Hon. David Arnot: Honourable senators, I speak to you today from Saskatoon, which is in the heart of Treaty 6 territory. Treaty 6 was entered into in August 1876 just a few miles north of where I stand at Fort Carlton. This area is also the traditional homeland of the Métis.

Today, I rise to speak in favour of the motion proposed by Senator Gold, the Government Representative in the Senate. This motion is designed to address an historic inequity placed upon the people of Saskatchewan.

In 1871, Canada entered into an agreement to build a national rail line to British Columbia within 10 years as a critical incentive to bring British Columbia into Confederation.

It took various iterations for Canada to get this commitment underway. To support the project, the Government of Canada provided a series of benefits to a consortium of investors, which eventually became the Canadian Pacific Railway company. These inducements included a payment of millions of dollars, a grant of millions of acres and a critical inducement: a tax exemption granted to the CPR in perpetuity — very unusual.

When Alberta and Saskatchewan were incorporated as provinces in 1905, the tax exemption was incorporated into the constitutional documents, resulting in section 24 of The Saskatchewan Act.

During the 20th century, a range of other actions occurred associated with railways, particularly with the transportation of grain. The purpose was to address the monopoly powers of the railways and the financial vulnerabilities of farmers shipping their grain to market. Various federal measures were taken. One included the establishment of the Crow’s Nest Pass rate, which capped the rates that railways could charge to transport grain to port. This protected farmers. However, as the cost of that operation rose, the railways began to experience a financial squeeze.

Ottawa intervened and, based on a transportation inquiry, developed a plan to pay direct subsidies to railways. That inquiry was the 1959 Royal Commission on Transportation, also known as the MacPherson Commission. It was created to investigate transportation policy, particularly freight rate inequities in Canada.

In their 1961 three-volume report, the commissioners, under the chair of Mr. M.A. MacPherson, a well-respected Saskatchewan lawyer, recommended that, first, railways be allowed more freedom to eliminate uneconomic passenger service and branch lines, and second, to receive direct subsidies for grain-handling responsibilities which were imposed upon them by Parliament.

The principles of the report included the value of competition between different forms of transportation, the need to reduce regulatory control and payment of reasonable charges by transportation operators for facilities provided by government. It also recommended the establishment of the Canadian Transport Commission.

In the early 1960s, the provinces of Manitoba, Saskatchewan and Alberta renewed lobbying efforts to end the constitutionalized tax exemption for the CPR. In 1966, the federal government saw an opportunity to leverage the subsidies in exchange for an agreed end to the CPR tax exemptions.

I have read a copy of the correspondence between Mr. Ian Sinclair, the president of the CPR, and Mr. Jack Pickersgill, the Minister of Transportation. Mr. Pickersgill was a former clerk of the Privy Council. In that letter dated August 29, 1966, Ian Sinclair wrote to the minister and stated:

. . . as a contribution to the rationalization of Canadian transportation legislation, Canadian Pacific would be prepared voluntarily to forgo the perpetual exemption from municipal taxation provided in clause 16 of its contract of 21st October, 1880 . . .

— between Canada and the CPR.

He further wrote that the exemption applies in Manitoba, Saskatchewan and Alberta. This exemption is contractual, statutory and constitutional.

Sinclair wrote further in the letter:

At any time . . . Canadian Pacific would have no objection to action being taken to amend the constitution and the legislation to terminate the perpetual exemption from local taxation . . .

and that he had the agreement of all of the board of directors.

From the debates in the other place on September 8, 1966, at page 8211, the minister said that the agreement reached between Canada and the CPR “is an act of good corporate citizenship.” Looking back, the minister also commented that he thought the tax exemption had been a mistake to make it in perpetuity.

On January 10, 1967, the minister, speaking in the other place, declared that he had spoken to the Canadian Pacific Railway Company and made it very clear to the Canadian Pacific Railway Company that immunity for perpetuity is not desirable in the 20th century. CPR said that if the government gave them the right to raise revenues, “then the company would be glad to give up this immunity.”

It is clear that if the government could change the Constitution, the CPR would not object.

From the debates in the other place on the same day, at page 11,602, Tommy Douglas stated that the “government of Saskatchewan between 1944 and 1964 made repeated representations for changes” to be made so that the CPR would be subject to municipal taxation.

In other words, this issue was a perennial one in the three prairie provinces in Canada throughout the whole of the 20th century. There is no ambiguity in the exchange; in my opinion, it’s very clear. The intent of the parties is evident in the letter of October 29, 1966, and the contemporaneous debates in the other place.

The CPR received what it wanted: an increase in subsidies. The federal government received what it wanted: an end to the tax exemption in section 24 of the Saskatchewan Act. I believe the CPR voluntarily agreed to end the perpetual tax exemption, recognizing the circumstances of the day and changes in transportation policy, subsidies and protection in the modern era.

The Saskatchewan Minister of Justice, Gordon Wyant, Q.C., introduced a motion in the Saskatchewan legislature in November 2021 to amend the Canadian Constitution as it relates to the Saskatchewan Act, which was accepted by both sides of the legislature and passed unanimously. We have all been informed that it was debated in the other place and unanimously passed in that place yesterday.

This resolution seeks to repeal section 24 of the Saskatchewan Act retroactively to August 29, 1966. This is the date of the crucial correspondence. I believe this reflects the common understanding of the parties at the time they reached that agreement. I believe that the CPR is one of the largest corporations in Canada and should continue to bear its responsibility for provincial taxes just like any other taxpayer.

The CPR benefits from using Saskatchewan’s infrastructure and should contribute to the maintenance of that infrastructure. The CPR should not be able to reap the benefits of operating in Saskatchewan without assuming any tax responsibility.

I believe that considering modern taxation and transportation policies, it is time to eliminate any uncertainty respecting the Canadian Pacific Railway’s tax exemption and to ensure an equal playing field for all companies operating in Saskatchewan.

Section 24 is a relic of an earlier time, an anachronism from the 19th century when Saskatchewan was not treated as an equal partner in Confederation. A perpetual tax exemption is no longer conscionable in the context of the third decade of the 21st century. If the tax exemption persists, it is to the detriment of the people of Saskatchewan, farmers, consumers, producers and businesses, including small businesses, across the province of Saskatchewan.

I ask my colleagues in the Senate to support this motion and to put to an end any uncertainty on this historic inequity. We need to prevent a wealthy corporation from obtaining an unfair competitive advantage in the marketplace.

To continue with a tax exemption in the 21st century, which was granted to the CPR in the 19th century, would be fundamentally unjust, unfair, unreasonable and an undeserved economic hardship on the residents of Saskatchewan. The continuation of section 24 after August 29, 1966, would not be consistent with the Province of Saskatchewan’s position as an equal partner in Confederation.

I hope this will be done with unanimity in the Senate. I encourage my colleagues to move with alacrity on this issue.

I believe that, in fact, it distills to a very straightforward issue and is not as complicated as it may seem. I note that the Westminster parliamentary model was designed to operate with principles of compromise, collaboration and cooperation. This motion introduced in the Senate by the government leader is a clear demonstration, in my opinion, of the cooperation and collaboration by the Government of Canada, Canadian parliamentarians and the Saskatchewan legislature to protect the interests of the Province of Saskatchewan. Thank you.