Sunday, May 31, 2009

Our Prima Facie Lying Minister, Stephen Harper


Flaherty, Harper don't even know what truth is
John Robson, Ottawa Citizen
May 31, 2009

You can't believe a word they say. We face a horrendous truth deficit.

Finance Minister Jim Flaherty now says the federal government deficit will be $50 billion this year. And it might. But the fact that he said it makes it less, rather than more, believable.

Permit me to review the facts, a term here meaning "the long sequence of non-facts that issued forth from the mouths of senior federal politicians."
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First, during the campaign Stephen Harper promised us no deficits.

Second, two days after the election he said there wouldn't be a deficit in the current year -- that is, 2008-09 -- but he wouldn't rule out a deficit in 2009-10.

Third, 10 days after that, the finance minister told us he couldn't rule out a deficit in 2008-09.

Fourth, in his Nov. 27, 2008, update Flaherty predicted a small surplus for 2008-09 and 2009-10.

Fifth, in December, Flaherty said there would be a deficit in 2009-10 but not 2008-09.

Sixth, a few days before the January budget, in what the Ottawa Citizen called "an unprecedented move to soften the blow of next week's federal budget," a "senior official with the Prime Minister's Office, who declined to speak on the record" told journalists the deficit would be $34 billion in 2009-10 and $30 billion the year after that.

Seventh, in the January budget the government said there would be a deficit of $1.1 billion in 2008-09, $33.7 billion in 2009-10 and a cumulative $50.1 billion in the next three years.

Eighth, on May 25 they told us the figure for 2009-10 would be more than $33.7 billion, but they wouldn't say how much until June.

Ninth, on May 26 they told us the 2009-10 deficit would be $50 billion and claimed they were telling us to avoid "inaccurate" speculation that might confuse markets. A bit rich given their own record of ... what exactly?

Are these lies? Perhaps. But at this point I am not willing to give them that much credit. Remember: A man who lies knows what the truth is and deliberately fails to convey it accurately or completely. He does not merely "say the thing that is not;" he knows it is not.

And it is not now possible to state with any degree of conviction that the people just cited knew whether their remarks were accurate when they made them. Or even to maintain plausibly that they cared.

From a purely practical point of view, it is hard to quarrel with the government's behaviour. It is manifestly clear that they can say whatever sounds good, then change their story months, weeks or even a single day later without political consequences.

And, psychologically, once you discover that you can utter self-serving fibs and pay no price, the temptation becomes enormous. It is so much easier and more fun to assume an air of solemn responsibility and make oracular declarations as a Very Important Person dealing with Very Important Matters in a Very Important Way than to admit that you have no idea what's going on. And why not, if there's no price to pay?

Actually, there is a large social price to pay when you foster cynicism on this scale. It's just that, as with the financial cost of deficits, political leaders don't pay it, we do.
If I may quote my own Jan. 30 column: "Now it's obvious what the pre-budget leaks were about. They were softening us up, so when we saw the actual $84.9-billion five-year deficit figures we'd go, oh well, that's only $20 billion more than the $64 billion over two years they already said, and what's $20 billion to government?"

Does not this cynical passage seem that much more plausible now that we've been through a further series of apparent softening-up steps, including moving from a $34- to $50-billion deficit for next year in two slices of only, say, $8 billion each? But I confess to growing doubts about its accuracy.

Such an analysis makes the politicians sound devious and sinister. But when these guys talk, there may well be no deceit, no depth, no hidden pool of knowledge and cunning. What you see is what you get. Their conceit and fatuity make them say whatever sounds good, and believe it as soon as they hear their own voice saying it.

They couldn't tell us the truth if they wanted because they don't know what it is. I don't mean they don't know the specific truth about the deficit, though they don't. I mean they don't know what "truth" is. When Flaherty said last Monday that he wouldn't reveal the true deficit figure until June, do you think he had a firm intention to reveal it Tuesday? Or a firm intention not to? If so, you misunderstand his mental landscape. It doesn't contain such items.

You can't believe a word they say. Not one word.

John Robson is a columnist with the Ottawa Citizen.


© Times Colonist (Victoria) 2009

Friday, May 29, 2009

Why did Jim Flaherty, the $35 billion Income Trust Fraudster, miss all of these signs?




"None of these economists, I can tell you, predicted this recession. And none of these economists predicted the depth of this recession. I have to deal with the reality of it — not the speculation surrounding it — and that's what we're doing,"
Jim Flaherty said on May 28, 2009

http://www.cbc.ca/canada/story/2009/05/28/flaherty-deficit-resign-economy564.html

So these 9 economists do not exist:

Nov. 19, 2007 (Bloomberg) -- The number of economists forecasting the U.S. will slip into recession almost doubled over the last two months, according to a survey by the National Association for Business Economics.

Nine of 50 economists pegged the odds of a contraction over the next 12 months at 50 percent or higher, according to a poll taken from Oct. 22 to Nov. 6. Just five of 46 held a similar view in September.

The spillover from the biggest housing slump in 16 years, turmoil in financial markets and higher energy prices will cause growth to slow to an annual pace of 1.5 percent this quarter, less than the survey participants previously forecast. More than two-thirds of those polled said the chance of recession was at least 25 percent.

http://www.bloomberg.com/apps/news?pid=20601103&refer=news&sid=a8OB88_sjTvw  

and these 54 forecasters do not exist:


"In the latest monthly survey, economists put the chance of recession at 42%, up from 38% in December and 23% just six months ago. On average, the 54 forecasters who participated see the economy expanding at less than a 2% annual rate in the first and second quarters. Last month's survey estimated 2007 growth at 2.5%." WSJ January 11, 2008

http://online.wsj.com/public/article_print/SB119990867859778525.html

and Goldman Sachs does not exist:

"The investment bank Goldman Sachs yesterday predicted a recession is on the way." January 10, 2008

http://www.post-gazette.com/pg/08010/848088-28.stm

and Swiss Re's economists do not exist:

"Swiss Re's economists predict a severe recession until mid 2009 in industrialised economies, including the United States and Europe" December 9, 2008

http://www.swissre.com/pws/media%20centre/news/news%20releases%202008/mi_sr_economic_forum_20081209.html

and economists at RBC, CIBC, BMO, TD and National Banks do not exist:


"Economists from Canada’s Big Five banks say they expect little or no growth in the near future and they warned today that the domestic economy’s current gloom will likely deepen into something worse than a recession." October 6, 2008

http://www.thestar.com/business/article/512491

and these 34 economists do not exist:


"Two-thirds of the 52 economists polled said the U.S. economy is in recession. Add those who believe the economy will be in recession soon, and 79% believe that the economy will contract at some point in 2008." April 29, 2008
 
http://www.usatoday.com/money/economy/2008-04-28-economy-survey-recession_N.htm
 
 
So Jim do you still believe that "none of these economists...predicted this recession" ?  Why did you not hear them? Or do you simply not understand Finance 101 or Economics 101, the two courses you skipped in university while on a hockey scholarship at Princeton?

Flaherty’s two faced tax treatment of phantom stock option gains


Like Roger Martin, Dean of the Rotman School of Management, I am not a big fan of employee stock options. Furthermore there is no justification whatsoever for taxing employee stock options at HALF the rate of income from employment, which is how employee stock option gains are taxed.

That practice should be abolished.

One of the side benefits of doing so would be to avoid the situation where taxpayers are faced with huge tax bills for options that were, “in the money” at one point, only to be “out of the money” at tax time and a huge tax bill is owing to the government on this “phantom” income. With the major market meltdown of late, this has become a huge problem for many. See May 26th CBC article entitled: "Thousands of Canadians taxed on 'phantom income' Employees who lost on stock options face bankruptcy over huge tax bills."

Meanwhile what is Flaherty’s hot air balloon response to these people’s enormous tax dilemma that is causing some people to sell their homes to settle their tax bills in phantom income:

"The tax laws apply to all of us equally," Flaherty said. "There are some remedies that are available through hardship cases, but the reality is that those stock option situations are not uncommon and apply to a large number of Canadians. So, I can't and I won't hold out any hope of any tax exemptions in respect to that."

Unfortunately, this is NOT THE APPROACH that Flaherty took to this same issue on behalf of 35 constituents in the riding of his fellow Cabinet Minister, Gary Lunn, back in December 2007 and who had worked for JDS Uniphase and were faced with the same phantom income dilemma. EXCEPT HOWEVER, the laws DID NOT “apply to all of us equally”, because in that instance these select taxpayers got a special tax concession deal from Flaherty, which I decried at the time, by arguing that the rules should be changed for all, and not just a few, as was done by Flaherty for 35 constituents of Gary Lunn’s riding. You will remember Gary Lunn, as he was the one who fired Linda Keen, Head of the Nuclear Safety Commission.....for doing her job properly and protecting Canadians from the potential nuclear fallout at Chalk River.

