Law Times

PAGE 6 COMMENT Law Times Group Publisher ...... Karen Lorimer Editorial Director ...... Gail J. Cohen Editor ................. Glenn Kauth Staff Writer ...... Michael McKiernan Copy Editor ........ Katia Caporiccio CaseLaw Editor ...... Lorraine Pang Art Director ......... Alicia Adamson Account Co-ordinator ... Catherine Giles Electronic Production Specialist ............ Derek Welford Advertising Sales ... Kimberlee Pascoe Sales Co-ordinator ........ Sandy Shutt ©2011 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reprinted or stored in a retrieval system without written per- mission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Law Times disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reliance upon information in this publication. Editorial Obiter Have we lost our tolerance for strikes? the federal Conservatives repeatedly showing themselves willing to inter- vene in labour disputes. Wages are supposed to be based on A the intersection of supply and demand, so if the government really believes in free markets, it would let workers like Air Canada flight attendants fight for their pay packages according to eco- nomic realities. If the labour supply is tight, the airline will likely have to pay more. If there's a surplus of workers, the company can get a better deal. It's not so simple in the airline in- dustry, of course. While Air Canada boasts that it gets 25 applicants for every job opening, a strike is crippling for its operations and revenues, a fact that puts the union in a stronger bar- gaining position. At the same time, it's not easy for an airline to bring in s a party that's presumably a big proponent of free mar- kets, it's a bit surprising to see what employers might call replace- ment workers and unions call scabs given the training required for jobs in the industry. That, however, is Air Canada's prob- lem to sort out. In the meantime, the government has responded to labour disputes in recent months with repeat- ed threats of back-to-work legislation. Last week, before Air Canada and the Canadian Union of Public Employees reached a tentative agreement, Labour Minister Lisa Raitt was already vow- ing to introduce a bill. The govern- ment, she said, will continue to do so whenever a labour dispute threatens the economy or causes inconvenience to the public. But what ever happened to the right to strike? Surely, it trumps the rights of travellers to get home, particularly when there are other options avail- able such as competing airlines, trains, and buses. It's not fun for passengers to have to go through that, but is that really more important than constitu- tional rights? At the same time, are Air Canada's operations that fundamental to the health of the Canadian econ- omy? It's hard to see how that would be the case. At Canada Post, the government repeatedly legislated employees back to work during numerous strikes, some of them wildcat, over the years. It did so again this year when the com- pany locked out postal workers. But in that case, it at least let the dispute play out before introducing a bill. With Air Canada last week, however, Raitt was already announcing intentions to im- mediately move forward on legislation before a strike even happened. That's arguably not fair to either side. If a presumably employer-friend- ly Conservative government wants to help businesses like Air Canada restructure their labour costs, they have to be able to let their workers go on strike in order to achieve their goals. And if employees want to fight for their demands, they, too, need to be able to stop working. Legislating people back to work — or threatening to do so in advance — likely leads to an unsatisfactory result for all sides: a status quo settlement achieved either at arbitration or during frantic last- minute bargaining as we saw at Air Canada last week. So besides asking what happened to the right to strike, it's also worth looking at how and why we as a so- ciety somehow lost our willingness to tolerate work stoppages. Strikes aren't fun, of course. But whether you favour workers or employers, the best results come from allowing the parties to work out their differences themselves according to their own resources and the economic realities. — Glenn Kauth up an image of a sunny off- shore island with sand, sailing, scotch, and secrecy: places like the Cayman Islands, the Baha- mas, and Jersey. A tax haven is a country that W doesn't levy income taxes. In contrast, an avoidance haven is a full-tax country — Italy, Greece, and India, for example — where few people actually pay the levied amounts. Canada and other high-tax members of the Organisation for Economic Co-operation and Development dislike tax havens because they attract capital, undermine tax bases, and erode domestic govern- ment spending programs. Still, we have our own havens — hundreds of them from ocean to ocean all blessed by the Su- preme Court of Canada. Canada's own tax havens without the sun and sand Financial hen people think of tax havens, they au- tomatically conjure Indian reserves are tax havens for aboriginals who derive income from proper- ty, real or personal, situated on a reserve in Canada. The Indian Act also provides immunity from seizure of property. The exemption spawns lucrative tobacco, liquor, and gambling indus- tries on reserves, all of which escape the taxes that Canadi- ans who indulge in such sins pay. Aboriginals can also earn income off reserve, import capital onto it, and invest it tax-free. The tax exemption derives from the royal proclama- tion of 1763 in which the Crown acknowledged that it's honour-bound to shield aboriginals from any efforts by non-natives to dispossess them of their property. The exemption, which is effective- ly a constitutional limitation, Matters By Vern Krishna protects people on reserves from the government's power to tax. Thus, the exemption prevents one branch of gov- ernment from emasculating the very benefits that another one gives. It's a propensity of governments that aboriginals wisely recognized nearly 250 years ago. The exemption applies only to property situated within the boundaries of a reserve. The phrase "on a reserve" has its plain and ordinary mean- ing. The taxpayer claiming the exemption doesn't have to re- side on the same reserve as the property. The availability of the www.lawtimesnews.com exemption doesn't depend on whether the property is integral to the life of the re- serve or to the preservation of the traditional way of life. In most cases, it's a rela- tively simple matter to de- termine the location of real property. The location of personal property, however, is more complex and uncertain. There are various factors that can connect personal property to income. For example, there's no simple or bright-line test to determine the location of investment income or unem- ployment insurance or pen- sion benefits. In each case, it's necessary to determine the situs of the particular property and its connection to the income. The connecting factors may depend upon the residence of the payer and the payee as well as the place of payment, em- ployment, the contract or the investment activity. The connecting factors don't all have the same weight in each case. One connecting fac- tor may have more weight than another in determining the sufficiency of connections to locate the particular property, which makes the entire process somewhat uncertain. If a connection is estab- lished, there's sufficient nexus between the income and the reserve and it becomes a per- fect tax haven, albeit one with- out the sand and the sailing. Tobacco, liquor, and gam- bling, however, are sometimes available without the usual sin taxes. LT Vern Krishna is tax counsel with Borden Ladner Gervais LLP and executive director of the CGA Tax Research Centre at the Uni- versity of Ottawa. His e-mail is vkrishna@blg.com. September 26, 2011 • Law timeS Thomson Reuters Canada Ltd. One Corporate Plaza, 2075 Kennedy Rd., Toronto, ON • M1T 3V4 Tel: 905-841-6481 • Fax: 647-288-5418 www.lawtimesnews.com Publications Mail Agreement Number 40762529 • ISSN 0847-5083 Law Times is published 40 times a year by Thomson Reuters Canada Ltd., 2075 Kennedy Rd., Toronto, ON, M1T 3V4 • 905-841-6481 clb.lteditor@thomsonreuters.com CIRCULATIONS & SUBSCRIPTIONS $165.00 + HST per year in Canada (HST Reg. #R121351134) and US$259.00 for foreign addresses. Single copies are $4.00 Circulation inquiries, postal returns and address changes should include a copy of the mailing label(s) and should be sent to Law Times One Corporate Plaza, 2075 Kennedy Rd. Toronto ON, M1T 3V4. Return postage guaranteed. 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