BRIAN LAGH AND STEVEN CHASE
From Wednesday's Globe and Mail
Feb 7, 2007
OTTAWA — The Conservative government has unveiled a new tax break targeted at a select few tobacco processors in a politically vulnerable region of Southern Ontario.
Sources said the break -- worth about $500,000 -- is aimed at the constituency of Immigration Minister Diane Finley, who is thought to be in some danger of losing the next election.
One tobacco processor that should benefit from the tax change -- Simcoe Leaf Tobacco Co. Ltd. -- is in Ms. Finley's riding of Haldimand-Norfolk. It was unclear whether any firms outside her riding would benefit.
One industry expert said Simcoe Leaf appears to be the only company that would be eligible for the tax break.
"It flies in the face of all the rhetoric of Stephen Harper that he was going to be different," said Judy Wasylycia-Leis, the New Democratic Party's finance critic. "It's unacceptable and absolutely outrageous."
There are about 650 tobacco farmers in Ontario, the vast majority of them in rural Southwestern Ontario, which is represented mostly by Conservatives. The industry has been hit hard in recent years. Production is slated to drop to as low as 30 million pounds in the 2007 crop year from 75 million in 2005.
Federal Finance Minister Jim Flaherty announced the tax break Friday, saying it was needed to save about 200 jobs. Simcoe Leaf has 41 employees, but swells to about 200 at peak season, residents say. The minority government's relief measure will need some opposition support to pass through Parliament.
One Tory said the party is concerned about Ms. Finley's electoral prospects because of the unpopularity of the Caledonia land dispute, which saw a native band occupy a tract of land that had once been a former housing site. That tract is in her riding.
(Ms. Finley added some political heft to her office recently by appointing John Weissenberger, a close confidante of Prime Minister Stephen Harper, her chief of staff.)
She is also facing pressure from local tobacco farmers who want a package of financial compensation and retraining in return for quitting the industry. But farmers have only until early March before they must begin preparations for the next growing season. Farmers will need all the help they can get, sources said, if the deadline passes without a deal and they are compelled to stay in the business another year.
The tax break will go to processors who sort, grade, dry and pack leaf tobacco and must pay manufacturers' surtax on their product. The Conservatives say independent processors who are not affiliated with cigarette makers should be exempted from the tax because they aren't involved in manufacturing the end product.
"It's an issue of tax fairness," said Dan Miles, communications director for Mr. Flaherty.
There are only a handful of processors that might qualify for this reduction. It's unclear whether firms outside of Ms. Finley's riding would benefit.
Asked to comment on suggestions this was a political lifeline thrown to Ms. Finley, Mr. Miles declined to identify beneficiaries of the tax. "I am not going to get into those specifics."
Asked whether firms outside of Ms. Finley's riding benefit from the relief, Mr. Miles would only say, "It applies to leaf tobacco processors in Canada."
Officials at Simcoe Leaf could not be reached for comment, but an official for the company's American parent, Universal Corp., would neither confirm nor deny whether the tax break would benefit the Simcoe, Ont., firm.
However, a Liberal MP who represents a riding adjacent to Ms. Finley's said that Simcoe Leaf had lobbied him for the same tax break.
Brant MP Lloyd St. Amand said he was lobbied by an official from the company as long as two years ago asking for a revisiting of the tax code.
"I'm pleased for Simcoe Leaf that they've now received seemingly a positive answer," he said. "The conjecture about the timing and why now and why in that riding in particular, I'll leave for your readers to draw their own conclusions."
Conservative sources said the announcement might also help the party to defeat Mr. Amand, who won election in 2006 by only about 500 votes over his Tory rival.
Ms. Finley's office did not return calls seeking comment.