied his interpretation as a regulator of elections despite the fact that the underlying statute had not changed.

In 2005, during the election, advertising regional media buys conformed with the 2005-2006 version of the handbook. Without any change to the statute by parliament, the CEO changed the 2007 version of the handbook with respect to how valid candidate expenses for regional media buys were defined. The Conservative Party argued that the 2007 handbook guidelines were retroactively applied to the 2006 election though the 2005-2006 handbook described expenses differently. Paragraphs 144-147 recognition by the judge that a retroactive application of the “rules” was applied,

[144] Nevertheless, a reading of all the handbooks published by Elections Canada up to, but excluding, the most recent handbook issued in March 2007 (the 2007 handbook), clearly suggests that the CEO will treat as an election expense for the purpose of reimbursement, any cost incurred by a candidate’s campaign for the purchase of an ad that is used to promote both the candidate and its affiliated party.

[145] The fact that the same ad would have been used by the party to promote itself on a different occasion would not be considered a reason for refusing to certify such an expense.

[146] This liberal interpretation of section 407 is reflected in the different versions of the handbook published by Elections Canada over time. For example, the handbook issued in December 2005 (the 2005 handbook) provides:

Election advertising
Election advertising means the transmission to the public by any means during an election period of an advertising message that promotes or opposes a registered party of the election of a candidate, including one that takes a position of an issue with which a registered party or candidate is associated….

Identification of election advertising
All election advertising that promotes or opposes a registered political party or the election of a candidate, including taking position on an issue with which a registered party or candidate is associated, must indicate that it is authorized by the official agent of the candidate.
(Emphasis added.)

[147] Indeed, the handbooks have even provided for the possible situation of a candidate and a party agreeing to share an ad. According to the handbooks, if such a scenario arose, the CEO would review the basis for allocating the cost incurred by each, to verify that it was reasonable. As mentioned in the 2005 handbook:

…The following are examples of transfers:
[404.2(2), 404.2(3)]
…a proportion of expenses incurred to promote or oppose a candidate or a party. Elections Canada will accept the basis of allocation used by the official agent, provided that it is reasonable in the opinion of the Chief Electoral Officer, and provided that the auditor agrees that the allocation is reasonable and in keeping with this handbook.

Again, regarding the handbook, the judge remarks that the CEO’s interpretation of the Elections Act is just plain wrong. The interpretation of statute by the CEO and change in interpretation is not supported by Act passed by Parliament. Paragraphs, 130 and 131 describe this,

[130] The respondent submits in his written memorandum that the object and scheme of the Act require subsection 407(1) to be read disjunctively, resulting in the following definition:

407(1) An election expense includes any costs incurred, or nonmonetary contribution received, by a [ … ] candidate, to the extent that the property or service for which the costs was incurred, or the non-monetary contribution received, is used to directly promote or oppose […] a candidate during an election period.

(Emphasis added.)

[131] According to the respondent therefore, to be an election expense for a candidate, the election expense must be used to directly promote or oppose a candidate, and not a registered party or its leader. The Court does not accept the respondent’s disjunctive interpretation outlined above. A plain reading of subsection 407(1) does not authorize the Court to discard the words used by Parliament in enacting this provision. Rather, a plain reading favours the conjunctive interpretation that was found in material published by the CEO prior to the 2006 election. Namely, an election expense for a candidate can be one that exclusively promotes a candidate, or it can be one that directly promotes both a candidate and a registered party or its leader.

Speaking to party officials close to the issue, what I get from them is that they feel that the CEO is making up the rules as he goes along, interpreting changes to the statute when no such changes have been passed into law by Parliament.

If we look at the recent victory by the Conservative Party against Elections Canada in the GST double dip litigation, we can see a pattern of this behaviour according to my sources. Paragraphs 78 and 79 of the Conservative Party Fund v. Canada (Chief Electoral Officer) decision suggest this,

[78] There is no basis in the statute for finding that, in the circumstances of competing policy concerns that are both directed toward furthering the policy of a “level playing field” among political parties, the interpretation that gives effect to the policy of a “level playing field” in respect of a political party’s maximum expense limit under section 422 must take precedence.

