Unethical Stand Of The Harper/Flaherty Duo On Income Trusts
Excerpts from MP Garth Turner's online blog:
"Just a few more words on income trusts.
Jim Flaherty is going to have to compromise on this. Stephen Harper will have to do for trust investors what he did for the environment. Take the ethical position.
The compromise is this: Prevent any more trust conversions – which is already done. Now, find a way to level out the playing field on taxing the trust income streams, so all taxpayers are treated equally, and all corporate entities pay a similar amount.
There are a few very creative and smart ideas for achieving this floating around Bay Street right now, and Flaherty should get off his ideological high horse, stop listening to the purists in the Department of Finance, and pay attention. There is nothing – repeat, nothing – inherently wrong with income trusts. They are not the tax evasion machines Ottawa has made them out to be, nor does the income they throw off end up in the pockets of greedy investors.
I used to admire Flaherty. A lot, actually. But that vaporized when I watched him in the House of Commons accuse people who questioned his trust tax as being “friends of big corporations.” If the minister of finance does not know better, he’s miles out of his depth.
The ethical position is this: Income trust investors who lost money because the prime minister lied to them must be compensated. They should be allowed to deduct trust unit capital losses suffered between October 31 and December 31, 2006 from taxable income in that year, with an unlimited carryforward until it is exhausted.
The coming hearings in Ottawa into the trust affair, although a mere six hours long, will surely uncover the untruths perpetrated by the Finance Department, and broadcast by the minister. For example, it is untrue that Canada is the only place in the civilized world with income trusts. A vast regime exists in the US.
It is untrue that trust money flowing into retirement accounts and RRSP is untaxed, costing Ottawa billions. As every retiree knows, money taken from an RRIF or an RRSP is fully taxable at that moment, regardless of where it originated.
Finally, it will remain forever untrue, or at least unbelieved, that income trusts hurt the economy, wound national competitiveness and rob the treasury of revenues, so long as Ottawa fails to give us the facts. The release this week to a financial analyst of 13 pages of documents under the Freedom of Information Act, which were blacked out and unreadable, only fuels our suspicion. The trust tax was imposed without reasons overwhelming enough to erase tens of billions of dollars in Canadians’ savings.
I think we’d understand the need to do something big to save the country. We’d go along even if a lie was involved. Even if the prime minister said it.
But in the absence of credible information, what are we to think? Especially when we see arrogance, where compromise, and ethics should be." -- Garth Turner, MP
Tax Leakage, Mr. Flaherty? There Is NO Tax Leakage!
“The notion of tax leakage has achieved the status of an urban legend in the press and public. The absence of any transparency by the Department of Finance (DoF) on this issue contributes to the myth of tax leakage. Exacerbating this absence of transparency is the equally glaring absence of competent methodology and analysis by the DoF. Their deeply flawed methodology means the government¹s assertion of tax leakage is indeed a myth: a dangerous and very costly myth that ill serves the public and degrades the government.
HLB Decision Economics prepared an authoritative analysis of alleged income trust tax leakage in the fall of 2005. HLB is economic consulting group based in Ottawa that does work for many departments of the federal government. HLB and DoF worked closely together. The government never released the analysis conducted by HLB. The final analysis of HLB and DoF diverged on the critical issue of revenue from Retirement accounts. HLB correctly considers these accounts as tax-deferred. DoF erroneously considers these accounts to be tax exempt. In fact retirement income is the second largest source of taxable income for the federal government. In 2004 Canadians paid $9 billion in retirement taxes on $52 billion in retirement income.
Erroneously characterizing retirement accounts as tax exempt instead of tax-deferred is a major cause underlying the myth of tax leakage. The Plan and all of its accompanying objectives are based on a foundation of sand. The mirage of tax leakage stems from the deeply flawed analysis and methodology of the DoF. Absent tax leakage there is no unfairness; absent unfairness the Plan is pointless.
In actuality the Plan is far worse than pointless: it is catastrophic. Announcement of the Plan instantly destroyed $30-35 billion in capital. A disproportionate number of investors harmed by this mammoth loss of capital are senior citizens and retirees. The Plan will also destroy a vibrant section of Canada¹s free market economy.
Virtually every study and report published after the Plan¹s announcement criticizes the Plan. Respected financial analysts and economists such as Gordon Tait and Yves Fortin are among those who have strongly criticized the Plan in their published reports.