Here was that exercise in hypocritical bespoke tax carve outs by the two-faced incompetent Flaherty in December 2007:


Tories forgive huge JDS tax bills
The Harper government has forgiven the tax bills of several dozen of the former JDS Uniphase employees who made and lost millions on paper, in a special deal that could open the door for other taxpayers to demand the same treatment.


By The Ottawa Citizen
December 7, 2007


The Harper government has forgiven the tax bills of several dozen of the former JDS Uniphase employees who made and lost millions on paper, in a special deal that could open the door for other taxpayers to demand the same treatment.

The decision, which was recently published as a "remission order" in the Canada Gazette, was approved by cabinet despite objections from officials at Finance and Canada Revenue Agency. Senior bureaucrats warned such a decision was unfair to other taxpayers and set a dangerous precedent for employees of other high-tech companies who watched their fortunes rise and fall during the dot-com boom and subsequent crash.

"It's outrageous, the biggest outrage in tax policy I've seen," said Jamie Golombek, vice-president tax and estate planning at AIM Trimark Investments.

"This is complete favouritism and is purely political. It is outrageous that a specific group of people could lobby and be given private tax relief when there are hundreds of thousands of Canadians in share-purchase or stock-option programs in the same position."

A similar warning came from Canada Revenue Agency commissioner William Baker. In a memo to National Revenue Minister Gordon O'Connor, he warned that waiving taxes in this case was "inconsistent" with the laws and policies applied to all other Canadians. It also flies in the face of the new Taxpayers Bill of Rights.

The Conservatives proclaimed the bill of rights last summer, guaranteeing taxpayers "the right to have the law applied consistently."

The order absolves 35 shareholders of having to pay hundreds of thousands of dollars in taxes and interest. All of them worked for SDL Optics Inc. in British Columbia when it was taken over by JDS Uniphase in 2000 in a $41-billion deal billed as one of the biggest technology mergers in corporate history.

The order has been in the works for months. The tax agency was instructed last December by then-national revenue minister Carol Skelton to prepare the order. That's also when the employees' long-time champion, Natural Resources Minister Gary Lunn, announced the government would forgive all taxes on the windfall gains employees made on their employee stock purchase plan, but never cashed before it plummeted in the high-tech meltdown.

As an MP for Saanich-Gulf Islands, Mr. Lunn took up the cause of these workers, many of whom are in his riding, and derided a policy that "taxed people for money they never saw."

"I'm pleased to finally be able to close this file," Mr. Lunn said. "The government followed through on this for a number of people caught in a very specific situation without remedy."

The remission order will repay taxes wrongly paid and interest for those who paid more in taxes than they earned, he said.

"It took a long time to do it, but I'm glad it's done," he said.

Remission orders are rare and are usually granted to individuals in cases of extreme hardship or a major financial setback that is complicated by extenuating factors. They will also be given if the tax agency made a mistake, gave wrong advice or the tax debt was an unintended consequence of the law. Remissions are a last resort and issued at cabinet's discretion after all other appeals are exhausted.

Some say it is highly unusual for the government to issue a tax remission for a specific group. The government could have amended the Income Tax Act to resolve the whole issue, but officials felt such a change in tax policy couldn't be justified.

The biggest concern is all the other employees in stock-purchase or stock-option plans who are in the same boat. What about all those who mortgaged their homes, took loans, sold assets or ended up declaring bankruptcy to settle their tax debts in similar situations?

"The provision of relief to a few SDL employees would be unfair to the many Canadians who voluntarily complied with the law," Mr. Baker wrote.

"If relief is granted, there will be extreme pressure to extend relief to others beyond SDL and there is a distinct possibility that those to whom relief is not provided would take legal action."

Mr. Golombek argues that if the government considered the law unfair it should change it, not show favouritism. He said the move shakes the foundation of Canada's tax system, which is built on fairness and consistency, and will put pressure on the government to change the policy.

"This is a purely political move that was done by a group of people lobbying in Minister Lunn's territory," he said. "But now that it's done, I think it is irreversible and they will have to do it for everybody or it is unfair to all Canadians."

But Mark Siegel, an Ottawa tax lawyer, disagrees. He argues these employees, who also ended up losing their jobs, faced extenuating circumstances and hardship that made them unique. This was a case of the government deciding these people were "hit so many times" that they deserved some relief.

"I don't think the agency and government has to be concerned that this will open the floodgates because the likelihood of another group hit so badly in the same situation is so low that it won't be a concern."

Few tech companies had the meteoric rise and fall of JDS Uniphase. The one-time Wall Street darling used its soaring stock to go on a buying spree of 11 companies, including SDL. It bought the rival company in an all-stock deal.

For some employees it was like winning the lottery. They were offered a stock purchase employee plan that allowed them to buy the stock, valued at $300 a share, at a deep discount of about $3 a share. And the stock continued to rise.

Under the Income Tax Act, however, employees who buy shares in stock purchase plans or exercise a stock option have to pay tax on the value of the stock when it was acquired -- whether they sold the shares or not.

About 245 of the more than 500 SDL employees bought stock in the purchase plan. Many sold the shares as soon as they received them. They faced big tax bills they paid out of their windfall profits.

Others, however, didn't sell and faced the same huge tax bills. By this time, however, the stock market crash of dot-com companies in 2000-2001 drove down shares and employees faced huge losses and tax obligations they couldn't afford.

The losses they faced were "capital losses" and under Canada's tax rules, investors can only write off such losses against capital gains, not against their salaries or employment income.

The impact was ruinous for some employees. Unsophisticated investors who made $35,000 to $45,000 a year were suddenly saddled with tax bills of $135,000 or more on paper gains they never actually received. Stories abound of those forced to sell or re-mortgage homes and cash in their life savings to pay taxes on money they never saw. On top of that, the plant closed and threw everyone out of work.

That led to the lobbying by former JDS employees, who first approached then-finance minister Paul Martin for help. He suggested a possible change in the act to give tax relief to employees in a situation like those at JDS, but that never materialized.
© (c) CanWest MediaWorks Publications Inc.

Harper lies to Canadians again, by saying that CPP is secure


Yesterday during Question Period, Stephen Harper responded to a question from Jack Layton about the bonuses paid to the executives of the CPPIB by saying that the Canada Pension Plan is secure and that it is well funded for decades to come.

At the very least such a statement is grossly misleading, if not downright incorrect, since it comes a mere four days after Flaherty and the Harper government made changes to the Canada Pension Plan that sees Canadians pension entitlements REDUCED, at a time when they are more needed that ever. Time was (i.e five days ago) that you could take your CPP at the age of 60 and retire with payments that are 30% less than if you waited until the age of 65. Four days ago, the Harper government increased that early retirement penalty from 30% to 36%. Therefore those taking early retirement, perhaps because they have recently been laid off from their job or because they had been planning to, will now retire on 64% of their full benefit, rather than 70% of their full CPP benefit. A benefit that they have fully contributed to in a way no different that it they waited to age 65 and a benefit that many had planned on.....only to get yanked from under their feet by the Harper government.

How is it credible or honest for Stephen Harper to say that the CPP is solid, at the very same time that he is reducing CPP benefits.......UNILATERALLY?

Are MPs and Senator’s pensions experiencing similar unilateral reduction in their entitlements, or is the fact that MPs and Senators pensions are funded by the annual government’s budget (err deficit) rather than a dwindling pool of assets, like the CPP, make them immune from such arbitrary and unilateral REDUCTIONS, while inherently dishonest politicians like Jim Flaherty portray the circumstances quite differently?

Here is what Harper said in the House yesterday to mislead Canadians about the security of their Canada Pension Plan:

“First, Mr. Speaker, it is important to correct the misinformation in that question. The Canada pension plan is actuarially sound. The benefits to Canadians are guaranteed for many decades to come.”

The Plan may be sound, but that’s only because Harper unilaterally REDUCED the CPP benefits paid to Canadians.

Here is what the Harper government announced four days ago, as described in a Paul Vieira article of May 22, 2009 in the Financial Post:

“However, this comes with a catch. Under the existing arrangement, CPP benefits are reduced by a small percentage for each month they are claimed in advance of the retirement age of 65. So those who begin drawing benefits at age 60 see a reduction of 30%. Under the new plan, that reduction would amount to 36%.”

This so reminds me of how Harper screwed the 75% of Canadians who save for retirement with no employer pension to speak of and who came to rely on the income from income trusts as a retirement investment alternative...only to get royally screwed by Harper under his false pretense of “tax leakage”, the gross lie and deception that that was.

