Canadian soldiers patrol an area in the Dand district of southern Afghanistan in June. Canada is denying reports that insurgents were paid off in the war-torn country. (Colin Perkel/Canadian Press)

Defence Minister Peter MacKay is dismissing reports that Canada paid off insurgents in Afghanistan as likely "Taliban propaganda."

Speaking in St. John's Friday, MacKay said it was the first that he had heard of suggestions that Canada had given money to the Taliban.

He was responding to a report from Agence France-Presse that cited an unnamed Western military source and suggested that Canadian soldiers made payments to insurgents to reduce violence in Kandahar.

Defence Minister Peter MacKay says reports that Canada paid off insurgents in Afghanistan are likely 'Taliban propaganda.' (Tom Hanson/Canadian Press)

In Afghanistan, Maj. Mario Couture — a spokesman for Canadian forces in the southern Afghan area of Kandahar — called the news report "totally baseless."

Couture said Canadians do pay Afghans to do development work and to turn in weapons.

"We do pay Afghans with money but we pay Afghans for the work they do," he said. "It’s legit money for legit work."

On Thursday, the Italian government and NATO officials denied reports in the Times of London that Italy paid off the Taliban to keep the peace in parts of Afghanistan patrolled by Italian troops.

Retired Canadian major-general Lewis MacKenzie suggested the notion of bribes to the Taliban "smells of a really intelligent piece of propaganda."

With files from The Canadian Press