Friday, March 9, 2007

REVENGE OF THE SENIORS! PART ONE?

ALL IS NOT WELL IN THE TORY HEARTLAND
-- Income-Trust Tax Leading To Talk Of 'Spoiler' Candidates!

Diane Francis,
Financial Post
Friday, March 09, 2007

There's lots of anger in Tory Land, as Calgary MP Diane Ablonczy discovered this week.

Things are getting ugly. Ablonczy's little town hall meeting in her Calgary riding this week turned into a booing session by victims of the ill-advised income-trust debacle.

No media were there, but this is from a witness: "I'm guessing there were about 400 to 500 people there split 50% invited family and friends and 50% furious investors. I was surprised at the number of protesters and how vocal they were. This issue seems to be bigger here than the party wants to admit. The party has greatly upset their foundation. I walked away with a sense that there is more trouble for the Conservatives in the heartland than I had expected."

The vast majority of investors, and successful people, in this country are Tories. So rather than holding their nose and voting for another party, there's talk of running "spoiler" candidates in key, or vulnerable ridings, simply to provide the disenchanted investors with a means of registering their protests and take away enough votes to defeat Tory candidates.

Another suggestion by a New York investment counsellor, whose clients took a bath, is for the energy-trust coalition to field candidates in key Alberta ridings against the Tories.

"I know that employees and unit holders of the energy trusts have been very active and vocal in communicating to their MPs -- via post, faxes, phone calls, and e-mails as well as in person at town meetings -- their profound distress and anger at this proposed legislation," wrote Bob Siegel of Cabot Capital Group in New York City.

"I would recommend that the coalition step up its campaign against Albertan Conservative MPs beyond mere voicing of intense opposition," he said. "Specifically, I would propose that the energy trusts, given their economic and political clout within the province of Alberta, recruit and put forth a slate of candidates who will run against any sitting Conservative MP in Alberta who follows the Party line and votes for this measure."

"The province of Alberta is the backbone of Conservative Party strength. If the Energy Trusts muster their considerable strength in Alberta to make known to Conservative MPs --in this kind of direct, immediate, 'in-your-face' electoral way -- that a vote for this measure will cost them their jobs and, thereby, cause at least some erosion in legislative support for this measure in Canada's Conservative stronghold," he concluded.

But Alberta is not the only hotbed. Plenty of ridings in Ontario -- where the Tories barely won -- could be attacked successfully by independent "income trust spoiler" candidates. Tony Clement won by 28 votes. Others are equally vulnerable. Same applies in B.C.'s retirement communities.

Another victim e-mailed me his reaction to the "dissenting opinion" posted by the Tories and written by the handful of Conservative members of the finance committee. That committee recently held hearings into the income-trust tax proposal and concluded that it was flawed and should be scrapped.

Obviously, the Tories kept to the party line.

"My family and I are lifelong conservative votes. Not any longer!!" wrote Les Parsneau in an e-mail. "Regarding Tax Leakage? The trusts don't pay taxes, the investors do. And how dare the Ministry of Finance refer to me [RRSPs and RRIFs] as 'tax exempt'. I have just taken more money out of my RRSP to live. I pay individual tax rates on that money."

Last week, another blow to the Tories was delivered by the Canadian Association of Retired Persons, which attacked the tax. It has 400,000 members.

"Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living," said an association statement.

It's reminiscent of the 1980s, when Michael Wilson's proposal to tamper with the Old Age Security met with a firestorm of protest and his Prime Minister was forced to back off from the decision. And they had a majority government.

Instead, this minority government has steamrollered and stonewalled, aided and abetted by a pliant press and in the belief that Tory voters have nowhere else to vote.

But the Internet and imagination are formidable foes. And investors are smarter than politicians.

Thursday, March 8, 2007

CAMBRIDGE TIMES QUESTIONS HARPER TRUST INITIATIVE

FINANCE MINISTER DEVASTATING SENIORS
-- Yet No Basis For Vicious Attack On Income Trusts!

The Cambridge Times
Mar 8, 2007


By John Power

I am reminded on a daily basis, every time I check my financial position on my computer, of the devastating effects of the Finance Minister's Halloween announcement on income trusts.

The rationale for this move was that Telus and BCE were about to apply for income trust status and the government could not afford the tax loss. Subsequent inquiries revealed that neither company was paying significant corporate tax to the government before deciding to become an income trust (and neither will pay any tax in the immediate future even though both have chosen to retain their conventional corporate structure and not convert to income trust status).

As the parliamentary hearings and debates on income trusts continue, the opposition parties are experiencing difficulty in obtaining the financial figures upon which the finance minister based his original decision. So far, he has not released any evidence that backs up his contention that the government was experiencing tax “leakage” (loss of tax revenues) because of income trusts.

Certainly his feet need to be held to the fire on this issue.

However, the effects of the Finance Minister’s actions, on seniors, are more crucial, since many investors lost hard earned dollars which they had invested in legitimate Canadian companies based on the Harper election promise that income trusts would not be touched.

With few exceptions, seniors are no longer employed or running businesses -- so our loss, as a result of the government’s irresponsible actions, is a permanent and lasting one. Also, since our incomes have been lowered, any so-called benefit for tax relief is of absolutely no value to those holding income trusts.