Income trusts deserve to be preserved. These securities are an important investment choice for Canadians, many of whom are either saving for retirement or are retired." -- Garth Turner, MP
Friday, January 26, 2007
Thursday, January 25, 2007
THE FOOL IN EXPERT'S CLOTHING
The Truth About Diane Urquart, Self-Annointed Income Trust Expert
From today's press release from the bipartisan I-Trust Institute:
MISINFORMATION FROM EXPERTS DUE TO LIMITED DATA
A respected financial expert, Diane Urquhart, took the press podium in October 2006 beside the NDP finance critic, Judy Wasylycia-Leis, to present an "independent" study, "Income Trusts: Heads I Win, Tails You Lose".
In lead-up to public hearings, that expert is now reinforcing the study conclusion that suggests that reductions in income trust distributions reflect a problematic structure inherent in trust securities.
Ms. Urquhart is quoted (Toronto Star, January 23, 2007) as saying that a key concern for investors is that trusts fail to report the difference in source of cash for distribution in terms of return of capital or net operating gains.
The study and follow-up public commentary gives the public, including Finance Committee members and politicians, the misimpression that such distribution and structure problems are significant and generic among trusts.
Such expert opinion fails, however, to measure the extent to which the relatively few securities cited for study reflect the way flow-through entities [such as income trusts] generate net earnings or growth. Neither pre-hearing media commentary nor expert original study observes a full data set for the income trust market.
As a result, the expert comments are irresponsible and misleading when presented as fact, particularly when published without comparative measure and out of context. The distribution-oriented propositions are as offensive to good Canadian managers as the statements are inappropriately generic.
Through use of comprehensive market-tracking data, the iTrust Institute can show that:
(a) During 2006, there were more than three times as many distribution increases as decreases by income trusts. There is little difference in statistics when REITs are excluded;
(b) Approximately three quarters of income trusts and flow-through entities have not had a reduction in distribution in the past two years and, furthermore, pay cash returns to investors that are less than operating cash from continuing operations;
(c) The high frequency of cash distributions unique to Canadian income trusts generally increases returns relative to market-related risk for investors. This kind of cash return to investors offers such informative and economic value to investors seeking transparency in managerial practice that there is increasing demand by sophisticated foreign investors to own Canadian flow-through securities. There is demand to own Canadian income trusts despite the economic dampening impact of new taxes on recipients of distributions from income trusts.
Comprehensive factual studies show very different findings with significant implications compared to those presented in the expert independent study that was publicized as if part of the NDP Finance Critic's position on income trusts and the Party's stated reason to support
Conservative tax policies.
Institute findings can support some of the conclusions of that same study by Ms. Urquhart in so far as there is common recognition of the need to protect Canadians from false claims and incomplete attention to risk during promotional efforts by financial product and broker sales personnel.
There is clear evidence of need to improve the accuracy of information provided to investors by sellers when they advise or promote purchase of units or shares, particularly for initial public offerings. This perspective is not new or isolated to income trusts, however, and has been featured as a conclusion of reports commissioned by authorities like the Bank of Canada.
From today's press release from the bipartisan I-Trust Institute:
MISINFORMATION FROM EXPERTS DUE TO LIMITED DATA
A respected financial expert, Diane Urquhart, took the press podium in October 2006 beside the NDP finance critic, Judy Wasylycia-Leis, to present an "independent" study, "Income Trusts: Heads I Win, Tails You Lose".
In lead-up to public hearings, that expert is now reinforcing the study conclusion that suggests that reductions in income trust distributions reflect a problematic structure inherent in trust securities.
Ms. Urquhart is quoted (Toronto Star, January 23, 2007) as saying that a key concern for investors is that trusts fail to report the difference in source of cash for distribution in terms of return of capital or net operating gains.
The study and follow-up public commentary gives the public, including Finance Committee members and politicians, the misimpression that such distribution and structure problems are significant and generic among trusts.
Such expert opinion fails, however, to measure the extent to which the relatively few securities cited for study reflect the way flow-through entities [such as income trusts] generate net earnings or growth. Neither pre-hearing media commentary nor expert original study observes a full data set for the income trust market.
As a result, the expert comments are irresponsible and misleading when presented as fact, particularly when published without comparative measure and out of context. The distribution-oriented propositions are as offensive to good Canadian managers as the statements are inappropriately generic.
Through use of comprehensive market-tracking data, the iTrust Institute can show that:
(a) During 2006, there were more than three times as many distribution increases as decreases by income trusts. There is little difference in statistics when REITs are excluded;
(b) Approximately three quarters of income trusts and flow-through entities have not had a reduction in distribution in the past two years and, furthermore, pay cash returns to investors that are less than operating cash from continuing operations;
(c) The high frequency of cash distributions unique to Canadian income trusts generally increases returns relative to market-related risk for investors. This kind of cash return to investors offers such informative and economic value to investors seeking transparency in managerial practice that there is increasing demand by sophisticated foreign investors to own Canadian flow-through securities. There is demand to own Canadian income trusts despite the economic dampening impact of new taxes on recipients of distributions from income trusts.
