Canada Liberals Blame Tax Policy For Alcan Takeover

Canada’s Liberals, the largest opposition party in Parliament, blamed a new government tax policy for making Alcan vulnerable to takeovers.

As reported,Alcoa has launched a $26.9  billion hostile bid for chief rival Alcan.

“It’s a bad day for Canada. I would put the blame (for the takeover) on this misguided interest deductibility policy of the government,” Liberal finance critic John McCallum said in an interview with Dow Jones Newswires.

The minority Conservative government’s March 19 federal budget proposed to end the practice of allowing companies to deduct interest on loans taken in Canada to fund foreign acquisitions.

Liberal finance critic John McCallum said Alcan’s chief executive Dick Evans had recently warned that the tax policy could make his company vulnerable to being taken over.

He said the opposition parties can’t do anything to stop the takeover. He called on Finance Minister Jim Flaherty to roll-back the new tax rule, which he described as the “worst policy in 35 years.”

McCallum said countries such as the U.S and Japan allow their companies to deduct the interest on loans taken to finance foreign acquisitions.

“The Finance Minister should immediately withdraw his highly destructive policy on interest deductibility because it weakens Canadian companies and forces them to compete with one hand tied behind their backs and make it all that much easier to be taken over,” McCallum said.

“It weakens them and makes them prey for takeovers as we are seeing today.”

McCallum said there have been more foreign takeovers of Canadian companies than U.S. ones over the last year.