RENOWNED BROKERAGE FIRM CONDEMNS FLAHERTY'S FOLLY

FAIRNESS, SCHMAIRNESS -- FLAHERTY EXPOSING CANADIAN BUSINESSES TO FOREIGN TAKE-OVERS

-- Special Report, RBC Dominion Securities, April 10, 2007

THE FEDERAL GOVERNMENT APPEARS BENT ON CREATING ITS OWN VERSION OF TAX FAIRNESS, AT THE EXPENSE OF MAKING CANADIAN BUSINESSES MORE VULNERABLE THAN EVER TO FOREIGN TAKEOVERS. AND AT THE EXPENSE OF FUTURE TAX REVENUES.

• TWO RECENT TAX CHANGES OPEN THE FLOODGATES – ALTHOUGH MAIN STREET MAY NOT KNOW IT, MANY CAN SEE THE WRITING ON THE WALL. TRUST TAXATION COUPLED WITH THE ELIMINATION OF DOUBLE-DIP INTEREST DEDUCTIBILITY LEAVES CANADIAN BUSINESSES ATTRACTIVE TO FOREIGN BUYERS. AND WE KNOW HOW FOREIGNERS LOVE TO PAY CANADIAN INCOME TAXES…. NOT.

• KILLING THE TRUSTS OFF – OCTOBER 31, 2006 WAS THE BEGINNING OF THE END AND ENOUGH HAS BEEN WRITTEN ON THIS TO KNOW THE FEDS ARE OUT TO ELIMINATE THE TRUSTS BY DECEMBER 31, 2010. THE PROPOSED LEGISLATION IS WELL ON ITS WAY THROUGH PARLIAMENT.

• KILLING THE DOUBLE DIP – IN THE FEDERAL BUDGET OF MARCH 2007, THE FEDERAL GOVERNMENT EFFECTIVELY ELIMINATED DOUBLE-DIP INTEREST DEDUCTIONS FOR CANADIAN CORPORATIONS ACQUIRING FOREIGN BUSINESSES. UNFORTUNATELY, THE RULES DO NOT STOP FOREIGN CORPORATIONS FROM USING THAT SAME TOOL TO ACQUIRE CANADIAN BUSINESSES. AS A RESULT, CANADIANS HAVE BEEN STRIPPED OF AN INVESTMENT TOOL THAT FOREIGNERS CAN USE TO ACQUIRE CANADIAN BUSINESSES.

• INTO THE CORPORATE RING WITH HANDS TIED SECURELY AT OUR BACKS – YOU WOULD THINK THAT THE FEDERAL GOVERNMENT WOULD TRY TO SUPPORT CANADIAN BUSINESSES (THE HOME-GROWN VARIETY) AS MUCH AS POSSIBLE, SO THEY ARE PREPARED TO TAKE ON GLOBAL COMPETITORS. INSTEAD, WE EFFECTIVELY TIE THE HANDS OF CANADIAN BUSINESSES BEHIND THEIR BACKS AND THROW THEM INTO THE GLOBAL RING. MANY WILL SURVIVE, BUT MANY WILL NOT IN A WORLD OF LOW INTEREST RATES AND INCREASING GLOBALIZATION.

• FAIR? TO WHOM? – ALL THIS DONE IN THE NAME OF TAX “FAIRNESS” WITHIN CANADA. BUT IF OTHER COUNTRIES DO NOT FOLLOW SUIT, THEN CANADIAN BUSINESSES AND INVESTORS ARE AT A GLOBAL DISADVANTAGE. THE CANADIAN FEDERAL GOVERNMENT CANNOT SET TAX POLICY IN OTHER COUNTRIES, AND CANADA CONTINUES TO HAVE ONE OF THE HIGHEST INCOME TAX RATES IN THE G-7.