Comprehensive factual studies show very different findings with significant implications compared to those presented in the expert independent study that was publicized as if part of the NDP Finance Critic's position on income trusts and the Party's stated reason to support
Conservative tax policies.
Institute findings can support some of the conclusions of that same study by Ms. Urquhart in so far as there is common recognition of the need to protect Canadians from false claims and incomplete attention to risk during promotional efforts by financial product and broker sales personnel.
There is clear evidence of need to improve the accuracy of information provided to investors by sellers when they advise or promote purchase of units or shares, particularly for initial public offerings. This perspective is not new or isolated to income trusts, however, and has been featured as a conclusion of reports commissioned by authorities like the Bank of Canada.
GORDON TAIT (BMO) -- TAX LEAKAGE? WHAT TAX LEAKAGE?
Hey Mr. Flaherty & Friends, Where's The Beef?
For an insight into the sheer arrogance and incompetence of Jim Flaherty and his Finance Department bureaucrats, nothing beats the recent ROB-TV interview of BMO analyst, Gordon Tait.
If you're able to view video files on your computer, then please click on this link to the Tait interview on ROB-TV.
Isn't the Freedom of Information act, as interpreted by the Great Helmsman Stephen Harper and his acolytes, grand?
For an insight into the sheer arrogance and incompetence of Jim Flaherty and his Finance Department bureaucrats, nothing beats the recent ROB-TV interview of BMO analyst, Gordon Tait.
If you're able to view video files on your computer, then please click on this link to the Tait interview on ROB-TV.
Isn't the Freedom of Information act, as interpreted by the Great Helmsman Stephen Harper and his acolytes, grand?
ENERGY TRUSTS -- KEY TO WESTERN PROSPERITY
Canadian Energy Trusts:
An Integral Component of the Canadian Oil and Gas Industry
Excerpted from CCET Report
Executive Summary
This report summarizes the perspective of the Coalition of Canadian Energy
Trusts (“CCET”) regarding the Government of Canada’s announcement of
October 31, 2006 with respect to energy trusts. The CCET also fully supports
the initiatives of the Canadian Association of Income Funds (“CAIF”) in regard
to reconsideration of the tax proposals made by the Minister of Finance.
Do Energy Trusts Cause Federal Tax Leakage?
No. Federal and provincial government revenues are actually enhanced by the
energy trust structure. During the past five years, CCET member trusts have
generated greater taxes both provincially and federally than would have
occurred had they been structured as corporations.
In 2005, the oil and gas trust sector generated over 30 percent of the tax
revenue collected from publicly-traded Canadian entities in the oil and gas
sector while representing only 16 percent of the revenue. Oil and gas royalty
trusts have also generated over 40 percent more taxes than Canadian publiclytraded
senior independent producers on a unit-of-production basis.
The capital intensity of oil and gas exploration and production generates
significant tax pools. As a result, oil and gas exploration and production
corporations have historically paid minimal corporate taxes. In contrast,
distributions from energy trusts generate:
• current personal income taxes from Canadians;
• additional tax from compounding investment in tax-deferred accounts; and
• a 15 to 25 percent withholding tax from foreign investors.
Because most CCET unitholders live outside Alberta, where all energy trusts
are based, Canadians throughout the country share in the distributions paid and
their provinces of residence benefit through hundreds of millions of dollars of
increased tax revenues. Alberta, in turn, receives the benefit of additional
royalties on mature oil and gas producing assets, spending on goods and
services in the province, employment and associated taxes, and all of the
ancillary economic spin-offs associated with increased activity.
Other Tax Considerations
• As long as there is no reduction in total tax paid, sources should be
irrelevant to the government, especially given that the government is
currently experiencing surpluses from its tax revenue collections.
• The federal government surplus is supported by taxes being collected
directly on distributions and from taxes being paid on retirement plan
withdrawals.
• Canadians’ retirement plans are “tax-deferred”, not “tax exempt”.
• Trust distributions in tax-deferred accounts act as huge savings accounts for
the government and serve to increase government tax revenues because:
- there is a gain to government revenues when trusts or other securities
are held inside tax-deferred accounts; and
- the tax cost of the contributions in any given year is offset by taxes
collected on the withdrawals in any given year.
• The existing 15 to 25 percent withholding tax on distributions to foreign
investors generates substantial revenues to the government, without any
corresponding use of services or infrastructure.
• Should a significant portion of the trust’s assets revert to foreign ownership,
tax value will most likely leave the country in the form of deductible interest
in Canada which will be subject to only 0 to 10 percent withholding tax and
from taxation of capital gains in foreign jurisdictions and not taxed in
Canada.
