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Cable television broadcasting industry

Maclean Hunter's Fate in the Hands of 90 Tax Officials

Strategic Insights

— 1 min read

Maclean Hunter Ltd., a major Canadian publisher, is seeking a favorable tax ruling from Revenue Canada's Rulings Directorate to facilitate a potential corporate restructuring and maximize shareholder value. The company is considering a complicated tax maneuver known as a "butterfly" that involves spinning off assets into new companies, which could generate more money for its shareholders than the $17-a-share offer from Rogers Communications Inc. The directorate will play a crucial role in determining the tax implications of this proposal, and Maclean Hunter's chances of success will depend on the expertise of the 90 accountants and lawyers who will review its case.

Key Takeaways:

  • Maclean Hunter is seeking an advance tax ruling from Revenue Canada's Rulings Directorate to facilitate a potential corporate restructuring and maximize shareholder value.
  • The company is considering a complicated tax maneuver known as a "butterfly" that involves spinning off assets into new companies.
  • The Rulings Directorate receives about 1,100 requests for rulings a year and completes and issues about 820 on average.
  • The directorate's files can take a long time to close, with a target turnaround of 90 days and an average of 45 person-hours per ruling.
  • MACLEAN HUNTER's chairman, Donald Campbell, and CEO, Ronald Osborne, are not considered major players in Canadian politics, unlike Rogers Communications Inc. boss E. S. (Ted) Rogers.
  • Political pressure is not explicitly mentioned as a factor in the directorate's decision-making process, but it is acknowledged that the directorate can prioritize complex cases with tight deadlines.
  • Clients usually restructure their proposed deals or withdraw them entirely rather than accept a negative ruling, and if they proceed with a transaction despite a negative ruling, they are "on their own" and subject to audit.

Statistics:

  • Maclean Hunter's proposed restructuring is estimated to cost over $3.1 billion.
  • Revenue Canada's Rulings Directorate receives about 1,100 requests for rulings a year.
  • The directorate completes and issues about 820 rulings on average per year.
  • The directorate's target turnaround for ruling is 90 days.
  • The average time spent on one ruling is 45 person-hours.
  • The directorate bills out its services at $90 a person-hour and requires a deposit of $450.

Sources:

  • The Globe and Mail - The fate of Maclean Hunter Ltd.: woes and woe
  • Revenue Canada
  • The Globe and Mail - Critics call for tax inquiry
  • The Globe and Mail - Maclean Hunter and Rogers to vie for crown in rush to buy, resell

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