Thursday, May 28, 2009

Politicians and the CPPIB: Penny wise and pound foolish


There’s nothing remotely impressive about politicians fixating on the $9 million in bonuses paid at CPPIB, while COMPLETELY ignoring the $300 million CPPIB lost from Flaherty's trust policy. Apart from being larger by a factor of 33 times, the trust policy was 100% Harper’s doing, in a way that the compensation policy is not. Meanwhile the management of CPPIB have made great efforts to hide their income trust losses from Canadians. Where are the brave politicians willing to uncover these major losses to Canadians retirement savings?

CPP bosses to receive millions in bonuses

May. 28 2009
CTV.ca News Staff

The heads of the Canada Pension Plan are slated to take home millions in bonus payouts this year, even as the fund struggles and the economy slips deeper into recession.

According to the fund's annual report just released by the CPP Investment Board, David Denison, the president and CEO of the CPP, along with his top four executives, will take home a total $8.5 million in pay and bonuses for the 2009 fiscal year.

Additionally, the executives are due another $7 million in long-term awards that will be paid out over the next three fiscal years.

Denison earned a total of $2.9 million in the last fiscal year -- down 30 per cent from $4.2 million the prior year -- including a base salary of $490,000, an annual bonus of $735,000 and "long-term incentive plan" awards of $1.6 million.

He also earned $59,023 in pension contributions and $9,571 in other benefits, which the CPPIB said include life insurance, disability benefits, and health and dental plan costs.

The fund's top five executives -- including senior vice-presidents Mark Wiseman, Donald Raymond, Graeme Eadie and CFO Nicholas Zelenczuk -- earned a total of $8.5 million in 2009, down 31 per cent from $12.4 million in 2008.

The executives' annual bonuses and incentives are calculated not on annual returns, but on a rolling four-year average of the fund's performance.

Long-term incentive awards for the five named executives, that have not yet been paid out or vested, will total an additional $7.8 million. Those incentives will be paid out over the next three fiscal years ending in 2012.

The value of those long-term incentives is down 43.3 per cent from $12,755,461, the annual report stated.

Denison is also due an additional $1.2 million and Eadie, $530,964, to be paid out if they chose to retire.

The new figures come as the board, which invests billions of dollars not immediately needed to cover CPP benefits, reported that the CPP Fund shrank by $17.2 billion to $105.5 billion in the last fiscal year.

The fund's value dropped 18.6 per cent to end the 2009 fiscal year, the CPP investment board said in its annual report, which was released last week.

Political reaction

NDP Leader Jack Layton expressed outrage over the figures Thursday during question period in the House of Commons.

"The CPP Board is supposed to protect the savings of Canadians. This is money earned through hard work and they were counting on it for their retirement," Layton said.

"We have the prime minister essentially endorsing $17 million of Canadians' money going into the pockets of executives who just lost $24 billion. How can that make any sense whatsoever?"

Prime Minister Stephen Harper responded that the bonuses are determined by the CPP's board of directors, not his government.

"The board is responsible independently for remuneration for the management of the plan," Harper explained. "I noticed by the way, that the board did drop the total compensation for its executives by 31 per cent last year. But that is a board decision, not a government decision."

"This is a joint body of federal and provincial governments that is administered at arm's length and independent of politics," he added.

The CPP Fund's assets fell by $17.2 billion to $105.5 billion in the year ended March 31, because of steep stock-market losses, the board reported, amid "the worst global financial crisis since the Great Depression."

Denison acknowledged that the past year was a challenging year for the fund "and it was a challenging year for me personally, for all of us who are involved in managing the fund.

"We take the responsibility we have for managing the assets for 17 million Canadians very, very seriously."

In a conference call with reporters, CPP Investment Board Chair Bob Astley said the board remains confident in Denison and his team to lead the investment program, noting that the compensation the board offers its execs allow it to "compete for talent" in the private-sector world.

"We believe the compensation paid to our team this year properly reflected the value created over the past four years, as well as the obvious challenges faced by the CPP Fund - and all investors - in fiscal 2009," Astley said.

Harper, “We’ll never go back into deficit.”, "We'll never tax income trusts" ,"We'll never.....


Why I deserve your vote
The Conservative leader explains in his own words why you should support him at the ballot box today

Oct 14, 2008
Stephen Harper
Conservative Leader
Toronto Star

I love Canada deeply and being Prime Minister is a great honour. In these times of global economic uncertainty, it's a great responsibility, too. That's why my government has weatherproofed the Canadian economy against the gathering international economic storm. The most important thing to me is that Canadian families are protected.

That's why we paid down nearly $40 billion in government debt. We lowered taxes by $3,000 a year for the average family. We brought in new reforms to Canadian banks, making them the safest and most secure in the world. We are careful with spending, making targeted investments in key manufacturing sectors, especially here in Ontario.

We did what Canadian families expect us to do – we made sensible preparations that are paying off.

Canada now has the strongest economy in the G7. Last month, more than 100,000 new jobs were created – the biggest one-month gain ever. We're going to get through this together.

Our election platform is not full of grandiose, costly promises. It's a prudent approach. We can afford it. We'll never go back into deficit.

St├ęphane Dion has a different approach. His risky carbon tax proposal would make energy more expensive, increasing prices for everything from groceries to gas. It's never a good time to introduce a new tax like that, but it's especially risky these days. It's an experiment Canadians can't risk.

Dion also announced enormous spending promises that we can't afford. He would put Canada into deficit again.

There are many reasons to vote Conservative, from our sensible approach to crime to our strong support for families. But right now, the most important thing is to protect our Canadian economy – and to stop Dion's risky carbon tax.

I respectfully ask for your vote. Together we'll keep our country strong, united, independent and free.

Time for Liberals to revisit Flaherty's first act of gross fiscal incompetence



Flaherty's tax conundrum

Paul Vieira,
Financial Post
April 18, 2007

John McCallum, the Liberal finance critic, said Canadians are starting to see the consequences of the trust tax.

"The effect of what he is doing is exactly the opposite of what he intended, because the holders of income trusts pay lots of tax," Mr. McCallum said. "All of these trusts are now being taken over in such a way so that the new owners will pay no tax.

"So, instead of a situation where a lot of personal taxes were being paid, you are having these induced takeovers by highly leveraged private-equity companies that will pay no tax."


Perhaps the Liberals would like to edify Canadians on how much this is costing taxpayers. Rather than Flaherty’s $500 million in phantom tax leakage widely reported in the press....what is the real tax leakage that is being incurred by Canadian taxpayers for the perverse privilege of having foreigners own Canadian companies?

We know where $4.3 billion of the $50 billion went to!



At least we know where $4.3 billion of the $50 billion went to.

Think of it as “stimulus dollars” and/or “shovel ready money” used to bury the McGuinty government.

That money was used to kick start the HST in Ontario, with Flaherty using $4 billion of taxpayers borrowed money to provide McGuinty with the means to bribe Ontario voters with a $1,000 check, actually a $1,000 perpetual mortgage that can never be paid off by consumers via the 13% HST tax on everything.

This $4 billion was a win win for the Flaherty household. First, it isn’t Flaherty’s money to begin with. Second it provides the means by which the Ontario Conservatives can defeat the McGuinty government in the next election, as the HST is understandably highly unpopular, with two thirds of Ontarians opposed to the tax, notwithstanding the Flaherty funded $1,000 bribe. Third, the HST allows Flaherty to play to his true constituency, which isn’t the voters of Whitby-Oshawa, but rather the corporations who are getting a tax reduction under all of this, sustained initially by the $4 billion from Ottawa (read: you) and then the $2 billion a year from Ontario consumers (read: you).

With the HST, Christine Elliott now has two planks to her Leadership platform instead of just one She is the spouse of Jim Flaherty AND she professes to hate the HST.

I wonder what Christine Elliott says to the corporations who are the beneficiaries, when she speaks with them in private meetings? No doubt she has learned duplicity from the master of duplicity, her husband Jim Duplicity Flaherty.

From “no deficits in sight” to the “largest deficit in Canadian history”, in the space of six short months. That deficit would “only” have been $45.7 billion, if the need to defeat the McGuinty government at Flaherty’s wife’s behest, had not been top of the list of budget priority items.

Wednesday, May 27, 2009

Flaherty's miscues give us reason to worry


Gerry Barker
Guelph Mercury

One might describe Finance Minister Jim Flaherty as the Alfred E. Neuman of Canadian politics.

Neuman, the Mad Magazine icon with the jug ears and stupid wide grin, was famous for the expression: "What me worry?"

For starters, the ebullient Flaherty who breezed through the country saying the recession is mild and we'll come out of it better than any other country, has now changed his tune saying it is more serious and deeper than first presumed.

"Relatively speaking," he recently told the Canada-UK Chamber of Commerce in London with a straight face, "this is a mild economic recession."

He'd better say a ton of Hail Marys for that big one.