Do Energy Trusts Threaten Canada’s Long-term Economic Growth?
On the contrary, energy trusts are the ideal model for Canada’s mature
hydrocarbon basins. Since their introduction in 1986, they have played a unique
role in maximizing oil and gas production and reserve recovery and providing
essential capital to Canada’s energy industry.
The Western Canada Sedimentary Basin (“WCSB”) has matured rapidly in the
past twenty years. Despite record levels of drilling activity and capital spending:
• Canadian conventional light oil production has entered a decline phase with
production dropping at 3.4 percent per year since 1997; and
• Canadian natural gas production has only remained flat since 2000.
Other evidence of the maturation of Canada’s most prolific hydrocarbon basin is
as follows:
• capital spending in conventional assets, excluding oil sands, has doubled
since 2002;
• annual drilling activity has increased 500 percent since 1992;
• the cumulative number of wells drilled in the WCSB has more than doubled
in the last 13 years, but with ever-diminishing returns as production per well
continues to fall;
• limited incremental conventional oil opportunities exist as annual oil drilling
activities have remained flat since 2002 despite significant increases in
commodity prices and capital spending in the WCSB;
• with the producing well count increasing, the average per well oil productivity
has declined at 4.6 percent per year since 1994;
• the basin’s conventional prospects are now predominately natural gas pools,
with over 70 percent of conventional wells drilled in the WCSB targeting gas
in 2005; and
• natural gas production has reached a plateau as average natural gas per
well productivity has declined 9.2 percent per year since 1996.
Investors expect oil and gas producers organized as corporations to grow
production. Growth is increasingly difficult in the WCSB, where new gas well
production can decline as much as 30 percent in the first year. This is the socalled
“treadmill” effect as oil and gas producers have to reinvest much of their
cash flow just to keep production flat.
Oil and gas royalty trusts have a sustainability mandate. With a successful
history of optimizing assets and increasing productivity, this model has
demonstrated improved capital efficiencies over exploration and production
corporations with conventional WCSB operations.
For oil and gas trusts, there is an urgent requirement to reinvest cash flow to
maintain production. This is one of the major differentiators of royalty trusts from
business trusts.
Energy trusts have an important symbiotic relationship within the energy
industry. The oil and gas royalty trusts:
• buy and enhance mature assets from senior producers;
• are the logical buyers of juniors’ assets once they have proven up new
reserves and seek to monetize value, often providing a catalyst for
successful junior management teams to re-capitalize new companies,
creating more economic activity;
• have injected over $17 billion of new capital into the energy sector in the last
five years, much of which has been redistributed to the other producer subgroups
in the sector;
• have themselves invested over $15 billion in the last five years into lower
risk / lower return projects aligned with the objectives of the trust’s incomeoriented
investor base to optimize mature fields, enhancing the ultimate
recovery of Canada’s oil and gas resources; and
• have repatriated approximately $10 billion of assets from foreign control
during the past ten years. Many of these assets are being aggressively
optimized by the energy trusts, providing additional production and reserves
with minimal impact to the environment.
The government’s proposed tax changes would force trusts back into a
corporate structure that is less efficient for mature oil and gas assets, reducing
tax revenue for both provincial and federal governments.
Evolution of Canada’s Energy Industry
Conventional finding and development costs are up substantially in the last five
years, while unit operating costs have more than doubled. The combination of
higher costs and lower production and reserve expectations has made it more
difficult for energy producers to invest profitably in the WCSB. Those factors
have driven senior producers to seek their growth opportunities outside
Canada, to reduce their production growth expectations in the WCSB and to
pursue development of Alberta’s oil sands.
Senior producers and their peers have been selling their mature WCSB
properties to energy trusts, which have become expert at maximizing the
resource recovery out of these mature reservoirs. With the lower cost structure
and lower cost of capital that results from the alignment of unitholder objectives
to the asset base and the business plan, energy trusts are able to exploit and
extend mature property opportunities that would be uneconomic to other
producers.
This provides more oil and natural gas from existing pools without
intensive capital and infrastructure development of the type required for oil
sands development. From an environmental point of view, a considerable
number of these mature properties conserve waste gases, utilize efficient power
sources and have significant potential for greenhouse gas sequestration.
Although newer Canadian conventional hydrocarbon basins outside the WCSB
are promising, they remain underexploited due to a number of factors. These
include remoteness from markets, lack of infrastructure or unsettled land
claims, such as is the case with the Mackenzie Valley and Delta; a lack of new
discoveries, such as in offshore Newfoundland; and moratoriums on exploration
such as offshore BC. Optimal recovery from the WCSB remains critical to
Canada’s conventional oil and gas industry.
