CRTC orders hearings before Manitoba Telecom can pay federal, provincial taxes

The move from public utility to pri company has forced Manitoba System (MTS) to start paying income tax to the federal and provincial governments. Remitting those levies has led to the CRTC initiating hearings over what the appropriate phone rates should be in the gateway to the west. MTS was originally privatized three years ago. It should have been liable for assessment, but a tax deduction offset the firm’s tax liability. Last year a request to pre-collect future levies through a jump in residential rates was rejected by the commission. On July 21, the CRTC issued Order 2000-677 which approved a three-dollar residential increase. The hike, which went into effect on August 1, will be used exclusively for payment of taxes. At the same time, the commission issued PN 2000-108 seeking input to determine the rate increases needed to recover the MTS tax bill for this year and for 2001. On September 7 it announced a public hearing will take place in Winnipeg on January 10 and 11. The location of the session has not been determined. The first day will be set aside for the general public to make their feelings known. The next day will permit cross-examination of expert evidence by MTS and other parties. MTS and others have until December 1 to inform the CRTC of their intention to participate in the cross-examination. Expert evidence may be filed by December 12. The telco is asking for increases in a number of business services, as well as a further $3 jump, effective next January 1, to cover the tax bill. The three bucks will be divided between two branches of government, with $1.86 slated to go to the federal government and $1.14 moving to provincial coffers. "If we didn’t need it, we wouldn’t be asking for it," Bonnie Staples-Lyon, VP corporate communications told Network Letter. "We’re trying to strike a balance between providing high quality phone service and keeping our customers, and striking a balance between we’ve got to pay income tax, we’ve got to do new investments to be a leading edge company and we have to make sure that we give a return to our shareholders." Staples-Lyon points out that the three- dollar charge will reflect only 60 per cent of the revenue needed to pay the taxman. A background document issued by the provincial telecom company says the average residential rate in Manitoba is $22 per month, while the actual cost of providing service is $34. MTS has also softened the blow on residential customers by splitting the cost between them and business users. The province’s geography and population distribution present unique challenges to MTS, the company maintains. Manitoba is a large province physically, but the population is mainly concentrated in two cities, Winnipeg and Brandon. Telcos in areas with small populations, such as the Atlantic provinces, do not have to cover as much territory as MTS. Bigger land masses, like Alberta, BC and central Canada, have larger populations to draw upon. The only province which equals Manitoba in size and citizens is Saskatchewan. But SaskTel is still a provincial crown corporation and thus not subject to a tax levy. The Public Interest Law Centre, acting on behalf of the Consumers Association of Canada (Manitoba Branch) and the Manitoba Society of Seniors, wrote to the CRTC on August 14 seeking changes to the process announced in PN 2000-108. The commission agreed with it and established the Winnipeg hearings for next year. Staples-Lyon is stoic about the additional sessions. "At the end of the day we’re fully prepared to explain why we need this increase, so we have no problem participating in the public hearings," she says. "I’m not sure who likes an increase, no matter what it is. In fact the only things that have gone down, I tell people, are long distance and the price of grain!"

CRTC orders hearings before Manitoba Telecom can pay federal, provincial taxes

News | 09/11/2000 4:00 am EDT

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