The member from Whitby-Oshawa announced spending $9.3 million to clean up Oshawa harbour. He was met with a blistering protest from members of the Ontario auto industry who are facing either not having a job, huge reductions in pay or pensions, or job "furloughs" at no pay.

But Flaherty's biggest lie is about the issue that won't go away.

He ripped $35 billion from Canadian investors when he announced Oct. 31, 2006, that income trusts, the income of which millions of Canadians relied on for support, were to lose tax status in 2011.

He acted without a shred of evidence that there was "tax leakage" as he proclaimed. His senior department officials argued that the government was losing up to $500 million a year in revenue because of the legal tax treatment of income trusts. The rationale ignored the 38 per cent of income trusts held in RRSPs and RIFs that would eventually be totally taxable.

It was an artful dodge. Even the Bank of Montreal and Royal Bank of Canada concurred with a major independent study, instituted by former finance minister Ralph Goodale, that there was no income trust "tax leakage." The minister stuck stubbornly by his decision.

Already there has been fatal fallout as the Tories, stigmatized with the fiscal rape of investors, failed to win a majority last October. Conservative investors defected in the thousands. It cost Stephen Harper control of Parliament.

How did this happen? The furious arguments of insurance and corporate lobbyists were determined to destroy the tax status of competing income trusts. Chief focus among these were the annuity products sold by insurance companies whose sales had taken a beating in the past 10 years because of soaring public investment in income trusts.

Without any public input or debate in Parliament, Alfred E. Flaherty met the enemy and, guess what? They is us!

It was the greatest government theft of private wealth in history. And the Tories wonder why their bunker mentality has resulted in their job approval polls slipping behind the Liberals.

The Tories cut the GST, costing Canada $10 billion in lost revenue in an effort to seek a majority. Yet they knowingly bray that this specious income trust $500-million "tax leakage" has a basis of fact and evidence. But they refuse to reveal the underlying "evidence" for the public to evaluate and comment.

Canada's recession has two faces: The monetary one in which the economy has fallen off the cliff; and the political one, where government wanders aimlessly, like Diogenes, hopelessly searching the world for an honest issue.

You cannot surround yourself with fawning "yes" men and expect to meet the most serious economic crisis the country is experiencing since the Great Depression. You don't prorogue Parliament for two months in the face of shattering economic collapse just to save your government.

Aux barricades, mes amis!

Gerry Barker's column appears regularly in The Mercury.

Jim Flaherty, Stephen Harper receive Canada's Order of Back Stabber


Hon. Ralph Goodale (Wascana, Lib.):

Mr. Speaker, that is the man who created a deficit before the recession.
This morning the Minister of National Revenue, the Conservative tax collector, was asked specifically to rule out tax increases by the government. He would not do it. Asked to be unequivocal on taxes his confused answer was “we're not there”; in other words, not unequivocal.

Remember when Conservatives promised never to tax income trusts. That promise was broken. They stabbed two and a half million innocent Canadians in the back.

How can Conservatives be believed on the deficit, or taxes or anything else that involves trust?

Jim Flaherty's top 10 mismanagement moments [with Editor's comments]


Liberal Press Release:
For Immediate Release
May 27, 2009

Just the Facts:

Jim Flaherty's top 10 mismanagement moments


"I'm comfortable with our projections. I'm staying with our budget projection. We're on track."

- Jim Flaherty on the budget deficit, April 22, 2009



1. Broken promise on income trusts [based on Flaherty’s out right lie about tax leakage] By imposing a punitive 31.5 per cent tax on income trusts, the Conservative government raided the hard-earned savings of Canadian seniors.{and caused $100 billion in policy related takeovers, that created a real tax leakage problem of $1 billion a year to solve a fictitious tax leakage problem of $500 million a year. This guy is Canada’s Finance Minister?]



2. Record deficits. Minister Flaherty appears incapable of managing Canada's finances. In September, he said there wouldn't be a recession. In October, he promised no deficits. In November, he predicted a surplus. In January, he tabled a budget with a $34 billion deficit. Yesterday, it turned into a deficit of at least $50 billion - the largest in Canadian history.



3. Raised income taxes. The 2006 Conservative Budget legislated an increase in the lowest tax rate to 15.5 per cent as of July 1, 2006, reversing the previous Liberal government's reduction to the lowest personal income tax rate from 16 per cent to 15 per cent effective January 1, 2005.



4. Failure to get Building Canada Fund infrastructure spending out the door. In the first year following the launch of the $8.8-billion Building Canada Fund, the Conservative government flowed zero funding to infrastructure projects. As recently as February 2009, officials at Infrastructure Canada admitted that of the $1.5 billion announced in its first two years of budgeted spending, only $80 million has flowed for municipal infrastructure projects across the country - only 5%.



5. Broken 120-day economic stimulus promise. Minister Flaherty's January 2009 budget explicitly stated, "Measures to support the economy must begin within the next 120 days to be most effective." Yet recent media reports confirm that little infrastructure money has flowed, even for projects strictly under federal jurisdiction.



6. Broken promise on equalization. Minister Flaherty's 2007 budget broke his government's promise to Nova Scotia and Newfoundland and Labrador that they would honour the Atlantic Accord commitment to leave 100 per cent of benefits from offshore resources exempt from equalization calculations.



7. Fudging the environmental benefit of the public transit tax credit. Minister Flaherty dedicated $635 million to a public transit tax credit that his government claimed would reduce green house gas emissions by 220,000 per year. Environment Canada amended the figure for expected reductions to an average of 35,000 tonnes per year-about 16 percent of the original estimate. In February 2009, Auditor General Sheila Fraser concluded that the public transit tax credit will have a negligible impact on Canada's greenhouse gas emissions. She went on to say that it is almost impossible to measure actual greenhouse gas emission reductions attributable to the tax credit, as many factors influence public transit ridership, including the price of gasoline.



8. Fiscal update led to Parliamentary crisis. Minister Flaherty's 2008 Fall Economic Statement caused a Parliamentary crisis by proposing zero economic stimulus measures on the eve of the recession, focusing instead on partisan measures and cutting funding for pay equity. Prime Minister Harper was forced to prorogue Parliament to save his job, but not before he nearly sparked a national unity crisis by pitting region against region with his rhetoric in the House of Commons.



9. Cuts to culture funding. Minister Flaherty cut $45 million of federal culture funding last year, despite the fact that Canada's culture sector directly contributed $46 billion - 3.8 per cent - to Canada's GDP in 2007. The cuts affected every sector in the culture industry, be it international touring for performing arts groups, funding for new-media research or independent film production, or financial support for Canadian writers - touching off a Canada-wide backlash among cultural organizations.



10. Cuts to scientific research. Minister Flaherty cut funding by $148 million in January's budget to Canada's three granting councils-the Natural Sciences and Engineering Research Council, Canadian Institutes for Health Research and the Social Sciences and Humanities Research Council. According to Statistics Canada, total federal funding for science and technology in 2008 was $365 million less than in 2005 when adjusted for inflation.



www.OnProbation.ca



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Dunce cap? No that’s still firmly on the head of the NDP


NDP Finance Critic Thomas Mulcair had this to say about Jim Flaherty today:

"He's wearing the dunce cap of all Canadian finance ministers," he said of Flaherty. "He swore up and down (last fall) that we would never go back to deficits. Then he said there was not going to be a recession.

"If we want to get out of this mess, the government's got to start telling the truth and the whole truth."

Truth? The whole truth? Flaherty? Dunce Cap?

Well isn’t that telling, as the NDP were the ones to buy hook, line and sinker about Flaherty’s totally fallacious argument (read: LIE) that income trusts cause tax leakage, as the rationale behind why the NDP thought it was good government policy to destroy $35 billion of Canadians pension savings and to leave Canadian companies vulnerable to foreign takeover like Abu Dhabi Energy acquiring Prime West Energy Trust or Hong Kong billionaire Li Ka Shing acquiring TransAlta Power income fund.

That makes the NDP the dunce cap wearers of all time. It also makes them into total hypocrites on matters they profess to hold dearly, like pension security, economic sovereignty, aversion to foreign takeovers, transparency and accountability and having sufficient tax revenue to fund needed social programs.

Meanwhile the New Dunce-cap Party of Canada’s support for the income trust tax would have seen BCE become a junk bond insolvent disaster that paid ZERO, versus $793 million more as an income trust and has seen $100 billion in trust policy related takeovers that have caused the loss of over $1 billion a year in tax revenues...a number that will become $7.5 billion a year unless the NDP take off their blinders on the issue of alleged tax leakage being the total hoax and fraud that it is.

Only then, will the NDP have any basis to remove the Dunce Cap that is so firmly on their head.....and pass it over to Jim Flaherty.