Environmental Considerations
Perhaps the most significant unintended consequence of the government’s
proposed tax changes relates to the environment, which is important to all
Canadians. Canada’s greenhouse gas (“GHG”) challenges are well
documented. As the WCSB has matured, ownership and control of the vast
majority of Canada’s legacy conventional oil reservoirs has transferred to the oil
and gas trust sector. The large corporations chose not to retain control of these
properties and pursue enhanced oil recovery (“EOR”) activities through CO2
injection, instead selling the majority of these large ‘in-place’ oil reserve assets
to the trusts.
The oil and gas trust sector’s low cost of capital and business model has
allowed these projects to become more attractive economically such that trusts
are now at the forefront of CO2 sequestration initiatives. In two large fields
alone, Pembina and Redwater, CO2 EOR projects could reduce emissions of
GHG to the atmosphere by 30,000 tonnes per day, or 11 million tonnes
annually. These projects represent the only truly meaningful opportunities to
dramatically reduce Canada’s GHG emissions in the near term.
Unfortunately these projects would be targeted to come on stream around
2011, just as the government’s revised tax treatment for trusts would come into
effect. The proposed changes will drive energy trusts back into a corporate
model.
As history has shown, this business model and a growth-oriented investor base
is not aligned with the pursuit of CO2 EOR projects in Alberta. At the very least
these projects will be delayed but more likely many may not proceed at all.
Social Considerations
Canadian energy trusts focus on optimizing existing conventional oil and gas
pools. This focus on optimization extends the effective working life of mature oil
and gas fields, providing continued direct and indirect economic benefits,
including future employment opportunities and municipal and county taxes, to
the many Western Canadian communities where trusts operate as well as to
the provincial treasuries. Additionally it creates new productivity in areas with
infrastructure, gas conservation and future potential for greenhouse gas
sequestration.
Other Unintended Consequences
Whenever major changes are made to government policies without consultation
of affected parties, unintended consequences result. In this case, these include:
• massive capital losses to millions of individual investors, on the order of $14
billion, and the associated lost tax revenue;
• reduced or lost income for millions of investors, many of whom depend on
this income to live;
• a ripple effect of reduced income for economic spending and lost investment
value for millions of Canadians, including charitable organizations;
• exposing Canadian corporations to leveraged buy-out groups seeking to
acquire intermediate-sized corporations;
• loss of head office jobs as management control leaves the country;
• a shifting of focus from implementing improved, energy-efficient optimization
methods on existing developed pools to less energy-efficient, grassroots
mega projects. This in turn imposes tremendous strain on infrastructure,
available labour and project costs; and
• ultimately reduced production and lower recovery of Canada’s oil and gas
reserves.
Without the trust structure companies will be forced to choose higher return
grassroots mega projects over lower return optimization of mature fields. With
the trust structure both types of projects can exist in harmony, ultimately
maximizing the recovery of Canada’s hydrocarbon resources.
Did Canada Stand Alone in its Treatment of Trusts Before These
Changes?
No. The U.S. did eliminate flow-through entities (“FTEs”) in 1987 but provided a
ten-year transition period, plus life thereafter upon electing to pay a 3.5 gross
income tax. This to be compared with the four years proposed in the “Tax
Fairness Plan”.
Further, the U.S. excluded Real Estate Investment Trusts (“REITs”) and explicitly exempted resource industries from the measures.
Ironically, the government’s proposed new tax will effectively eliminate the trust
structure in Canada’s resource sector just as that structure expands in the U.S.
Acting consistently with the U.S. would mean exempting the resource sector
and providing other trusts with a ten year transition period.
Conclusions
Energy trusts are different from other trusts by virtue of their very high
reinvestment requirements and their role in maintaining Canadian oil and
gas production. The proposed changes will have many unintended
effects, including the diminution of Canada’s energy supply.
Exempting energy trusts from the proposed tax changes is the only
sensible course of action for this government. Failure to do so will be
counter-productive to the government’s own stated reasons for acting.
Excerpted from: A Report By The Canadian Coalition Of Energy Trusts
An Integral Component of the Canadian Oil and Gas Industry
Excerpted from CCET Report
Executive Summary
This report summarizes the perspective of the Coalition of Canadian Energy
Trusts (“CCET”) regarding the Government of Canada’s announcement of
October 31, 2006 with respect to energy trusts. The CCET also fully supports
the initiatives of the Canadian Association of Income Funds (“CAIF”) in regard
to reconsideration of the tax proposals made by the Minister of Finance.
Do Energy Trusts Cause Federal Tax Leakage?
