Pork aplenty: A new CTF study tallies the billions doled out
by Industry Canada in corporate welfare
National Post
Mon 15 Jan 2007
Page: A15
Section:
Issues & Ideas
Byline: Adam Taylor
Source: National Post

Ottawa's culture has changed dramatically since the
1980s. Long gone are the days when Canadians tolerated government deficits and
unrestrained spending. Yet throughout this transformation, one thing has
remained constant: Industry Canada has remained a bloated, intrusive and
politically-driven ministry wedded to the past. Nothing illustrates this better
than a review of the department's subsidy programs.

A new report from the Canadian Taxpayers Federation, entitled On the Dole:
Businesses, Lobbyists and Industry Canada's Subsidy Programs, tracks billions of
dollars in handouts for the period April 1, 1982, to March 31, 2006. All said,
the Industry department authorized $18.4-billion in various subsidies, paid to
businesses, associations and foundations in 47,960 separate grants,
contributions, loans and loan guarantees from 150 different programs. This
figure does not include subsidies from other departments, federal regional
development agencies or corporate welfare programs from other levels of
government.

Of the total amount, $7.1-billion is considered repayable funding, yet a
paltry $1.25-billion (17.6%) has been repaid. All said, less than 7% of the
total $18.4-billion subsidy portfolio has been recouped by Ottawa. Handing "free
money" to businesses and failing to collect loans means fewer tax dollars for
priorities such as health care, infrastructure, defence or tax relief.

Top subsidy recipients long ago took up permanent residence at Ottawa's
trough and morphed from entrepreneurs to "grantrepreneurs." The top 50
beneficiaries (listed on the accompanying chart) have received $5.9-billion -- a
third of all money authorized. The top five secured more than $3.2-billion in
handouts and are companies Canadians (and shareholders) know well. They are
Pratt & Whitney with $1.5-billion authorized, Bombardier at $745-million,
$360- million for General Motors Canada, Bell Helicopters flew away with
$339-million, and CAE Inc. received $321-million.

One notable recipient is the Wachovia Bank, which received $43-million when a
loan, guaranteed by the federal government, went bad. Astoundingly, this
beneficiary of Ottawa's largesse is based in North Carolina. In January, 2000,
Ottawa rejected a proposal to subsidize Canada's professional hockey teams after
hearing from outraged taxpayers. But Canadian tax dollars are helping U.S.
teams: Philadelphia's professional basketball and hockey teams play home games
at the Wachovia Centre.

One sorry consequence of the cozy relationship between corporations, their
lobbyists and government officials is rule-breaking. Government audits reveal
companies routinely paid "success fees" to lobbyists in exchange for securing
subsidy handouts. These fees are prohibited by Ottawa but are paid anyway.
Moreover, many lobbyists neglect to register their activities, which is another
violation of accountability rules. With Industry Canada unloading hundreds of
millions of subsidy dollars annually, it is no wonder the department is the
most-lobbied ministry in Ottawa.

Another concern to taxpayers is the lengths politicians and bureaucrats go to
avoid checks and balances when doling out loot. Almost 10% of approvals from
Technology Partnerships Canada (TPC) --Ottawa's flagship corporate welfare
program--are under the $10- million mark. Payments under this dollar amount do
not require approval from the Treasury Board. Without as many hoops, the money
flows quicker (albeit by smaller amounts) and there is less scrutiny over
recipients.

And what have taxpayers received in return for the $3-billion doled out by
TPC? Ottawa originally told the public every TPC investment dollar would return
$1.74 in repayments from businesses. Instead, the program's repayment rate is
less than 6%. Taxpayers have recouped $169-million from this "investment." This
is more proof corporate welfare programs are a sinkhole for tax dollars. Yet
subsidies continue to flow unabated.

A 2005 C.D.
Howe Institute
study ranked Canada 30th among 36 industrialized countries in terms of combined
average federal-provincial corporate income tax rates. The report also found
Canada had the second highest marginal tax rate on capital. (The worst spot was
reserved for Communist China.)

Rather than offer subsidies to some, the federal government should offer low
business taxes for all. By getting out of the subsidy and regional-development
business altogether, Ottawa could save $2- to $4-billion a year. In turn,
Ottawa's corporate income tax burden -- which is 21% -- could be reduced by two
or even three percentage points. Such tax relief will benefit all companies (not
just those with the best lobbyists), our domestic economy, and improve Canada's
international competitiveness.

Industry Minister Maxime Bernier stated last summer that "prosperity for all
Canadians comes from markets that are allowed to move in a free, efficient and
competitive manner." Yet his ministry's meddling creates an unfair, inefficient
and uncompetitive marketplace.

Minister Bernier's commitment to free markets will soon be tested. He is
expected to announce reforms to Ottawa's subsidy programs. His challenge is to
end corporate welfare handouts, transform his department and not permit industry
officials to convince him failed 19th century industrial strategy is good public
policy for the 21st century.

- Adam Taylor is National Research Director of the Canadian Taxpayers
Federation. www.taxpayer.com.

Illustration:
• Black & White Photo : /
•

Edition: National
Story Type: Business; Editorial

Length: 794 words
Keywords: SOCIAL WELFARE