This makes too much sense to ever be considered by our paid elected MPs


Calvin: Don’t be fooled by our politicians “issues of the day”, as these are only the means to get elected and to appear sympathetic in voters’ eyes.


Brent,


Two of our Governments biggest challenges receiving a great deal of attention lately are:

1) loss of tax revenue's contributing to the overall deficit problem

2) retirement fears among the 75% of Canadians without pension plans (now finally and widely being addressed by the media)

These events are now been brought forward to the public in a big way and it would seem to me that the Conservatives (or the Liberals) have a ready answer to help with both problems.

Put a moratorium on the Income Trust Tax, either entirely or, pending further "study"

One of the very sad ironies is that while we (75% of pension-less Canadians) are having our retirements viciously threatened via the flawed and corrupt Income Trust Tax our good government expects to use our tax dollars to bail out the auto sector with their fat pensions.

How much more can we be expected to take from these jokers?

Calvin
Calgary

Vote on HST? Dalton doesn't do democracy. Just what Ed Clark wants.



Why would Dalton have a vote on HST that shifts $2 billion of annual tax burden from Ontario corporations to Ontario consumers?

Dalton doesn’t do democracy. Rather Dalton simply does what’s mandated to him by Ed Clark of the TD Bank.

Put harmonized sales tax to a vote: Hillier
By ANTONELLA ARTUSO
Toronto Sun
May 27, 2009

A Conservative leadership candidate is demanding the Dalton McGuinty government put the harmonized sales tax to voters before implementing it -- or to simply scrap the controversial measure.

MPP Randy Hillier said voters won't get a chance to pass judgment on the proposal to blend the federal and provincial sales taxes until the provincial election of 2011 -- more than a year after it will have been fully implemented.

"If the Liberals are so sure of themselves that this is the right tax, let's put it in front of the people," he said yesterday. "Bring it in in 2011 and have people decide if it's a good tax."

Hillier said he'd repeal the 13% HST should he become leader of the Ontario PCs and, then, premier.

Finance Minister Dwight Duncan said Hillier has clearly flip-flopped on the issue.

"He's making it up on the fly," Duncan said.

This Flaherty guy, can't even count


What kind of country has a Finance Minister who can’t even count?

That might have something to do with Jim Flaherty’s background and profession as an ambulance chasing insurance litigation lawyer, where numbers could be inflated with impunity, if it helped win the case and reach a settlement. But why should Canada settle for a Finance Minister who first denied that Canada was even going to be caught up in the world’s economic downdraft or even run a deficit (September 2008) and then faced with the loss of confidence of the newly elected Parliament delivered the largest deficit budget in history at $34 billion in February 2009, only ti proclaim yesterday that...ooops...it’s actually going to be a mere $50 billion deficit, with none of the $15 billion increment being what would qualify as “stimulus”, but rather just keeping the lights on in Canada.

Speaking of keeping the lights on, there is that other exercise over which Jim Flaherty has become infamous, and that involved his income trusts tax. That was another exercise where the election promise proved fleeting. Just like the deficit we were told by Jim Flaherty he would never run, the income trust matter was another promise broken. A promise that just made the difference for hundreds of thousands of Canadians, mostly retirees and seniors, between keeping the lights on and not keeping the lights on. This was another instance of Flaherty being unable to even count. Somehow, Jim Flaherty is of the belief that the taxes that are mandatorily paid on RRSP and RRIF withdrawals are worthless to the government. Flaherty can’t count, as he assigns zero value to these deferred taxes? And yet when Teachers’ seeks to buy BCE in a junk bond laden LBO, Flaherty is the first one to rush to his own defense by pointing out that “Yes... And there is taxation, of course, when pensions are paid out.”

Had Flaherty been able to count, he would have realized that Ottawa would have collected $793 million MORE PER YEAR, had BCE been allowed to become a trust rather than an LBO, and $550 million MORE PER YEAR than remaining as a corporation. Ditto for income trusts at large. But who's counting?

The real question however is whether Flaherty can count, and whether his analysis of tax leakage can stand up to the scrutiny that it deserves, but has yet to formally receive. The answer to that becomes glaringly obvious when we witness a $35 billion deficit figure proffered up by Flaherty in February morph into a $50 billion deficit number in the space of three short numbers. Clearly Flaherty can’t count, and he has no business or qualifications to be Canada’s Minister of Finance. He cause harm where none otherwise existed.

At least as a lawyer, Jim Flaherty should understand that one of the basic tenets of a civilized society is the concept of “duty of care” to one’s fellow citizens.

The best way for Jim Flaherty to exercise his duty of care to Canadians, at this long overdue juncture, is for him to resign, before Canadians rename the Peter Principle as the Jim Principle, as Flaherty clearly has risen to a level far beyond his shallow competence.

Tuesday, May 26, 2009

Government Secrecy on the Income Trust Tax Issue



By W. T. Stanbury, Professor Emeritus, University of B.C. May 24, 2009


1. INTRODUCTION:


The Harper Government exacerbated the anger it created by the Halloween Surprise (October 31,2006) when it announced a 31.5% tax on certain types of income trusts by the secrecy it imposed on the methodology, data and assumptions used to calculate the purported “tax leakage” or revenue losses for the federal government. For 2006, these were said by the Department of Finance to be $500 million. Ironically, two things helped the critics to get around this secrecy.

First, as we explain below, the parts of the documents released pursuant to Access to Information Act requests in December revealed a crucial part of the methodology—namely that Finance had failed to include deferred taxes. That hugely inflated the so-called “tax leakage” Second, the Minister stated on January 30,2007 that the same methodology was used for the 2004 and 2006 estimates. The previous government had provided more information on Finance’s methodology in the “Consultation Paper” of September 8,2005. Still---the Government stonewalled and fueled the critics’ anger. See below.

Section 2 describes the blacked-out documents. Section 3 outlines the secrecy game as it was played by the Harper Government on the trust tax issue. It should be read in conjunction with Appendix A. Section 4 questions the need for secrecy about the methodology. My conclusions are in Section 5.


2. THE BLACKED-OUT DOCUMENTS


In November,2006, several individuals, including Gordon Tait of BMO Capital Markets, make an Access to Information Act request to obtain the information used by the Department of Finance Officials to calculate the “tax leakage” of $500 million in 2006. On December 12,2006, the Department of Finance provided some 25 pages of material to Gordon Tait and others in response to their ATI Act requests. See Appendix A.

Brent Fullard, the President of the Canadian Association of Income Trust Investors, describes the blacked- out documents he received from Gordon Tait as follows:

Page 000 Cover page

Pages 001-016 Various analyses in which row and column headings are visible,. and body of analysis is 100% blacked out

Pages 017-021 Input data concerning what appears to be all the outstanding
trusts in which EBITDA/Interest/Dist[ribution] data is blacked out for about
half the companies, ie, pages 017 and 018, but not the other half, ie, pages
019 - 021

Pages 022-027 More input data, none of it blacked out. Again, concerning
what appears to be all the outstanding trusts Title: Summary of 2005
Distributions Tax Treatment. This is derived from a non government source (
I believe CIBC) in a report called 2005 Tax Report - April 06, 2006

Page 028 More input data. Sheet has logo of CIBC. This is also not blacked
out. Has only selected trusts from the Power & Pipeline sector and the Oil
and Gas sector. Contains CIBC's 2006 estimated Distribution.

During his testimony before the House of Commons Finance Committee on January 30,2007, Fullard, said: “ it's amazing how much the redacted documents that we were provided under the spirit of the Freedom of Information Act [sic, Access to Information Act ] actually do reveal as to the methodology.”

The putative reasons for the secrecy was explained by a finance official (Mr. Lalonde ) before the Senate National Finance Committee on June 19,2007 as follows: “ As a department of the Crown, we are subject to the Access to Information Act. We spend an inordinate amount of time dealing with access to information requests. We also have to comply with the provisions of the Access to Information Act……

Senator Ringuette: We broadened the provisions so that Canadian citizens could have greater access.

Mr. Lalonde: As I was saying, one of provisions of that act is section 69, which is not a discretionary provision. It is a mandatory provision that talks about cabinet confidences. To the extent that there is information in documents that relates to legislation or pending legislation or advice to ministers for particular use by ministers, that cannot be released. The law says that it cannot be released. It is not a discretionary exclusion or severance; it is a mandatory exclusion. We have to comply with the law.

Senator Ringuette: I understand that you have to comply with the law. However, I do believe that if the minister refers to such a document publicly, then the document should become public. I understand that you are not political people, and I respect that, but there is a balance in the transparency and accountability process. Perhaps we will soon have another bill. I know that not all the provisions in Bill C-2 [ the budget implementation bill ] are in effect yet, even though it has been quite a few months since we passed that bill.