No. Federal and provincial government revenues are actually enhanced by the
energy trust structure. During the past five years, CCET member trusts have
generated greater taxes both provincially and federally than would have
occurred had they been structured as corporations.
In 2005, the oil and gas trust sector generated over 30 percent of the tax
revenue collected from publicly-traded Canadian entities in the oil and gas
sector while representing only 16 percent of the revenue. Oil and gas royalty
trusts have also generated over 40 percent more taxes than Canadian publiclytraded
senior independent producers on a unit-of-production basis.
The capital intensity of oil and gas exploration and production generates
significant tax pools. As a result, oil and gas exploration and production
corporations have historically paid minimal corporate taxes. In contrast,
distributions from energy trusts generate:
• current personal income taxes from Canadians;
• additional tax from compounding investment in tax-deferred accounts; and
• a 15 to 25 percent withholding tax from foreign investors.
Because most CCET unitholders live outside Alberta, where all energy trusts
are based, Canadians throughout the country share in the distributions paid and
their provinces of residence benefit through hundreds of millions of dollars of
increased tax revenues. Alberta, in turn, receives the benefit of additional
royalties on mature oil and gas producing assets, spending on goods and
services in the province, employment and associated taxes, and all of the
ancillary economic spin-offs associated with increased activity.
Other Tax Considerations
• As long as there is no reduction in total tax paid, sources should be
irrelevant to the government, especially given that the government is
currently experiencing surpluses from its tax revenue collections.
• The federal government surplus is supported by taxes being collected
directly on distributions and from taxes being paid on retirement plan
withdrawals.
• Canadians’ retirement plans are “tax-deferred”, not “tax exempt”.
• Trust distributions in tax-deferred accounts act as huge savings accounts for
the government and serve to increase government tax revenues because:
- there is a gain to government revenues when trusts or other securities
are held inside tax-deferred accounts; and
- the tax cost of the contributions in any given year is offset by taxes
collected on the withdrawals in any given year.
• The existing 15 to 25 percent withholding tax on distributions to foreign
investors generates substantial revenues to the government, without any
corresponding use of services or infrastructure.
• Should a significant portion of the trust’s assets revert to foreign ownership,
tax value will most likely leave the country in the form of deductible interest
in Canada which will be subject to only 0 to 10 percent withholding tax and
from taxation of capital gains in foreign jurisdictions and not taxed in
Canada.
Do Energy Trusts Threaten Canada’s Long-term Economic Growth?
On the contrary, energy trusts are the ideal model for Canada’s mature
hydrocarbon basins. Since their introduction in 1986, they have played a unique
role in maximizing oil and gas production and reserve recovery and providing
essential capital to Canada’s energy industry.
The Western Canada Sedimentary Basin (“WCSB”) has matured rapidly in the
past twenty years. Despite record levels of drilling activity and capital spending:
• Canadian conventional light oil production has entered a decline phase with
production dropping at 3.4 percent per year since 1997; and
• Canadian natural gas production has only remained flat since 2000.
Other evidence of the maturation of Canada’s most prolific hydrocarbon basin is
as follows:
• capital spending in conventional assets, excluding oil sands, has doubled
since 2002;
• annual drilling activity has increased 500 percent since 1992;
• the cumulative number of wells drilled in the WCSB has more than doubled
in the last 13 years, but with ever-diminishing returns as production per well
continues to fall;
• limited incremental conventional oil opportunities exist as annual oil drilling
activities have remained flat since 2002 despite significant increases in
commodity prices and capital spending in the WCSB;
• with the producing well count increasing, the average per well oil productivity
has declined at 4.6 percent per year since 1994;
• the basin’s conventional prospects are now predominately natural gas pools,
with over 70 percent of conventional wells drilled in the WCSB targeting gas
in 2005; and
• natural gas production has reached a plateau as average natural gas per
well productivity has declined 9.2 percent per year since 1996.
Investors expect oil and gas producers organized as corporations to grow
production. Growth is increasingly difficult in the WCSB, where new gas well
production can decline as much as 30 percent in the first year. This is the socalled
“treadmill” effect as oil and gas producers have to reinvest much of their
cash flow just to keep production flat.
Oil and gas royalty trusts have a sustainability mandate. With a successful
history of optimizing assets and increasing productivity, this model has
demonstrated improved capital efficiencies over exploration and production
corporations with conventional WCSB operations.
For oil and gas trusts, there is an urgent requirement to reinvest cash flow to
maintain production. This is one of the major differentiators of royalty trusts from
business trusts.