[79] Accordingly, I conclude that there is no basis in the Act, or in the Harper decision, for the CEO’s position that the policy of a “level playing field” for all political parties in Canada mandates the CEO’s interpretation of the Act in the face of the plain wording of the Act and the other considerations set out above.

Two separate court hearings before two different courts have concluded that the Chief Electoral Officer’s interpretation of statute has been flat-out wrong. In fact because of this poor interpretation of statute, the CEO has been making up rules as he goes along. This faulty interpretation of statute has impeded the Conservative Party specifically.

Troubling is the position of Elections Canada in this entire ordeal. Their role as a regulator is to apply statute passed by the will of Parliament. If they were to appeal this decision or proceed with an investigation, the regulator would then enter the arena among the partisans. Elections Canada should be educated by the court’s decision and not move to disagree because it would reflect a divergent view from that defined by statute and clarified by the Federal Court this week.

For reference, here are the two decisions discussed in this post:
Martineau decision, Federal Court – In and Out

Wilton-Siegel decision, Superior Court of Justice – GST double dip

Dion was an unexpected gift, but Ignatieff was an original Tory prospect

During the Liberal convention in December of 2006, Bob Rae was seen by Conservative strategists as the most fearful prospect that the Liberals had on offer to their delegates. Most messaging that came from the Conservative camp during this time was against Rae and the party did its best to suggest to Liberal delegates that he would deliver economic disaster to Canada like he did for Ontario. The Tories did their best political maneuvering to spike Rae’s bid because focus testing showed that enough time had passed between the sour days of Bob Rae the NDP Premier and the “give-him-a-chance” Bob Rae Liberal leadership candidate. Dedicated Ontario political watchers would remember tough economic times under Rae but apparently the modern dynamic had changed for the typical voter. “He has the chance to be a Canadian Bill Clinton” was how I heard the smooth talking and charming candidate described by a particularly concerned senior Conservative.

Yet, times have changed again and the economic recession is now centre-stage and it doesn’t take a surplus of political sense to acknowledge that a Rae leadership win would have been trouble for the Liberals in the 2006 leadership race, and that in 2009 — if it had occurred. During the 2006 race, as the front-runner, the Conservatives had already constructed a thorough game plan against Ignatieff and believe they had a workable strategy against the American-tenured academic should he become leader of Canada’s natural ruling party. “Ignatieff is awkward and tends to put his foot in his mouth a lot” was the consensus among senior Tory partisans. My sense was that during the 2006 leadership race, while Conservatives were concerned about Rae, they were less so about Ignatieff. And then Dion happened and he became a surprise, a wonderful gift and an unexpected best case scenario for the Conservatives and their Prime Minister.

Today, Michael Ignatieff is the leader of the Liberal Party of Canada and he’s starting to show strong gaffe potential, a lack of clear policy direction and a generally aloof attitude towards the Canadian electorate. In fairness, I’d say that Ignatieff is much more calm and calculated that his hapless predecessor and instead, we find him focused on the long game. This should help Liberal prospects. Yet, Ignatieff is failing along the predicted lines of the original Conservative assessment. Yesterday, in Cambridge, the good professor mused that “we will have to raise taxes”. As a front-runner-turned-crowned-leader of the Liberal Party, Ignatieff never needed to wedge and never needed to segment in order to differentiate his campaign. It is unclear as to why in a trajectory largely devoid of policy pronouncements that of the rare policy musings he is making, he is offering ideas that are generally seen as unpopular. For example, in an interview with CityTV’s Richard Madan last December, the Liberal leader mused that he’s open to reversing the Conservative’s 2% GST cut.

Few election campaigns have seen bold policy stands by leaders fail so spectacularly. Despite this, we recently saw how the idea of funding non-Catholic faith-based religious schools sunk the PC Party’s prospects during the last Ontario election and for the Liberal Party of Canada, the carbon tax was a federal electoral disaster in 2008. Though Mr. Dion will be scapegoated with the carbon tax and conveniently shelved away, the Liberals will be considering the policy again at their next convention. Though in truth, Mr. Ignatieff was the original proponent of the tax.

Now it seems that Mr. Ignatieff is against such a tax but how can we be so sure given his reversal on this policy that his membership is now proposing? For Mr. Ignatieff, whether we’re taxed on carbon, income, or our purchases, what he’s made clear is that under his leadership our taxes would go up. Though cliché, this paraphrased statement holds:

“A carbon tax if necessary, but not necessarily a carbon tax.”

or rather, “a tax is necessary, but not necessarily a carbon tax.”