3. THE SECRECY GAME RE THE INCOME TRUST TAX ISSUE IN 2006


Here are the main tactics used by the federal government to maintain secrecy over the largest possible domain with respect to the income trust tax issue.

•Did not hold any form of public consultation process in 2006 as the previous government did in 2005).

•Put less information on the estimate of federal revenue losses for 2006 (in the “Backgrounder” of October 31,2006 ) than was put out for 2004 in the “Consultation Paper” of September 8,2005 when the Liberal Government was in office. But this was largely remedied by the News Release of January 30,2007 to accompany the testimony of the Minister before the Commons Finance Committee on that date.

•Respond slowly as possible under the Access to Information Act rules and reply beyond the statutory deadline if the issue needs more time to cool down politically.

•Interpret the ATI Act in the most restrictive fashion when dealing with requests regarding the income trust tax issue. Or, flood the person requesting information with as much irrelevant material as possible. See Appendix A for November 29,2007 and February 2008.

•When replying to ATI Act requests, black-out all the key data and calculations. Do not provide details of the model or assumptions.

•Make sure no spokesperson ever describes how the estimates of tax leakage were calculated, and make sure they do not respond frankly to questions about the analyses done by others. [Note, however, that the Minister said in his testimony before the Commons Finance Committee on January 30,2007 that the methodology used to calculate the “tax leakage” for 2006 was the same as that used to prepare the estimate for 2004.]

•Let the critics reason, or rant, but never give up any information that might validate their criticisms. Stonewall, stonewall, stonewall. Richard Nixon would be proud.

•Have the “feisty” Minister of Finance attack the critics, or more frequently ignore them.

•Promote the key senior Finance official to a better, higher-paying job ( Governor of the Bank of Canada ) where he can’t be questioned or if someone rudely does so, he can shrug, smile and say, “No comment.”


4. SECRECY RE METHODOLOGY, DATA, ASSUMPTIONS RE “TAX LEAKAGE” IN 2006?


In March 2004, Dennis Bruce’s (HRD/HLB Decision Economics) study for the Canadian Association of Income Funds: showed that Finance’s standard operating procedures did not include present value of taxes on income trust units in tax deferral accounts like RRSPs; showed that what Finance’s method showed was a revenue loss due to income trusts instead of business corporations was a net gain; and included a sophisticated sensitivity analysis using Monte Carlo simulation to calculate the probability of the net effect on tax revenues being negative (or positive).

During the summer of 2005, Bruce worked with Finance officials on the methodology, data and assumptions to estimate the tax consequences of income trust versus regular business corporations. a)They agreed on almost everything; b) They disagreed about whether the present value of the personal income tax on income trust units inside RRSPs should be included. Finance said no. Bruce said yes. c) This difference in methodology produces highly significant differences in the estimates of the effects on federal revenues. Indeed, it can turn a large negative effect into either a “wash” or even slight positive effect on revenues.[cite data from Bruce 2004 study ] d) The interaction with Finance showed Bruce the big difference in Finance’s “annual budget” approach versus his broader “policy analysis” approach. e) Both Finance and Bruce failed to look at effects on provincial tax revenues and – as importantly – at the re-distributional effects across provinces.

In the Goodale Round, the Finance “Backgrounder” of September 8, 2005 gave considerable details regarding the calculation of claimed federal revenue loss for 2004. [Note: at that time the phrase :tax leakage” was not used by Finance.]

In the key table, Finance provides the assumptions about the key data used in calculation. Finance shows the tax effects for each of four types of flow through entities. Finance does a sensitivity analysis of revenue loss based on different assumptions. Finance does not include the p[resent] value of deferred taxes.

In January 2007, in response to criticisms about failing to release the details re methodology, data and assumptions, Finance officials (and the Minister) emphasized that the estimate of “tax leakage” (a new emotive term introduced in the October 31, 2006 announcement) for 2006 was done using the same approach as was used in September 8, 2005 Consultation Paper (and Backgrounder).The implication was that the Liberals had used that methodology to make plans to tax income trusts in 2005.

It seems reasonable to believe that Finance officials knew that even with the heave redacting (blacking-out) on the 25 pages of documents released in December 2006 (in response to several ATI Act requests), that at least some analyst’s – and certainly Dennis Bruce – would be able to tell that Finance had continued to exclude the present value of personal income tax revenues from income trust units in tax deferral accounts such as RRSPs.

So why the secrecy in 2006? Here are some possible explanations:

a)Arrogance – both by Finance, but more likely by the Minister and the Prime Minister.

b)Providing the details would shine a light on the lack of public consultation process in 2006 versus 2005 when the Liberals were in power.

c)Providing the details would confirm with certainty that the methodology was seriously flawed. If it was proven flawed as Bruce has indicated, then the “huge tax leakage” argument falls. But it was the core stated rationale for the huge tax on income trusts!

d)“Fuzzification” and uncertainty is a powerful tool for a Government hell bent on a policy for reasons it does not want to disclose.

e)The Minister of Finance did not want to provide any support for his main argument against the income trusts, namely that they had a lower re-investment rate and so reduced productivity growth.


5. COSTS OF UNNECESSARY SECRECY


The biggest costs of unnecessary government secrecy are the following: It facilitates poor analyses of proposed government actions. It covers-up ex post analysis of government programs that reveal waste, corruption inefficiency and lack of efficacy. Such secrecy facilitates the cover-up of shoddy analyses which led to poor (even spectacularly bad) decisions by ministers, cabinet, PM. It helps to foster a “culture of mediocrity” in the policy analyses done by government officials. There is no peer review by independent outside experts. And the policy analyses tend to incorporate political factors and to muddy the important distinction between efficiency (or efficacy) and distributional effects.

Appendix A

Chronology re Secrecy Issue, 2006-2008

November,2006: Several individuals, including Gordon Tait of BMO Capital Markets, make an Access to Information Act request to obtain the information used by the Department of Finance Officials to calculate the “tax leakage” of $500 million in 2006.

December 12,2006: The Department of Finance provided some 25 pages of material to Gordon Tait and others in response to their ATI Act requests.

December 12,2006:The ATI Act was amended in an effort to reduce the scope of the greater secrecy authorized ironically by the Federal Accountability Act.

January 23, 2007:The headline of Steven Chase’s article in the Globe and Mail is “Finance refuses to divulge trust data.” In response to Gordon Tait’s (BMO Nesbitt Burns) ATI Act request, Finance released 13 pages that appear to detail the calculations, but these were heavily blacked-out so only the columns and row headings were revealed. Another 12 pages were less heavily censored – details of distributions by income trusts – information already in the public domain. The justification given for the censorship was the provision in the ATI Act which allows withholding data “which could reasonably be expected to be materially injurious to the financial interests” of the federal government. The law makes it clear, however, that this is a discretionary provision, not a mandatory one. Finance’s second reason: it is allowed to keep secret advice provided to ministers.

Mr. Tait was quoted as saying, “Do they feel they can’t substantiate the tax loss claims that they have made? I can’t find another reason why you wouldn’t make it available.” The “tax leakage” argument was central in the Finance Minister’s explanation for the new tax. Tait said “What we want to know is how they took information and processed it to come up with these losses so we know if its valid or not.” Brent Fullard of CAITI called the failure to disclose “a joke.” They’re treating it like somebody’s private health records or bank account details.”

January 24, 2007: CTV.ca News Staff: “Ottawa won’t show details of income trust figures” (posted on Brent Fullard’s blog, February 20, 2008).

February 8, 2007: Liberal MP, and the party’s finance critic, John McCallum, states that despite the release of close to a thousand pages of documents pursuant to ATI Act requests, there is no evidence of the information and calculations on which the Minister of Finance relied in making his October 31, 2006 announcement.

April 16, 2007: A Finance Department official (Kathy Wesley) sent a letter to a CAITI member,to Gordon Tait and others requesting that some of the information released by Finance to him (on December 12, 2006) be returned and not disseminate it further. She said PCO had determined that “portions of the released information, namely pages 1-5 and 9-21, are confidences of the Queen’s Privy Council of Canada.” Tait complied even though all of the documents had been posted on the Internet in December 2006.

May 14, 2007: CAITI has a double-page ad in The Hill Times: “If Finance was Wrong” then how can Flaherty be Right?”

September 9, 2007: On his blog, Fullard said NDP MPs sent letters to constituents saying the party’s Finance critic “is confident that the government’s estimates of future tax leakage are accurate.” He asked how NDP finance critic Judy Wasylycia-Leis could be confident in light of the refusal of the government to disclose its methodology, and the inferences many analysts drew from the parts of the 18 blacked-out pages that were not covered up.