The Prime Minister promised to “protect seniors” and “NOT tax income trusts.” Now his government has broken that promise and caused irreparable financial harm to those Canadians who believed that promise and continued to buy and hold income trusts.

In the Enron scandal, senior executives who misled their shareholders paid a high price, including jail time.

In Canadian politics, it seems, one can misrepresent all kinds of financial matters and they are usually rewarded in some manner. Where does the PM’s much ballyhooed Accountability Act come into play? Or is this act exempt from such obligation?

How much advance consideration was given to this decision? Or was it just a improvised effort to destroy the income trust sector?

Why not limit the time frame a company could use the income trust structure to say 10 years, allowing the company to start up, and solidify its market and products, before it had to start paying corporate taxes?

Or, why not put a financial limit on the size such firms could grow to, and still let the income trust sector live on?

I'm certain there are a number of other solutions that would have satisfied the government’s purported aims (to stop further conversions of Canadian companies to income trusts strictly for tax benefits) and still have benefited trust investors, particularly seniors. But the more one follows the Commons hearings and debates on the income trust issue, the more one realizes that this Finance decision was hastily arrived at on the back of an envelope.

If the Conservatives expect the support of seniors in the coming election, major adjustments to this initial trust tax proposal of the Finance Minister's will be required -- not the inflexible stance he is presently taking.

Tuesday, March 6, 2007

CANADIAN ASSOCIATION OF RETIRED PEOPLE ENDORSES LIBERAL 10% SOLUTION

THE LIBERAL "TEN PERCENT SOLUTION":
A STEP IN THE RIGHT DIRECTION


CARP Press Release

Toronto, February 27, 2007 - The loss of $25 billion as a result of the Conservative Government’s unexpected action against Income Trusts continues to haunt Canadian investors and keeps CARP’s phones ringing off the hook with calls from seniors whose lives have been turned upside down by this action.

That is why this Association, representing 400,000 members, working on behalf of 11 million older Canadians, strongly supports the federal Liberal Party’s “ten percent solution.” The Liberal proposal to reduce the tax on current Income Trusts from the government's proposed 31.5% to 10% is a step in the right direction -- as is their proposal to grandfather current Income Trusts without adding new ones.

CARP notes that the severe impact of the tremendous losses of retirement income due to the Conservatives’ Income Trust policy can be eased with the Liberal proposal. Losses ranging from $10,000 to $100,000, by retirees, have been reported to CARP.

Regardless of the amount, such losses can create social and health crises, especially with the reduced market value of income trusts, and in some cases, lower monthly distributions -- a problem which is expected to increase as the four-year tax holiday comes to an end. This translates into lower spending power, which, in turn, affects the economy and the country's productivity.

Grandfathering current Income Trusts would, at least, ensure that investors get a better monthly distribution and the opportunity to significantly reverse their losses.

Thursday, March 1, 2007

HOW DO THE NDP & TORIES SLEEP AT NIGHT?

CONSERVATIVE GOVERNMENT’S DECISION ON INCOME TRUSTS WRONG!
-- COMMONS STANDING COMMITTEE ON FINANCE

Ottawa – The Conservative government must immediately follow the Finance Committee’s recommendations to implement a fully-refundable 10 per cent tax on income trusts in place of its destructive 31.5 per cent tax, Liberal Finance Critic John McCallum said today.

“The 10 per cent plan is good public policy that would help investors hurt by the Conservatives’ broken promise, level the tax playing field, protect an income stream that seniors have come to depend on, and help to prevent the decimated income trust sector from being bought up by foreign interests,” said Mr. McCallum. Mr. McCallum was referring to a report tabled today by the Standing Committee on Finance, which urges the government to drop its proposal for a 31.5 per cent tax on income trusts beginning in 2011. The report advocates the implementation of a 10 per cent tax – fully refundable to Canadian investors – in place of the highly destructive Conservative plan. This follows a similar recommendation put forward by Liberal Leader Stéphane Dion on February 13.

The 10 per cent plan has received support from both the Canadian Association of Retired Persons and the Canadian Retired & Income Investors' Association. Both RBC Dominion Securities and BMO analyst Gordon Tait have confirmed that such a plan would return two-thirds of the $25 billion that investors lost the day after the Conservative announcement. CIBC World Markets called the plan a “balanced approach” to income trusts. “Prime Minister Stephen Harper gave his word that he would not tax income trusts and when he broke that promise $25 billion of investors’ money went up in smoke. Now it’s time for Mr. Harper to swallow his pride, listen to the advice of the Finance Committee and Canadians, admit that his policy is wrong, and move to do what is right for Canada,” said Mr. McCallum.

The Committee report recommended that the Conservative government:

• Table any legislation dealing with tax income trusts in a stand alone Bill;

• Release the data and methodology it used to calculate the tax leakage it has alleged occurs due to the income trust sector; and

• Consider the 10 per cent plan and extending the phase-out period to 10 years.

Mr. McCallum also noted that the NDP has supported the Conservative government’s policy on income trusts, despite the number of low- and middle-income Canadians who depend on these investments for income. “The NDP must realize that they have an opportunity to live up to their motto and actually get results for people by endorsing the 10 per cent plan,” said Mr. McCallum.

For more information contact: Office of the Hon. John McCallum Liberal Finance Critic (613) 996-3374