The Canadian Labour Congress — the umbrella organization for virtually every union in the country — held a news conference in late January to mark its self-proclaimed "Corporate Tax Freedom Day."
The event and a report released at it took aim at a long-list of Canadian businesses that, according to the CLC, are using recent reductions in business taxes to "hoard more cash" rather than reinvest into the Canadian economy.
Of course, the CLC’s remedy to this "hoarding" is to raise taxes on businesses. Unfortunately, the CLC didn’t do its homework and doesn’t understand how many of these companies operate.
"The leading cash hoarder in 2011 has been Teck Resources Limited, which accumulated over $4.4 billion in assets," the CLC states in its release.
"The top-10 hoarders alone have managed to pile up $27.7 billion since 2001. Instead of investing the savings from corporate tax cuts to boost real investment and productivity, and to create jobs, they have kept those funds locked away for an undefined future point."
If any of the deep thinkers at the CLC had bothered to read Teck’s annual report, they would have learned that Teck Resources added more than 2,500 jobs in 2011, pushing its total workforce over 12,000, up from 6,105 in 2001.
Nor did the union organization point out that the company has grown into a global mining and resources giant with assets of $34.2 billion, compared to $5.1 billion in 2001, increasing its overall size nearly seven-fold.
On top of Teck’s $520 million investment in existing projects, it spent $720 million in new development projects in 2011: $250 million, for example, on its coal operations in B.C.’s Elk Valley; $32 million on its wind power project in Alberta — a joint venture with Suncor, another supposed cash-hoarding villain on the CLC’s blacklist.
So with the company investing $1.24 billion and adding 2,500 jobs, how did it manage to end the year with $4.4 billion in additional cash, raising the ire of the Canadian Labour Congress?
First, Teck Resources made a profit and took in $1.9 billion in cash from its operations during the year. Second, the company actually did more than $3 billion in new borrowing, taking advantage of lower interest rates to pay off older loans at higher interest rates, reducing its after-tax interest costs by $55 million annually.
So most of the "cash hoard" under attack by the CLC is actually money the company has borrowed.
Other companies on the CLC’s list of so-called hoarders have different reasons for holding the cash that they do. Blackberry maker, Research in Motion, is fighting for its life against competitors such as Apple and Samsung. If it didn’t have the massive war chest it does, there’s every chance the Blackberry maker would have already gone out of business or fallen to a foreign takeover by now.
Thanks to RIM’s multi-billion dollar bank account it was able to allow the resources and time necessary to bring the new Blackberry 10 to market today. And if the Blackberry 10 fails, RIM will hopefully have enough cash to give it a chance to fight another day.
Would the CLC really be happier if RIM were another Nortel, throwing its cash at every takeover opportunity that came along, until one day the company went bankrupt, costing Canadian workers thousands of jobs and leaving former employees with empty pension accounts?
Speaking of pensions, if Barrick Gold, Suncor and Goldcorp — three of the ten worst "hoarders" on the Canadian Labour Congress list — are really so bad, why did a union pension fund like the Ontario Teachers’ Pension Plan have $741 million of its members money invested in them?
If the CLC and its member unions are serious about opposing companies that hold cash, perhaps they should put their money where their mouth is and ask union members if they want to take smaller pensions so that the union can drop these "hoarding" companies from their stock portfolio.
Anything short of that would be hypocritical.
Gregory Thomas is the federal and Ontario director of the Canadian Taxpayers Federation.