November 29,2007: Liberal MP and finance critic John McCallum filed an ATI Act request for the estimated tax leakage if the corporate income tax rate is 15%,not the 21% rate used in the Finance estimate released on October 31,2006. See response in February 2008 below

December 7, 2007: The Green Party called for a public inquiry into the Finance Minister’s unproven allegation that income trusts result in a loss of tax revenues to Ottawa. Finance has provided no evidence to date. After supplying heavily blacked-out documents in response to an ATI Act request, the government has asked for them to be returned. The press release also referred to the study of takeovers of trusts by Deloitte, released the same day.

December11, 2007: The Liberal Party calls for a public inquiry regarding the Harper government’s tax on investment trust distributions.

December 24, 2007: Brent Fullard received 340 pages of documents (at a cost of $193) under Ontario’s access to information law. The documents dealt with allegations made in a letter from Ontario’s Minister of Finance Greg Sobara (in January 2007) that Ontario was losing tax revenue as the result of income trusts (the conversion of corporations into income trusts). Many of the documents were copies of studies already in the public domain. But then there was the memo by Brian Lewis (in Finance Ontario) called “Net Revenue Impact of Income Trusts.” He concludes Ontario was losing $38 million p.a. in tax revenues. Yet Ontario supported the 31.5% IT tax. [Owen stated that 37.7% of trust investors reside in Ontario.] Note that when compared to Ontario’s total tax revenues - $38 million p.a. is a rounding error.
February ?, 2008:The Department of Finance replies to Liberal finance critic John McCallum’s question of November 29, 2007. Here is a summary of the response.

The Tax Fairness Plan was necessary due to “troubling trend of acceleration of companies to income trusts” – more than $70 billion in conversions taking place or announced in the first 10 months of 2006. Some were purely to avoid paying corporate income tax. Federal and provincial governments feared hundreds of millions in revenue losses. Answer also said that John Manley and Sheila Copps (prominent Liberals and both former Deputy PMs) favored the action taken by the government. The response noted that the new tax will not hit until 2011 tax year.

The response concludes with a “gotcha” by quoting Mc Callum’s remarks on CTV on November 5,2006. Then McCallum had said that the tax decision removing the distortion was “absolutely the right thing and [former Liberal government] had started on this tract to protect the tax base, to ensure tax fairness and to work for the productivity of the nation.”

Note that the response never actually answered Mc Callum’s question—because it involved a hypothetical calculation. [Note that Dennis Bruce did this and found that by failing to take into account the already announced cuts in the federal corporation income tax, Finance had substantially overstated the so-called tax leakage. And every one of Finance’s five omissions had the same effect!!! See his testimony of February. 1,2007 before the Finance Committee.]

February 29, 2008: The four Liberal members of the Commons Finance Committee called on the Auditor General to investigate the government’s claims of tax leakage caused by income trusts. John McCallum said the “stonewalling has gone on long enough…” A direct request by the Committee to Finance to see the data resulted in “two thick binders of superfluous information that did not contain the data or methodology originally requested.” (See Fullard blog of same date.) The Liberal members’ press release review other efforts to get this or similar information.

March 19, 2008: Financial Post columnist Diane Francis’ blog entry is “Energy trust tax: “dumb and dumber.” She argued that the 31.5% tax on income trusts “is the single biggest reason the Tories have not, and cannot get a majority at the polls…it devastated and alienated their base.” Energy trusts have joined the Liberals in asking the Auditor General to investigate the Minister of Finance claims about tax leakage. About 20% of the 33 energy trusts have been acquired by foreigners. Flaherty’s point about tax leakage, she said, was debunked by a report by Deloitte Canada a few weeks ago.[ that study was released on December 7,2007. ]

May 2, 2008:A news story headline: “Tories kill access to information data base.”

The Globe really should listen to John Polanyi, Nobel laureate




The Globe, of all papers, has a piece today by Canadian Nobel laureate, John Polanyi, entitled “Hope lies in the scientific method ”.

I have written many times about the importance of “scientific method” and how it is NOT being applied by the Globe and Mail and other news organizations to the question of alleged tax leakage.

The Globe and Mail accepts this central premise of tax leakage as some god given creationist concept that is blindly accepted, and promulgated by them without debate to all the Globe’s readers. This makes the Globe the equivalent of some religious propaganda news organization promoting creationist concepts like tax leakage. What tripe nonsense. Like the speed of gravity, or the distance to the moon, there can only be one answer to the question of whether tax leakage exists or not. To be valid, that answer has to come from the application of the Scientific Method to the question of tax leakage and not shrouded in secrecy under 18 pages of blacked out documents, proffered up by Jim Flaherty, Canada’s snake oil salesman Finance Minister.

Applying the Scientific Method to the question of tax leakage is something which the Globe and Mail has FAILED to do, and yet here they are printing articles by Nobel laureates which extol the virtues of the Scientific Method?

I think the Globe would be wise to heed the words that are printed in its own pages today, and actually reflect on what John Polanyi is saying when he writes:


“It is sometimes overlooked that the power of science comes from debate - that science is grounded in democracy. There is a caricature of science as being composed of a catalogue of facts. If this were the case, there would be no need for the scientific meetings, since we would not need to debate. Facts would be transmitted online to a central location, where they would trigger a round of applause.

But that is not our experience of scientific meetings. Rather than using them to state facts, we advance propositions. As with evidence in court, these are tested in cross-examination before a jury of our peers.

Truths established in this fashion can subsequently be overthrown by a higher court. Indeed, on examination, the new laws of science often turn out to be approximations. This serves as a reminder that the Creator did not originate them; human beings did. Human constructs though they are, they give evidence of their power by opening a Pandora's box of possibilities.

Though we meet in alarm because of the impact of science, science remains our greatest hope. This is not just because science marshals the power of reason, but because it does so in a civilized way.

We must hope that the same civilized approach can be employed to persuade a wider public of new truths. It is, in fact, our only hope. We cannot conduct ourselves on a crowded planet as we please; the economy will fail (as to a degree it has), the environment will fail (as it has begun to do) and the victims of both failures may, in desperation, take up arms.”

How many Finance Ministers does it take to vaporize $35 billion in personal pension savings?



Answer:
Eleven. One bright light by the name of Jim Flaherty, to come up with his fraudulent tax leakage argument. And the other ten to screw it to investors, by piling on, much like the group mentality swarming of Reena Virk, with letters of support to Flaherty, during a period of federal provincial transfer payment negotiations.

Next question:
How many of these 11 Finance Ministers, with a new found interest in Canadians dwindling retirement savings, ever provided to their citizens or even asked for Flaherty’s proof of supposed “tax leakage” from income trusts?

These collective incompetents, known as “Finance Ministers’, need to be held to account for their theft of $35 billion in Canadians' retirement assets, for no proven purpose:

Finance Ministers to discuss pension security
CTV News
May 25, 2009

The ministers decided to form a study group that will examine Canada's private pension plan system.

Ontario Finance Minister Dwight Duncan and other provincial ministers had called on the federal government to focus on the lack of retirement savings among Canadians, as the recession erodes people's bank accounts.

"We need to look at the question of pension adequacy," Duncan told CTV's Power Play. "In Ontario -- and I think the number is comparable across the country -- only about 30 per cent of people have a private pension."

He also said many of those with pension plans are not maximizing their savings with the various tax incentives, and that increasing longevity is also having an impact.

"We're living longer," he said. "The costs associated with getting older, like heavier medical needs and heavier long-term care needs, mean that our costs are going to be higher than I think many of us are anticipating."

Ontario Premier Dalton McGuinty said on Monday he personally asked Prime Minister Stephen Harper to host a national summit to develop polices that will maintain a decent retirement income for seniors.

McGuinty rejected a call from Ontario's New Democrats on Monday to establish a provincial pension plan for the two-thirds of people who don't have a workplace pension. But he told the legislature if the federal government fails to act, it's something he would consider.

McGuinty said that most premiers agree the issue needs to be dealt with at the national level even though British Columbia and Alberta mulled over the possibility of setting up their own provincial plans.

Demands for Ottawa to act have been increasing as private pension schemes falter and stocks suffer from the recession.

TD Chief Economist Don Drummond said many Canadians have been left with inadequate amounts of savings in their Registered Retirement Savings Plans.

He said the Canadian Pension Plan only replaces about a quarter of one's earnings after retirement and as the baby boomers begin to retire, the system will be put under considerable stress.

"There is an onus on the public policy authorities either to make other alternative plans available voluntarily or perhaps even make it compulsory," he told CTV Newsnet.

Although the Conservatives have introduced incentives for Canadians to save money such as tax-free savings accounts, they have been reluctant to shore up pension savings on a broad scale.

Rather, the government has so far directed its efforts to study how to preserve the small amount of workplace pension plans regulated by Ottawa.