Mr. Rae would have been a wonderful leader for the Conservatives to oppose, unelectable as he would have been though disastrous for Canadians should have assumed residency at 24 Sussex Drive. Mr. Dion would have raised our taxes with a carbon tax. With Mr. Ignatieff, we know that while times are tough, he’d heap on increased government burden. At least with Mr. Dion, we would have known where it was coming from and how to brace ourselves. Terrible Liberal fiscal policy makes for good Conservative electoral prospects. Terrible and ambiguous Liberal fiscal policy makes for great Conservative electoral prospects.

Conservatives are looking forward to a Liberal party led by the professor on loan from Massachusetts. They’re anticipating the Canadian reaction of watching Mr. Ignatieff debate himself on how to best raise our taxes.

Bombshell: PM Ignatieff may hike the GST in the future

In a one-on-one interview today with Citynews’ Richard Madan, Liberal leader Michael Ignatieff said that he won’t take a GST hike off the table in dealing with the economic crisis.

Madan: “On the tax side, is it time to boost up the GST to its former levels of 6%? Do we need to that? Do you support raising the GST?”

Ignatieff: “I won’t be drawn at the moment where Canadian taxpayers and consumers are struggling with their bills, jacking up GST doesn’t sound to me like the greatest idea. But, let me be clear here: If we are in a deep deficit in year 3 or 4 you can’t exclude tax increases to get us out. Canadians understand how bad deficits are. So I’m not going to take a GST hike off the table… later, I just think it would be a bad idea now, in the recession.”

Richard Madan has the video.

Green Party releases platform

Here’s the platform of the Green Party of Canada:

Read this document on Scribd: GPC platform

Notes:
– Money for a Green VC fund for green R&D
– renegotiation of NAFTA
– corporate tax cuts for carbon reductions
raise the GST to 6%
– combines the Liberal Green Shift carbon tax with NDP/Conservative plans for cap-and-trade. Also has a more intense GHG target than the Conservatives with 30% reduction from 1990 levels rather than Conservative’s absolute carbon reduction of 20% by 2020 from 2006 levels.
– raise taxes on cigarettes
– labeling of GMOs
– Single payer, universal healthcare
income splitting for everyone
raise income tax exemption to $20k
Guaranteed Annual Income
– meet 0.7% GDP pledge for foreign aid
– turn Afghanistan mission over to the UN

From carbon taxes, to income splitting to massive increases in foreign aid, I look forward to the costing of this platform.

There is not one word in this platform on proportional representation as it relates to democratic reform. Has the Green Party dropped this from it’s goals? Was this dropped at their last party convention on policy? Is this just more evidence that PR is a distasteful policy to the Liberal Party and a Red-Green alliance depends on seat sharing and first-past-the-post rather than proportional representation? Is the NDP now the only party that supports PR?

Economic update

Here are the main points of Flaherty’s economic update:

  • Eliminate the net debt by 2021

  • Reduce debt to 25% of GDP by 2012-13
  • inflation target at 2% until at least 2011
  • GST at 5% by 2011
  • Working Income Tax Benefit for low-middle income Canadians
  • Income tax reductions based on interest that would have been paid on the debt. Debt reduction will result directly in income tax cuts.
  • Establish lowest tax on business investment in G7.
  • Large investments in the knowledge and training economy

Here’s the executive summary of Advantage Canada.

Income splitting, but just for seniors. No GST cut yet.

VERDICT: Nothing too exciting. A good direction forward.

UPDATE: David Akin sends me a correction live from the finance committee! It’s NET debt that’ll be gone by 2021, not the debt.

UPDATE: NDP finance critic Judy Wasylycia-Leis is decrying the Conservative plan to put so many surplus dollars against the debt. A sound endorsement!

UPDATE: Liberal finance critic John MacCallum isn’t impressed and believes that this doesn’t change anything. Underlines the distinction of “net-debt” and calls it a gimmick. Net-debt is a valid OECD measure though.