Energy trusts have an important symbiotic relationship within the energy
industry. The oil and gas royalty trusts:
• buy and enhance mature assets from senior producers;
• are the logical buyers of juniors’ assets once they have proven up new
reserves and seek to monetize value, often providing a catalyst for
successful junior management teams to re-capitalize new companies,
creating more economic activity;
• have injected over $17 billion of new capital into the energy sector in the last
five years, much of which has been redistributed to the other producer subgroups
in the sector;
• have themselves invested over $15 billion in the last five years into lower
risk / lower return projects aligned with the objectives of the trust’s incomeoriented
investor base to optimize mature fields, enhancing the ultimate
recovery of Canada’s oil and gas resources; and
• have repatriated approximately $10 billion of assets from foreign control
during the past ten years. Many of these assets are being aggressively
optimized by the energy trusts, providing additional production and reserves
with minimal impact to the environment.
The government’s proposed tax changes would force trusts back into a
corporate structure that is less efficient for mature oil and gas assets, reducing
tax revenue for both provincial and federal governments.
Evolution of Canada’s Energy Industry
Conventional finding and development costs are up substantially in the last five
years, while unit operating costs have more than doubled. The combination of
higher costs and lower production and reserve expectations has made it more
difficult for energy producers to invest profitably in the WCSB. Those factors
have driven senior producers to seek their growth opportunities outside
Canada, to reduce their production growth expectations in the WCSB and to
pursue development of Alberta’s oil sands.
Senior producers and their peers have been selling their mature WCSB
properties to energy trusts, which have become expert at maximizing the
resource recovery out of these mature reservoirs. With the lower cost structure
and lower cost of capital that results from the alignment of unitholder objectives
to the asset base and the business plan, energy trusts are able to exploit and
extend mature property opportunities that would be uneconomic to other
producers.
This provides more oil and natural gas from existing pools without
intensive capital and infrastructure development of the type required for oil
sands development. From an environmental point of view, a considerable
number of these mature properties conserve waste gases, utilize efficient power
sources and have significant potential for greenhouse gas sequestration.
Although newer Canadian conventional hydrocarbon basins outside the WCSB
are promising, they remain underexploited due to a number of factors. These
include remoteness from markets, lack of infrastructure or unsettled land
claims, such as is the case with the Mackenzie Valley and Delta; a lack of new
discoveries, such as in offshore Newfoundland; and moratoriums on exploration
such as offshore BC. Optimal recovery from the WCSB remains critical to
Canada’s conventional oil and gas industry.
Environmental Considerations
Perhaps the most significant unintended consequence of the government’s
proposed tax changes relates to the environment, which is important to all
Canadians. Canada’s greenhouse gas (“GHG”) challenges are well
documented. As the WCSB has matured, ownership and control of the vast
majority of Canada’s legacy conventional oil reservoirs has transferred to the oil
and gas trust sector. The large corporations chose not to retain control of these
properties and pursue enhanced oil recovery (“EOR”) activities through CO2
injection, instead selling the majority of these large ‘in-place’ oil reserve assets
to the trusts.
The oil and gas trust sector’s low cost of capital and business model has
allowed these projects to become more attractive economically such that trusts
are now at the forefront of CO2 sequestration initiatives. In two large fields
alone, Pembina and Redwater, CO2 EOR projects could reduce emissions of
GHG to the atmosphere by 30,000 tonnes per day, or 11 million tonnes
annually. These projects represent the only truly meaningful opportunities to
dramatically reduce Canada’s GHG emissions in the near term.
Unfortunately these projects would be targeted to come on stream around
2011, just as the government’s revised tax treatment for trusts would come into
effect. The proposed changes will drive energy trusts back into a corporate
model.
As history has shown, this business model and a growth-oriented investor base
is not aligned with the pursuit of CO2 EOR projects in Alberta. At the very least
these projects will be delayed but more likely many may not proceed at all.
Social Considerations
Canadian energy trusts focus on optimizing existing conventional oil and gas
pools. This focus on optimization extends the effective working life of mature oil
and gas fields, providing continued direct and indirect economic benefits,
including future employment opportunities and municipal and county taxes, to
the many Western Canadian communities where trusts operate as well as to
the provincial treasuries. Additionally it creates new productivity in areas with
infrastructure, gas conservation and future potential for greenhouse gas
sequestration.
Other Unintended Consequences
Whenever major changes are made to government policies without consultation
of affected parties, unintended consequences result. In this case, these include:
• massive capital losses to millions of individual investors, on the order of $14
billion, and the associated lost tax revenue;
• reduced or lost income for millions of investors, many of whom depend on
this income to live;
• a ripple effect of reduced income for economic spending and lost investment
value for millions of Canadians, including charitable organizations;
• exposing Canadian corporations to leveraged buy-out groups seeking to
acquire intermediate-sized corporations;
• loss of head office jobs as management control leaves the country;
• a shifting of focus from implementing improved, energy-efficient optimization
methods on existing developed pools to less energy-efficient, grassroots
mega projects. This in turn imposes tremendous strain on infrastructure,
available labour and project costs; and
• ultimately reduced production and lower recovery of Canada’s oil and gas
reserves.