Flaherty said pensions will be a major part of the discussion and agreed with Duncan that the issue needs a national approach, even though only 10 per cent of private pensions are regulated by the federal government

"We're all Canadians, we're all in this together," he said Monday.

Monday, May 25, 2009

Jim Leech, C D Howe, hypocrites extraordinaire, don’t speak for 75% of Canadians



Today we have the ultra hypocrites known as Jim Leech and C D Howe weighing in on a Globe Editorial (of all papers!) entitled “Pensions for the pensionless”.

Jim Leech and the C D Howe institute are two of the last who are morally qualified to speak on the matter of the 75% of Canadians who are without workplace pensions and what Jim Leech now admits will “create a broader economic drag, as a growing portion of the population becomes unable to contribute meaningfully to growth.”

Well, the 75% of Canadians without pensions had already figured out a prudent way to provide income during retirement, and that was through investments in businesses that apid out their excess earnings by way of an income trust. That was until Flaherty came along to destroy that option for retirement, and double taxed income trusts at the rate of 62%, and into oblivion.

Both Jim Leech and the C D Howe applauded Jim Flaherty’s income trust tax. Why? Because in the case of Jim Leech this policy provided the pension funds with a material advantage in the ownership of income trusts by pension plans versus RRSPs. Pension plans like Teachers’ were handed the opportunity to opportunistically and predatorily acquire these devalued trusts and own them privately and NOT PAY the 31.5% tax. That’s precisely why the PSP bought Thunder Energy Trust and OMERs bought Golf Town Income Trust and Teranet Income Trust, etc. etc.

Meanwhile the C D Howe merely represents the interests of the corporate managers who fund the C D Howe and who want to preserve the abuses that are inherent in the corporate model versus the non-abuses that are inherent in the income trust model.

The inherent abuses that are inherent in the corporate model that are not present in the income trust model are why the marketplace assigns a premium value to a business under a trust versus a corporation. End of story. This created a pressure to convert, which meant goodbye to big personal pay checks for the managers. Hence the managers went to Ottawa to sabotage this alternative for their owners. Well done C D Howe. Meanwhile Jim Leech of Teachers, under Goodale was screaming bloody murder when the pension plans were going to be discriminated against, but are the first one’s to applaud the execution when the average Canadian via their RRSP is the one to be discriminate against.

As such, both Jim Leech and C D Howe have disqualified themselves from commenting on this matter, as both have proved themselves to be the enemy of the 75% of Canadians without pensions. Meanwhile the market had already evolved in a way that addressed this fundamental need for retirement income on behalf of the 75% of Canadians without pensions. That EVOLUTIONARY response was the emergence of the income trust model that took cash flows from businesses and dispensed them to individuals on a monthly basis, and these people happily paid taxes at average rates of 38%, resulting in far more tax collection by Ottawa, which is why the Steve Chase story ran in the Globe on October 29, 2006 entitled: “Tax cash floods in, leaving experts at a loss” and due to the timing of this article, explains why “There's a mystery bedevilling the Finance Department: Canadians are sending far more personal income tax revenue to Ottawa than expected -- and nobody knows exactly why. “

The reason why no one could explain the surge in taxes, which happened to come from the ownership of income trusts, was because the fix was already in. The 75% of Canadians without pensions were about to get royally screwed. An event that was applauded by these two hypocrites extraordinaire: Jim Leech and C D Howe. Neither of whom speak for the 75% of Canadians without pensions. Neither of whom have any sense of fairness when it comes to public policy that was designed to screw the very people they are now feigning concern for, and who they summarily led to the gallows, a few short two and half years ago.


Pensions for the pensionless
Editorial
Globe and Mail,
May. 25, 2009

Saturday, May 23, 2009

Did Harper leave his balls out west?


Question: Speaking of leaders without “balls”, does Ignatieff have the balls to expose Harper’s lies about tax leakage, and confront Bay Street’s true power brokers and their Flaherty induced rip-off of average Canadians? Or is their something rotten in Ottawa? In Canada? In our democracy at large?

“Mr. Harper left his balls out West”
Views from the lake…eh?
Saturday, May 23, 2009
http://viewsfromthelake-eh.blogspot.com/2009/05/mr-harper-left-his-balls-out-west.html


The Globe and Mail reports that the GM/CAW agreement will, in fact, result in provincial and federal taxpayers forking over billions to protect the pensions of GM retirees. This in spite of Harper’s and Clement’s repeated assurances to the contrary.

In decrying the blatant about-face, Kevin Gaudet, federal director for the Canadian Taxpayers Federation, provides one of the best quotes I’ve seen in a while, stating, “Mr. Harper left his balls out West when it comes to taking a principle stand…”. Truer words were never spoken.

I presented my thoughts on bailing out any pension plans in the following letter to the editor, published by the Ottawa Citizen April 27. It now appears more relevant than ever.

“While I certainly sympathise with retirees from Nortel, Chrysler, GM and others who are concerned that their retirement incomes will be impacted by the current state of their companies and the recession, I must protest in the strongest possible terms any government action to guarantee 100% payouts from those defined pension plans.

I am one of the vast majority of Canadians who never had a pension plan, who never had an employer making matching contributions (or better) to my retirement funds. Now retired, what I have to live on I saved from my own earnings. And over the past 2 ½ years, thanks to Jim Flaherty’s income trust fiasco and now the global recession, my retirement fund has slipped to slightly better than 50% of where it was projected to be today. To put it in even plainer terms, my income is now half of what I had expected. As a consequence many plans have been cancelled or deferred indefinitely, and total retirement remains elusive as part-time work supplements my modest retirement income.

There are many, many of us in similar situations, and to ask us to now use our tax dollars to augment the pension incomes of others is neither fair nor appropriate.

By all means provide support to those workers who might lose their entire company pension, but under no circumstances should we be topping up pensions that have unfortunately suffered a similar degradation in value as the rest of us have experienced.”

Mark Carney. Just visiting.


Mark Carney. Just visiting. And raping and pillaging.

First with Goldman Sachs on behalf of Russian oligarchs ripping off Russian citizens under the regime of Russian privatizations under Yeltsin and then in the Department of Finance on behalf of Canadian wannabe life insurance oligarchs under Harper.

He’ll do whatever it takes. Manufacture tax leakage numbers. Lie to all Canadians. Restrict growth of Canadian companies while in Canadians’ hands, but not foreigners. Allow pensions funds a special exemption, not permitted RRSPs. Create a two tiered pension system in Canada. Provide tax subsidies to groups like Abu Dhabi Energy to acquire Prime West Energy or Hong Kong billionaire to buy TransAlta Power, while displacing average Canadians who were happily paying taxes and providing themselves a means with which to retire with dignity and replace them with billionaire foreign investors who pay zero taxes?

In the absence of allowing it to become an income trust, allow BCE to leverage itself up under US private equity ownership until it becomes insolvent, so BCE can pay Goldman Sachs an advisory fee of $48 million and pay $793 million less in taxes per year than as an income trust. Eliminate the 15% withholding tax to ZERO otherwise paid by foreigners on interest on corporate debt that is already deductible for income taxes here in Canada, such that these foreigners can strip pretax earnings of Canadians companies out of this country TOTALLY TAX FREE.

Mark Carney.....just visiting, and raping and pillaging on behalf of foreign interests. If Michael Ignatieff wishes to prove where his nationalistic interests lie, he can start by exposing all of Mark Carney’s outright falsehoods and the foreign interests that they serve. Not that I doubt Michael’s allegiances. I only question his willingness and political resolve in exposing the truth, in light of his oft repeated comment of “Canadians deserve the truth”. From where? The bottom of a Cracker Jack box, or from the Leaders of Opposition Parties? If not now, then when?

Why are ABCP investors and GM pensioners getting bailed out with taxpayer money and the rape of income trust investors remains hidden under a Liberal bushel? We are not looking for any bailout of any form. We simply want the truth to be told and the fraud known as tax leakage exposed. We take you at your word that “Canadians deserve the truth”. Prove that you are deserving of that faith. Lest it prove fleeting, which it surely will. The question is not whether you are a visitor. The question is whether you are a leader. Barack Obama wants to be known as the Empirical President, by virtue of his intention to base all his policy decisions on the empirical facts of the situation.

No issue in Canada is more fact based in nature than the income trust tax. A policy that saw Canadians lose $35 billion of their retirement savings and has seen all Canadians taxpayers lose $1 billion a year in taxes to solve an alleged $500 million tax leakage problem. Does that sound very wise, where the cure is twice as bad as the alleged disease. What happoness when all the trust get taken out and that tax loss rises to the inevitable $7.5 billion a year? That will be the legacy of Liberal inaction on this file and in exposing the truth behind Mark Carney’s lies. Mark Carney.me Just visiting....and raping and pillaging....and lying to Canadians and getting away with it, in the absence of effective political opposition.