Millions of dollars in ‘departure tax’ by Toronto Hydro’s sale
According to sources, any municipality that wants to sell more than 10 per cent of a local distribution company would have to pay a 'departure tax' to the province. In the case of Toronto Hydro, the tax could be a huge amount, around $200-million, reports said.
Reports pointed out that Premier Kathleen Wynne’s government could be interested in a Toronto Hydro sell-off for their own privatisation of Hydro One.
Sources also said that Queen’s Park was interested in helping the city in privatising Toronto Hydro, to raise money for transit, housing and other relevant infrastructure but polls revealed this sell-off was not a popular move.
According to reports, Mayor John Tory had tried to convince both federal and provincial officials that helping Toronto with its Hydro move could help the Wynne government improve its political performance. Tory had also hoped that the Hydro sale would be exempted from tax.
“It’s a wait-and-see approach for me. The decision on what Toronto Hydro will do is based on what Toronto council will do," commented Energy Minister Glenn Thibeault.
Selling 50 per cent of Hydro would give the city a large upfront payment of more than $1-billion, which could be spent on infrastructure to help upgrade and repair the electricity grid, but according to reports, the main drawback was that the city’s loss of a portion of the company’s $60-million annual dividend.
The province had also shown willingness to give the electricity sector tax breaks to encourage share sales.
Last year, the province cut a different tax on electricity company privatisations, called the 'transfer tax' from 33 per cent to 33 per cent and small utilities with fewer than thirty thousand customers were exempted from it. Reports confirmed that this policy would be in effect until the end of 2018.
According to sources, Tory would not be comfortable selling more than 50 per cent of Hydro and losing effective control.
The departure tax would be Toronto’s main concern due to lack of credits against it for previous tax payments.
The tax would be calculated based on the total market value of the company, and will be the same irrespective of how much of Toronto Hydro is sold, said the reports.
(Reporting by Asha Bajaj)
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