Over the course of the last 3 months while maintaining this blog I have had the opportunity to meet and collaborate with some very dynamic and certainly well versed individuals. Yesterday I published a blog posting titled “Who owns Nortel ? I say the Canadian taxpayer. Why ?” I had written this posting as a rebuttal to a posting that Mark Evans from AllAboutNortel.com had done on Monday. Mark Goldberg, (who hosts the Canadian Telecom Summit and maintains his own blog), took the time to rebut my posting with the following comment. I am re-posting Mark’s comment below:
There are a number of problems with thinking that the Canadian taxpayer owns Nortel and that the government should have intervened in Ericsson’s purchase.
Not the least of these problems is the fact that much of Nortel’s intellectual property stayed with Nortel – the Ericsson deal licensed the intellectual property on a non-exclusive basis. Let’s also keep in mind that for years, Nortel has not been able to take advantage of tax incentives, since they haven’t been profitable, so the cash exposure to taxpayers has been less than many think.
Does Nortel (and its owners) own the company’s assets or does the government seize possession by virtue of having ever provided a tax incentive or benefit? To simplify the thinking on this point, let me ask if you continue to own your home or does the government now get a piece because you take advantage of a home renovation tax incentive?
The xenophobic views on foreign ownership (nationalizing assets if acquired by a foreign company) are outdated. Modern societies encourage foreign investment. Canada’s own industrial policy and numerous treaties ensures that we don’t discriminate in the manner you propose; after all, we provide tax credits for R&D performed in Canada by Canadian firms and similar benefits are paid to those that happen to be foreign owned. Why wouldn’t we? The point is that Canadians are working in attractive R&D jobs.
Ontario recently gave more than a quarter of a billion dollars to recruit a foreign gaming software company. Ericsson didn’t ask for cash handouts and it is maintaining skilled jobs in Canada. The Canadian taxpayer will continue to benefit from payroll taxes being remitted to both levels of government, in addition to property taxes, and all sorts of economic benefits from having stability for these employees.
There was no “pilfering” of any public or private assets – the sale conformed to the law with judicial oversight.
On the other hand, political interference would have sent a message to the investment community around the world that we are no better than banana republics that change the rules and nationalize assets on a whim. Just imagine the impact that would have on jobs, investment, the dollar, stock prices.
The government got it right by looking at the big picture and resisting the temptation to score short term, cheap political points.