Wednesday, January 27, 2010

Reuters is allowing a biased and inherently false news article to go unrebutted



Today Reuters published a news story (see below) that quoted Flaherty as saying “The whole purpose of the changes with respect to income trusts in 2006 was to ensure that there was fairness in the Canadian tax system, and we'll continue to aim at that goal”

Meanwhile the Reuters Principles (see below) that govern the reporting by Reuters states “ That Thomson Reuters shall supply unbiased and reliable news services to newspapers”

The comments by Flaherty are not just grossly biased, they are false. To suggest that a tax regime that allows the Public Sector Pension Plan to privately own artificially devalued Thunder Energy Trust or OMERs to own artificially devalued Teranet Income Fund and NOT PAY the 31.5% trust tax, whereas I HAVE TO pay the 31.5% tax when I hold those very same investments is nothing remotely akin to achieving “tax fairness in the Canadians tax system” unless you think discrimination is fair, and the 75% of Canadians without pensions (and no seat at the negotiating table) go to the back of the bus, while the 25% with pensions (and endless access to the Minister of Finance) go to the front of the bus,, where they exploit this tax advantage by predatorily acquiring these artificially devalued trusts in a scheme known as a tax arbitrage.

Reuters is required by its own governing principles of accurate and unbiased reporting to report on what I have just told them, which is that Flaherty’s statement is false and highly misleading to the Canadian public about what was actually achieved by his income trust tax policy, which is a complete unlevel playing field between the holding of trusts by pensions funds and the holding of trusts by RRSPs, when it needs to be understood that this is in complete defiance of why RRSPs were created by a Liberal government over 50 years ago, which was to create a level playing field between these two sub groups of investors and make them one equal class and not two classes, with one preying on the other employing bespoke tax loopholes and tax holidays.

Meanwhile Reuters is owned by the billionaire Thomson family of Toronto, and the Thomson family has exploited this gross unfairness as between the 31.5% tax loophole that applies to RRSPs but not to private trusts, in their predatory purchase of Sleep Country Canada Income Fund, placing Reuters in a conflict of interest position of the possible reasons why this gross unfairness went unreported in their article of today and allowed Flaherty’s words to go unrebutted when he falsely claimed the income trust tax policy was designed to create tax fairness. It did nothing of the sort.

Please correct the public misperception that you are fostering with this biased and factually misleading statement by Flaherty in your article of today.

Also please note the following conflict of interest as between Reuters and the income trust policy unfairness that you fail to draw to the attention of your readers, but which has not escaped the attention of your owners as they exploit it to their financial advantage. Is Canada a Third world Canada where discrimination is pawned off as Tax Fairness:

Westerkirk spreads wings with Sleep Country takeover

Andrew Willis
Globe and Mail

Thomson family (owner of Reuters) holding company Westerkirk Capital continued to move out of the shadow of its larger corporate cousin on Thursday by teaming up on the $356-million buyout of Sleep Company Canada Income Fund.

......ask Flaherty why the Thomson billionaire are getting away with paying ZERO taxes and no 31.5% tax as his idea of a Tax Fairness Plan. Tell any one of these 500+ people why they have become second class citizens to the Thomsons:

400) belleville Comments: I am 78yrs old and have been fighting throat cancer for 6yrs and survive on liquids. I do not have a pension and have a RRIF which was totally invested in energy trusts which I was advised to keep invested after the Harper Flaherty promise. My RIFF dropped about 80 thousand dollars and the cut the annual minimum payment in half. The result was that any enjoyment I hoped for was lost for ever.


http://caiti-online.blogspot.com/2010/01/another-200-reasons-to-adopt-marshall.html

http://caiti-online.blogspot.com/2010/01/200-reasons-to-adopt-marshall-savings.html

Thank you
Brent Fullard
Caiti.info



Flaherty says to keep close eye on trusts

Wed Jan 27, 2010 10:14am EST

OTTAWA (Reuters) - The Canadian government will keep an eye on income trusts to make sure they do not avoid taxes when their favored tax status expires next year, Finance Minister Jim Flaherty said on Wednesday.

