LEST WE FORGET

(1) For your viewing displeasure:

http://www.youtube.com/watch?v=U9mibZYpVPY

(2) And for a quick reminder of the damage done by a broken political promise:

TRUST FIASCO FALLOUT:READERS STILL ENRAGED OVER TORY BLUNDER

by Diane Francis,
Financial Post
Wednesday, December 06, 2006

This is a small sample of the hundreds of remarks and insights from readers following my columns criticizing the Tories' income-trust-policy blunder.

A Westerner points out the damage to the oilpatch:

"Under this back-of-a-napkin policy, thousands of 'stripper' [low production] wells will be abandoned. Every barrel lost is another never to be recovered -- no more employment, taxes, royalties, export income, etc. As I watched the Liberals choose their champion to go against [Prime Minister Stephen] Harper, I had to keep reminding myself that I don't give a damn. I won't vote Green, Liberal, NDP or Harper."

Ron Kuhn puts this another way from a poor-resource-stewardship angle:

"The only other aspect I would add to your trust comments is the impact higher financial costs and the climate of uncertainty will have on reducing the amount of oil/gas that energy companies will eventually extract.

"Normally the production of a field will be based on a combination of production rates and technological processes that maximize the net present valuation. The likelihood is that the ultimate recoverable resources from our dwindling resources will be further reduced. And, generally, it will be impractical to go back to fields that have been over-produced and easily access any remaining oil or gas.

"I would have expected that Harper would have appreciated the emerging need for some mechanisms to encourage maximization of field recovery. Rather we are now on the road to do just the opposite -- pump out as much as you can in the next four years."

Louis Mix points out the government proposal appears to impose a punitive double taxation on RRSP recipients:

"For the well-heeled, savvy investor holding IT [income trust] units in a non-registered account, the after-tax difference will be relatively small, largely because of the dividend tax credit. But after 2010, the investor who continues to hold the units in an RRSP account will be subjected to double taxation of (a) 31% on income earned by the RRSP and (b) another 17% to 32% when IT income is withdrawn from the RRSP.
"For the taxpayer in the lowest bracket, the tax on IT income earned and withdrawn will be 48%."

From Laszlo Kozalk:

"What is especially distasteful to me is that Stephen ran his campaign on honesty and integrity. That was the image he wanted to portray to the Canadian people.

"It was interesting to hear that [Finance Minister Jim] Flaherty is now going after off-shore trusts. Apparently there is $88-billion outside the country. Thanks for warning them that you are training your sights on their assets. I am sure they have their accountants working feverishly for ways to hide this money from you again.

"As an investor who manages his own finances, I understand the risks involved in what I do. I never anticipated the government and especially my government would do something so blatantly harmful to the equity market. He vapourized $30-billion of peoples' assets. I can't believe we have no laws in this country to protect Canadians and their assets and provide some sort of recourse."

I have also received hundreds of e-mails from U.S. investors who pay only a 15% withholding tax on their repatriated income trust distributions. Here's one from Wil Huett of Colorado:

"Congratulations on an excellent piece on the royalty trust situation. You have hit the nail on the head on almost all points. I do quibble with your assertion that the real tax loss is to U.S. investors. To assume that the 15% tax I pay is a loss to Canada presupposes enough capital within Canada to fully fund the needs of the trusts.

"My capital has helped the trusts succeed and thus contibute to the Canadian economy. The 15% tax I pay appears to me to be 'free money' to the Canadian government. I receive no services, nor use any Canadian infrastructure. Indeed, I have never been in your country. It might be interesting to see if any of your academic institutions have done a cost/benefit analysis of the effects of foreign investment."

A Calgary investor called and said that the Finance Minister cost him plenty after his announcement cost the market $30-billion in value, thus creating tax losses for some and forfeiting capital gains taxes of at least $5-billion.

dfrancis@nationalpost.com

© National Post 2006