Friday, February 26, 2010

NDP feeling the heat of their fraudulent past

Elaine: Thank you for sharing this with me. I would simply respond to this letter, that is rife with nonsense, by asking Denise Savoie where is the NDP Party’s proof of tax leakage, and what is remotely fair about income trusts being double taxed in RRSPs when they aren’t double taxed when held in a pension plan? The issues, like “overvaluation” that Denise attempts to defend her party’s action with are complete revisionist history and to suggest that Diane Urquhart is widely respected is nonsensical in the extreme. Thanks again for sharing Brent

On 2/26/10 7:36 PM, xxxx wrote:

Mr. Fullard;



----- Forwarded Message ----
From: ""
To: Elaine xxxxx
Sent: Fri, February 26, 2010 11:33:12 AM
Subject: RE: Income Trust Issue

February 26th, 2010

Thank you for writing to share your thoughts regarding income trusts. The issue of income trusts has been a difficult issue for many, as I know the Conservative government’s decision to tax trusts has had a serious impact on some of my constituents who were perhaps over-invested in trusts at the expense of a balanced portfolio. I’m deeply sorry if this has hurt you. In the months after the Finance Committee hearings into income trusts and before the recent Liberal motion, I spent time researching the issue and seeking out the wisest financial advice at my disposal to arrive at a decision.

Some of you have asked why I supported the Conservative plan to tax income trusts. I would like to take this opportunity to set the record straight and to share my thought process with you.

I must first clarify that I do not agree with the manner in which the Conservatives have proceeded, namely, misleading Canadians into thinking trusts would not be taxed due to a promise they made during the last federal election. This promise effectively served to reinforce the false impression that all was well with income trusts. However, before the election, in 2005, members of the Liberal party were openly speculating about whether to tax income trusts and, at the time, my NDP colleague, Finance and Financial Institutions Critic, Judy Wasylycia-Leis proposed a different way of proceeding to reduce the risk to seniors’ income. Unfortunately, her proposal did not get the support of either the Liberal or Conservative parties at the time.

The NDP has always favoured a full and comprehensive public discussion of income trusts and called for consultation on this issue long before the federal government broke its election promise not to tax trusts. In June of last year, well before the October 31st announcement of the Conservative’s so-called “Tax Fairness Plan”, the NDP asked the federal government to take action in order to protect small Canadian investors. Judy Wasylycia-Leis held a news conference in June 2006 and again in October to call for a closer look at the trust sector and to propose a moratorium on all new trust conversions in order to conduct an in-depth study into the reporting practices of income trusts as well as their impact on government revenue, pensions and industrial growth – a move that was supported by the National Pensioners and Senior Citizens’ Federation, the Small Investor Protection Association (SIPA) and the leading forensic accounting team of Rosen and Associates, among many.

The NDP’s call for a moratorium was made necessary by a series of well-documented and systemic problems with the income trust structure that had already been identified in reports by various renowned financial institutions, including Standard and Poors and the Canadian Securities Administrators, as well as in a seminal research report authored by well-known independent financial analyst Diane Urquhart, among others. These problems include inaccurate reporting of both the value and the returns of income trusts in addition to the conversion of many corporations to a trust structure in order to avoid paying corporate income taxes, causing so-called “tax leakage” and entailing future erosion of Canada’s corporate tax base.

One of the many individuals who questioned the reported value of income trusts was Paul Hayward, legal counsel for the Ontario Securities Commission. He warned that the use of the ill-defined term “yield” could potentially mislead investors into thinking they were receiving a higher return or gain on the capital they invested.

Similarly, research into income trusts conducted by Standard and Poors, the Accountability Research Corporation and the Canadian Securities Administrators (a consortium of 13 provincial and territorial securities regulators) concluded that trust payouts were largely overvalued and had significantly less cash available for distribution than reported by management.

In light of these facts and the testimony of experts in the trust sector during the House of Commons Finance Committee’s review of income trusts, the NDP agreed that the federal government had little choice but to tax trusts and we could not in good conscience reverse the position we took before and during the last federal election. The NDP has been clear and consistent in its position on income trusts and has always supported a full review of the investment opportunity that these trusts provide.

Contrary to the claims of lobbies representing certain groups of investors, the issue of foreign takeovers is not limited to the income trust sector. The flurry of Canadian corporate buyouts is being seen in other sectors as well. What's more, according to statistics provided by Standard and Poors, foreign ownership of Canadian trusts already made up 33% of trust units before the announcement of the Tax Fairness Plan. Correspondingly, the Department of Finance Canada estimated that foreign-owned trusts accounted for 50% of all energy trusts in early October 2006. Having said that, foreign takeovers are a matter of concern to me and my NDP colleagues and I have proposed measures to reduce the occurrence of this phenomenon.

As for the assertion that the changes to legislation regulating income trusts will result in greater tax leakage, the Canada Revenue Agency employs a number of tax avoidance tools, known as the General Anti-Avoidance Rule (GAAR) and “thin capitalization” rules, which deal with private equity groups that may seek to buy up trusts and load them with debt in order to keep from paying taxes. These rules apply to both trusts and corporations and are designed to prevent such tax leakage.

Furthermore, since the modifications to the income trust sector will only enter into effect in 2011, many analysts predict that income trusts will increase in value and recover most of the losses they suffered immediately following the unveiling of the Conservative Tax Fairness Plan. In fact, reports show that the average gain in the trust sector during the month of April 2007 alone, just six months after the announcement of the new trust tax, is 4.5%, a significant increase in value. The latest figures indicate that the value of trusts has rebounded and is now within 5% of its October 31st price.

