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Taxpayers squeezed in election-financing battle

It is more convoluted than this, of course, and there are those who believe that it may even be sinister, and perhaps, to minds more schooled in the rough-and-tumble of Ottawa politics, it is.

But the very bottom line of what happened in Ontario Superior Court yesterday remains this - the same beleaguered Canadian taxpayer who allegedly refunded the federal Conservatives too much in GST in two past elections is now footing the bill to stop the party from being able to give the money back.


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Meantime, a cheque for $591,117.40 - the amount the Tories say they owe and having been trying to repay for 18 months - is sitting in trust, untouched.

The battle pitches Elections Canada and Chief Electoral Officer Marc Mayrand and their hired legal guns on one side, with the Conservatives and theirs on the other.

Appearing before Mr. Justice Herman Wilton-Siegel for Elections Canada were well-known senior lawyer Barbara McIsaac of Ottawa and Angela Vivolo of Toronto, both from the Borden Ladner Gervais firm, and, watching from the wings, Stéphane Perrault, senior general counsel for the electoral watchdog.

Acting for the Tories were Bill Burden and Arthur Hamilton of Cassels Brock & Blackwell of Toronto.

The battle is over GST rebates the Tories were paid in 2008 by the Canada Revenue Agency because, under a separate piece of legislation, the Excise Tax Act, they had obtained status as a Qualified Not for Profit Organization (QNPO).

But that was the problem: The QNPO designation meant the Tories' accounting of their expenses to Elections Canada in the two previous election campaigns was now overstated.

The 2008 rebate cancelled out half the GST the party had claimed as expenses in the 2004 and 2006 campaigns.

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The issue was not unfamiliar to the Tories, in that their political predecessor, the Progressive Conservative Party, had been advised by Mr. Mayrand's predecessor in 1996 that election expenses should be reimbursed net of GST, and that to do anything else would constitute "a subsidy to the party involved and a means to unjust enrichment" - in other words, double-dipping from the public trough.

So, within two months of receiving the CRA rebate, the Tories last June sent a letter to Mr. Mayrand, explaining the party's predicament, asking him to accept the corrected return and offering to send a cheque for the overpayment.

The party wrote again to Mr. Mayrand in August last year, but in September was advised that "complex issues" needed to be resolved before he could make a decision.

Finally, in December, 2008, Mr. Mayrand told the Tories that the CRA GST rebate didn't have any impact on how they had reported their election expenses, and refused to authorize the requested corrections.

And in January of this year, Mr. Mayrand's office issued a memo to all registered parties formally advising that "any subsequent rebate of GST has no impact on election expenses."

Indeed, Ms. McIsaac told the judge something similar yesterday when she agreed that, "Yes, you get reimbursed twice ... but that's just what happens," prompting the judge a few minutes later to make a little joke and say, "We do live in an accrual world..."

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All parties can apply for status as a QNPO if at least 40 per cent of their revenues are from public sources, which, for a political party, means either a quarterly allowance from Elections Canada or, in a campaign period, the reimbursement of election expenses. Only a handful of parties have the designation, including, obviously, the Tories.

If the federal Liberals also are a QNPO, and received both rebates, presumably a ruling in favour of the Conservatives would mean the cash-strapped Liberals too owe Elections Canada money.

The Tories say Mr. Mayrand's interpretation of the competing legislation allows double-dipping, and inexorably would lead to parties keeping two sets of books - one that complies with what are called generally accepted accounting principles for the annual tax return (these standards hold that parties must record election expenses net of any GST rebate received as a QNPO), and one that is contrary to those standards for the election expenses return.

(This is separate from, but perhaps related to, the fact that if successful here, the Tories could reduce the amount by which the party allegedly exceeded its 2006 campaign spending limit, which is the focus of another court fight the party has with Elections Canada. In April, 2008, RCMP officers acting for Elections Commissioner William Corbett executed a much-publicized search warrant on Tory headquarters. The candidates involved in that probe are suing Mr. Mayrand for failing to reimburse them.)

Frankly, all that is clear to me is that thanks to former prime minister Jean Chrétien, who changed the rules in 2003-04 to make public financing of elections a taxpayer responsibility - upping the reimbursement rate for election expenses to 50 per cent and paying a quarterly allowance on a per-vote basis to qualified parties - the taxpayer pays, and pays again.

As the Elections Canada factum filed in the case notes, in the most recent quarter, the five registered parties that qualify received a total of $6,833,445. Add to that the cost of the legal battle to stop the Conservatives from paying back what they say they owe. O joy.

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