Canada Revenue Agency has rejected the tax deal Pacific West Commercial Corp. had proposed as part of their proposal to purchase the NewPage Port Hawkesbury mill.
The rejected proposal would have allowed Pacific West Commercial Corp. to use $1 billion of accumulated losses by NewPage against its taxes. Also, Nova Scotia Power would become a 30% owner in the mill and get paid in tax free dividends.
Over 100 people returned to work at the mill this week, to prepare it for reopening, despite the fact the sale deal has not yet been completed.
Nova Scotia’s Minister of Natural Resources, Charlie Parker, is making a statement regarding the decision this afternoon at 3:15pm Atlantic time.
Update: Nova Scotia Government to restructure package
The Province of Nova Scotia has indicated that they will restructure the $124.5 million package for Pacific West Commercial Corp. in the wake of the rejection by Canadian Revenue Agency.
Details will be released on Monday.
At the press conference this afternoon, it was revealed that under the proposed deal, the mill wouldn’t have paid provincial income tax. Now, because the ruling was rejected, now the mill will have to pay income tax.
“Out of that new tax money, we’re able to re-work the investment that we had with them to allow them some cash flow here initially within the first critical couple of years,” he said. “But overall, again, there’s going to be no further investment on behalf of taxpayers in Nova Scotia, and in fact it may even be a net gain for the province.” (source)
Update: Statement by Minister Parker
Pacific West Commercial Corporation and Nova Scotia Power Inc. have been informed by the Canada Revenue Agency that an advanced income tax ruling, which was a condition to the completion of the sale of the former New Page mill, will not be provided.
I don’t have to tell the workers, businesses and families in and around the Strait region what a catastrophe the permanent shut down of this mill would be.
The truth is, losing that mill and those thousands of jobs would represent a hit to the economy that the entire province would feel.
At the same time, it isn’t reasonable to insist that Nova Scotia taxpayers should pay to keep that mill open at any cost.
So, as soon as we got word of the federal government’s decision, our government went to straight to work to see what could be done within the envelope of support already announced, to have the mill open and operate successfully for the long term.
I am pleased to announce that we have reached an agreement that we believe does that.
Here’s what we’ve been able to do: The tax ruling from the federal government, while it isn’t what Pacific West was looking for, will actually mean millions of dollars in tax revenue that the Province of Nova Scotia would not have otherwise collected.
We are able to use that windfall to create room for Pacific West to earn forgiveness on some of the loan money in the support package already announced. Even with that earned support, the province will still come out a bit further ahead under this deal, with more tax revenue than it would have under the previous deal structure.
There are those who would turn their backs on the workers and families in the Strait Region. Who would see small businesses in the region close because their customers are no longer bringing home a paycheque. Who would see programs and services erode because families move away.
Nova Scotians do not turn their back on friends, families and neighbours in an entire region, especially when there is a better choice.
I am proud to stand shoulder to shoulder with workers, families and community leaders throughout northeastern Nova Scotia have been working hard to ensure a good future for this mill.
A technical briefing and formal announcement of the details of the revised agreement will be provided early next week.