The NDP’s overriding focus throughout the income trust debate has been to find a solution that best serves the interests of ordinary Canadians. We have been consistently fighting for fairer taxes and against corporate tax loopholes and in our opinion, the practices of many income trusts deserved a closer look. Our call for a moratorium on new income trusts was motivated by a desire to allow adequate time to resolve the many problems in a way that would cause the least damage to seniors’ income security. Once that option was no longer available, we followed the course of action that we thought was best with the most complete information as we could gather from experts.

I felt it was important for me to share my rationale in supporting the NDP’s position on income trusts. I hope you will understand that this was not a frivolous decision or one that was entered into lightly. Although I believe that the market will eventually rebound, I sincerely regret the financial hardship inflicted on Canada’s seniors, particularly those who were ill-advised to invest in already overvalued income trusts.

Once again, I thank you for your message.

Best regards,

Denise Savoie
MP Victoria

From: xxxx
Sent: February 18, 2010 10:34 PM
To: Savoie, Denise - M.P.
Subject: Income Trust Issue

Ms. Savoie ;

This article by Mr. Fullard says it all! .

I would appreciate it if this government action, which has negatively impacted the financial situation of my family and the families of thousands of other Canadians, be given your immediate attention. I would also appreciate receiving you assurance that the 'Marshall Plan' will receive your support.

Elaine xxxx


Anonymous said...

Looks like Diane U just made another commission writing that piece of fiction. This response is patently false. Seems she has mixed the Liberal review with the Con betrayal and fabricated an entirely different version of events.

I received many letters of response from NDP MP's when I wrote to ask them to drop the support to Harper on this issue and not one of those responses was anywhere near this latest piece of NDP fiction. It's just another Lie.


Dr Mike said...

It sure sucks to be us!!

This MP could not even take the time to write a current letter as this was obviously written mostly back in 2007 with a few add-on bits to make it look personal.

It didn`t even answer the question as asked regarding the Marshall Plan.

It just boggles my mind about the quality of the people we elect to office as they are followers & not leaders.

Toss me the big pay & the gold plated pension & even I could do this job---I sure would not be any worse.

Dr Mike Popovich

Anonymous said...

Re: NDP feeling the heat of their fraudulent past
""The issue of income trusts has been a difficult issue for many, as I know the Conservative government’s decision to tax trusts has had a serious impact on some of my constituents who were perhaps over-invested in trusts at the expense of a balanced portfolio. I’m deeply sorry if this has hurt you.""

Now they're experts on asset allocation and 'if investors had only properly diversified' maybe these losses would have been mitigated.

I have zero tolerance for negligence.


Madrigal said...

The people screaming about the taxing of income trusts seem to have no perspective on the real problem. Which is that well over 50% of the trusts (I think much more, Al Rosen carefully compiled the figures) were paying dividends to the investors out of the capital of their own investment (just like a Madoff Ponzi scheme). That is, the trusts were not generating enough cash flow to pay dividends, but were depleting the capital of the investors.

Moreover, the time delay in taxing has allowed investors to get out of the trusts at a profit, or small losses. Instead, some investors seem to be hoping for a freebie, a government hand-out. Since they were responsible for investing in generally non-viable trusts, I think they should also be responsible for their loss.

The federal government might just have done the right thing for small investors for the wrong reason. Neither the Conservatives nor Liberals (nor the NDP, to its credit) were prepared for Canadians to lose the tax revenue to a loophole.

But in closing this loophole they have inadvertantly done the right thing for the small investor. The income trusts were a time bomb that would have cost many small investors dear. This is one of the few cases recently of governments actually doing the right thing for small investors.

David Yudelman

CAITI said...

Hey David Yudelman:

That's quite the authoritative comment that you posted. I especially liked the authoritative tone of:

"Which is that well over 50% of the trusts (I think much more, Al Rosen carefully compiled the figures)"

Why don't you get you facts straight in your mind before you hit the "comment" button?

Meanwhile Al Rosen is aa disreputable a source that you could have cited.

If trusts were such ponzi schemes, then why are the pension funds and savvy foreign private equity buying them?

Next time you decide to do me a favour in disguise, I have one little piece of advice for you and your do-gooder kind:


Brent Fullard

Madrigal said...

Well I guess Brent Fullard believes sarcasm is the highest form of wit.

Just in case there's someone here who still has an open mind on the issue, as opposed to coming here merely to vent, I attach the stats Fullard is so keen to see...

Business IPOs as of Jan 1, 2001 in capital loss as of November 11,2006: 75, or 61% of total (I said well over 50%, apologies for understating).

Of the 75, 45 (or 37% of the total) had capital losses of over 20%.

I guess you can say what you like, Mr Fullard. But all you're showing is your outrage at your perceived personal loss, which was the direct result of your greed in believing you could outpace the market (and the average small investor), by exploiting system loopholes.

You're not showing any concern whatever for the small investor.

CAITI said...


What kind of a point is it you are making?

What you have cited is proof of nothing, except your willingness to cite numbers that prove nothing, assuming they are even correct.

What is the end date of this series of numbers you are citing to come up with this 20% loss or greater?

Oh golly's November 11, 2006. Surprise. Surprise.

Thanks for making my case you the direct consequence of these losses you are citing (bozo) is the trust tax announcment of October 31, 2006, or did you not realize that, in which case you are not a bozo, but simple sorrily misinformed.

The trust tax announcement created a permanent loss of $35 billion of investors' wealth, arising from the 18%, yes I repeat 18% loss that this announcement and the resultant tax caused.

A tax supported by the idiot NDP fools.

Therefore you can thank Denise Savoie and the NDP party along with Stephen Harper, for screwing the small investor.

Brent Fullard