Flaherty was responding to a question, at a news conference on Haiti, about some income trusts trying to avoid paying tax in 2011. He said the government tries in each budget to close any loopholes it may find.

"If there's an issue with respect to the income trusts, then we'll look at that as well. The whole purpose of the changes with respect to income trusts in 2006 was to ensure that there was fairness in the Canadian tax system, and we'll continue to aim at that goal," he said.

(Reporting by Randall Palmer; Editing by Jeffrey Hodgson)

Reuters Trust Principles


The Reuters Trust Principles impose obligations on Thomson Reuters and its employees to act at all times with integrity, independence and freedom from bias.

They are fundamental to the entire business of Thomson Reuters.

The Trust Principles were created in 1941 in the midst of World War II with the express purpose of preserving Reuters’ independence, integrity and freedom from bias.

Although the language of the Trust Principles has been slightly modified over the years, their purpose has remained true to the original. The Trust Principles now state

● That Thomson Reuters shall at no time pass into the hands of any one interest, group or faction;

● That the integrity, independence and freedom from bias of Thomson Reuters shall at all times be fully preserved;

● That Thomson Reuters shall supply unbiased and reliable news services to newspapers, news agencies, broadcasters and other media subscribers and to businesses, governments, institutions, individuals and others with whom Thomson Reuters has or may have contracts;

● That Thomson Reuters shall pay due regard to the many interests which it serves in addition to those of the media; and

● That no effort shall be spared to expand, develop and adapt the news and other services and products of Thomson Reuters so as to maintain its leading position in the international news and information business.

13 comments:

Anonymous said...

Now I am fusking mad, your telling me the Thomson family owns that private equity firm that bought Sleep Country?

JIC

rabbit said...

The reason income trusts were canceled was because major companies such as BCE and Telus were planning to put most of their operations under income trusts. Had income trusts continued, corporate tax revenue would have plummeted to nothing.

After Flaherty's announcement, these companies canceled their plans to create an income trust:

http://www.cbc.ca/money/story/2006/11/01/bceconversionplan.html

Had income trusts NOT been canceled, people would be howling that corporations are not paying their fair share of taxes.

CAITI said...

Rabbit:

Do a bit of research before you go off half-cocked repeating Flaherty's pre-programmed lies.

BCE?......puhlease. You make me laugh:

http://caiti.info/resources_it_mythbusters.php#myth3

Brent Fullard

rabbit said...

I'm afraid it's CAITI who are blowing smoke. Here's what they say:

When it was correctly pointed out at the time that neither Telus nor BCE had paid any corporate taxes for some time, we were assured by our Finance Minister that both of these companies were on the very verge of becoming taxable and these imminent taxes would be "lost". That was early November 2006. ... Not long thereafter, Telus revealed that it wouldn't pay taxes for 2 full years.

Here's the income tax paid by Telus over the last 8 years (in millions):

2001 $97
2002: $(39)
2003: $181
2004: $264
2005: $330
2006: $353
2007: $233
2008: $436

This represents about 30% of their profits, a fair chunk of change.

Dr Mike said...

Rabbit

The average corporate tax rate , as stated by Rev Canada , was 6.2% --this is due to fact that these outfits write-off every bad business deal & all the interest on their debt causing the tax rate to plunge.

Income trusts pay at a rate near 0% as they flow most of their profit thru to their owners who pay at an average rate of near 38%.

Far more tax is paid in a public trust format than if that same trust was in a corporate structure.

So why the hollering.

Beats me.

Dr Mike Popovich

rabbit said...

Dr. Mike:

I don't understand your post. 6.2% of what? The corporate tax rate for Canada in 2005 was around 36% (it's less now), and there were few ways around that except to carry forward losses or form an income trust.