UPDATE: reaction from stakeholders (the ones that do press releases!)…

The Canadian Real Estate Association
(CREA) and its more than 88,000 REALTOR(R) members across Canada welcomed the
federal government’s identification of tax, fiscal, and infrastructure issues
as key elements to improve the quality of life for all Canadians. The three
were among the five Canadian Advantages outlined in the Fall Economic
Statement delivered by Finance Minister Jim Flaherty today.

One of the proposals outlined by Minister Flaherty in the Advantage
Canada document was the reduction of taxes on savings, including capital
gains, to make Canada’s tax system more competitive. REALTORS(R) have been
calling on the federal government to implement a capital gains rollover
provision for small investors when the proceeds of the sale of real property
are reinvested in another real property investment within a set timeframe.

Certified Management Accountants:

CMA Canada is encouraged by the direction of
Federal Finance Minister Jim Flaherty’s economic and fiscal update and looks
forward to the government accepting its recommendations to achieve economic
objectives.

“We are pleased that the economic groundwork laid out by the Finance Minister today is aligned with our recommendations to the government,” said Michael Tinkler, CMA Canada’s public finance analyst. “However, the proof will be seen in the specific measures delivered in the next federal budget.”

Canada’s life and health insurers:

Canada’s life and health insurers strongly commended the government’s Advantage Canada economic plan. CLHIA President Greg Traversy said, “The combination of tax reduction, debt reduction and paper burden reduction will position Canadians to compete effectively and prosper over the years ahead. Life and health insurers particularly welcome the commitment to foster a dynamic and globally competitive financial services industry and look forward to continuing their own efforts towards that goal in the context of the improved business environment set out in Minister Flaherty’s plan.”

Greg Sobara, Minister of Finance of Ontario:

The federal government’s economic update
contains a few positive signals that Ottawa may be listening to Ontario’s call
for fairness in federal transfers, Finance Minister Greg Sorbara says. “What I don’t see – and this disappoints me – is any detail on anything except tax cuts and debt reduction,” Sorbara said. “There are no specifics on how they’re going to invest in infrastructure. There are no specifics on how they’re going to address the fiscal imbalance. There are no specifics on how they’re going to invest in post-secondary education.”

CUPE:

“Today’s Fiscal and Economic Update shows
that Stephen Harper’s government is trying to buy the votes of Canadians with
the promise of more tax cuts that could lead to deep spending cuts in the
future,” said Paul Moist, national president of Canada’s largest union – CUPE.

Certified General Accountants:

The Certified General Accountants
Association of Canada (CGA-Canada) is pleased with the federal government’s
plan to boost Canada’s productivity and global competitiveness. Of special interest to CGAs are the government’s policy commitments relating to: Program spending, the Canadian economic union [and] the business environment “We welcome the government’s policy commitments. The plan to reduce taxes, streamline the regulatory environment, reduce the paper burden and remove internal trade barriers will address Canada’s competitiveness”

Federation of Canadian Municipalities:

“We welcome the reaffirmation of the Government’s commitment to work
toward a comprehensive infrastructure plan that includes long-term and
predictable funding. The extension for two additional years of the federal gas tax transfer is an important first step as we transition toward a longer term effort to erase Canada’s municipal infrastructure deficit. This also signals the Government’s long-term commitment to vibrant and competitive cities and communities.

Canadian Taxpayers Federation:

“Since 1997, the Canadian Taxpayers Federation has called for Ottawa to implement a legislated debt relief schedule and eliminate the debt in a generation,” said CTF federal director John Williamson. “Today, Finance Minister Jim Flaherty announced the Government of Canada will do just that.”

Williamson continued, “We applaud Mr. Flaherty for embracing and adopting policy advanced by the taxpayers’ federation, but for this policy to be meaningful the Conservative government must table legislation to make it the law of the land. Otherwise it is an empty promise. With the national debt standing at $481.5-billion, lawmakers cannot afford to not take debt repayment seriously.”



“In the May budget, Minister Flaherty reported program spending would grow by 5.3 per cent this year yet today he reported the annual spending increase will instead be 7.1 per cent,” observed Williamson. “The government has already betrayed its commitment to keep program spending below the growth rate of the economy. Economic growth is estimated to be 2.8 per cent this year. It is disappointing the Conservative government’s spending is already way off target. And if spending targets are missed, meaningful tax relief in the next budget can’t happen and debt repayment just isn’t possible either.”