It may well be that the government would have collected more tax under income trusts than not (although a lot of income trusts were held in RRSPs, meaning that no money would be taxed until it was withdrawn from the RRSP, confusing the issue).

Nevertheless, it would have represented a profound change in the tax structure, one that the government obviously was not keen about.

Dr Mike said...

Rabbit

6.2% was the average rate of taxation for corporations--some paid no tax ,while others paid at the max rate--the average as stated by Rev Canada was 6.2%.

You stated " one that the government obviously was not keen about."..

Actually it was Power Corp , Manulife & others in corporate Canada that were not keen about the whole thing as they were having one hell of a time to compete for the investment dollar--this was because trusts paid out much better yields.

The much tighter accounting practices in the trust genre were not conducive to the CEO compensation packages either.

Corporate Canada wanted these things gone & as such the gov`t complied.

We got caught in the crossfire.

Dr Mike Popovich

CAITI said...

Rabbit:

Don't confuse "taxes" with cash taxes.

These numbers you are citing contain large amounts of deferred taxes, which unlike the deferred taxes of RRSPs, are often deferred in perpetuity and are merely an accounting reconciliation arising because depreciation of assets for tax purposes differs from the rate of depreciation for accounting purposes:

Here's the income tax paid by Telus over the last 8 years (in millions):

2001 $97
2002: $(39)
2003: $181
2004: $264
2005: $330
2006: $353
2007: $233
2008: $436

How much of the above is cash versus deferred taxes. The following are the cash taxes paid by Telus. (btw: anything before 2006 is irrelevant to the discussion):

2007: 0
2008: 0

Brent Fullard

rabbit said...

Dr. Mike:

You still didn't say 6.2% of what. Of profits? Horse droppings. The tax man is not so easily eluded. You'd better give a citation, cause I don't believe you.

Yes, sometimes corporations pay no tax at all, but that's almost always because they earned no profits, or because they had losses in previous years.

Anonymous said...

BF:

Re: Income Trusts and taxes etc., Flaherty says he is
"determined to do what is fair"....

What a joke. Fair for whom.......

W.W.

rabbit said...

Dr. Mike:

I read the Telus 2008 financial statements, and I don't believe you. Had Telus paid no income tax, there would be an entry in cash flow for $436 million called "Future income taxes", caused by the difference between the profits as calculated for accounting and as calculated for tax purposes.

The entry is $160 million, no where near enough to offset $436. In other words, they had to cut the government a cheque for $275. At any rate, the full amount still has to be paid in the near future, which is what Telus wanted to avoid with the income trust.

CAITI said...

Rabbit:

The 6.2% that Dr Mike is referring to is the tax rate on an apples to apples comparison basis to the earnings of a business that is paid out to trust holders, namely EBIT, which is earnings before interest and taxes. As trusts, this EBIT is paid out as distributions and taxes at the average rate of 38%, according to the Department of Finance. As a corporation, this EBIT is used to service interest on debt and then what's left is taxes at the statutory rate of x%, and the blended rate accross all companies according to StatsCan is 6.2%.

meanwhile as for Telus, here is what Telus was telling the world (presumably that includes Flaherty) at the time he was claiming big taxes would be lost from a Telus conversion:

Transmitted by CNW Group on : December 14, 2006 08:00

TELUS sets 2007 financial and operating targets
Strong record of growth in revenue and underlying profitability to
continue in 2007

VANCOUVER, Dec. 14, 2006 /CNW/ - TELUS Corporation (TSX: T and T.A / NYSE: TU)

"Based on a an updated review of the company's tax loss position, TELUS now expects minimal cash tax payments in 2007, a preliminary estimate of approximately $100 million in 2008 with the payment of significant cash taxes largely deferred to 2009, rather than 2008 as previously anticipated."

Anonymous said...

Handy to know about this Sleep Country thing. We will be purchasing a new mattress in a few months. Thanks to this, we won't be shopping there!

Wow, what a great service. We don't want to accidentally support a company on the wrong side of the Trust Unit issue.