Without the trust structure companies will be forced to choose higher return
grassroots mega projects over lower return optimization of mature fields. With
the trust structure both types of projects can exist in harmony, ultimately
maximizing the recovery of Canada’s hydrocarbon resources.
Did Canada Stand Alone in its Treatment of Trusts Before These
Changes?
No. The U.S. did eliminate flow-through entities (“FTEs”) in 1987 but provided a
ten-year transition period, plus life thereafter upon electing to pay a 3.5 gross
income tax. This to be compared with the four years proposed in the “Tax
Fairness Plan”.
Further, the U.S. excluded Real Estate Investment Trusts (“REITs”) and explicitly exempted resource industries from the measures.
Ironically, the government’s proposed new tax will effectively eliminate the trust
structure in Canada’s resource sector just as that structure expands in the U.S.
Acting consistently with the U.S. would mean exempting the resource sector
and providing other trusts with a ten year transition period.
Conclusions
Energy trusts are different from other trusts by virtue of their very high
reinvestment requirements and their role in maintaining Canadian oil and
gas production. The proposed changes will have many unintended
effects, including the diminution of Canada’s energy supply.
Exempting energy trusts from the proposed tax changes is the only
sensible course of action for this government. Failure to do so will be
counter-productive to the government’s own stated reasons for acting.
Excerpted from: A Report By The Canadian Coalition Of Energy Trusts
TERRANCE CORCHORAN: TIME FOR COMPROMISE ON TRUSTS
END TRUST WARS
BY Terence Corcoran,
Financial Post
Published: Thursday, January 25, 2007
Eventually we may get to a rational point in the income trust debate, some higher plain where we can no longer hear the juvenile caterwauling that currently drowns out sensible discussion. We got a glimpse of what that point might look like in Jack Mintz's commentary on this page yesterday reiterating his proposal to end the double taxation of corporate dividends.
Prof. Mintz's ideas and views on trusts, published in detail in the Canadian Tax Journal last year, are a good start, but maybe there's more to be done. An RBC Capital Markets analyst has done just that, taking up the Mintz plan and merging it with another to create a tax regime for both corporations and income trusts that would resolve the current cause of the clash between the systems.
The Mintz plan aims to end the core corporate tax problem that still exists in the Canadian system. Corporations are taxed on their income, but dividends paid to investors in RRSPs and pension plans are subject to tax again when the dividends are distributed as retirement income. To end that double taxation, Prof. Mintz proposes that Finance Minister Jim Flaherty introduce a refundable dividend tax credit for all Canadians.
An example: If a corporation earns $100 in profit, it pays $32 in tax at the corporate level. If it pays a dividend of $68 with the remaining cash, the $68 will eventually become taxable again in the hands of a retired person. If we assume a top tax rate of 43%, that leaves only $38 in the hands of pensioners. That's not fair.
To fix that double taxation problem, Prof. Mintz proposes a dividend tax credit that would refund the original $32 paid by the corporation to the pension fund or RRSP holder. The pensioner would then effectively receive $100 and pay tax only after the money is distributed as retirement income some time in the future. All investors would be in the same after-tax position.
The Mintz plan, thus oversimplified, ends there. The expectation is that the plan, which effectively standardizes the corporate tax rate across all Canadian taxpayers, would end the demand for income trusts since there would be no tax advantages to the trust structure.
Dirk Lever, at RBC Capital Markets, takes the Mintz plan further by incorporating another idea, first suggested in December by PricewaterhouseCoopers. The PWC proposal was aimed at neutralizing the double taxation effect of Mr. Flaherty's new tax on income trusts. It follows the same track as the Mintz plan. The tax paid by an income trust under the Flaherty plan would be reimbursed to pension funds and RRSPs on distribution. The income therefore enters a pension fund tax free and would then only be taxable when it is paid to the final recipient of retirement income.
The PWC proposal, therefore, only aims to fix the double taxation of income trust distributions, while the Mintz proposal aims to fix the same problem on corporate dividend payouts. The RBC Capital Market plan joins the two proposals, creating many benefits for the whole Canadian corporate tax system.
First, the RBC plan puts income trusts and corporations on the same tax footing. Second, it means that existing income trusts may not have to go through costly conversions from the income trust structure back to corporate structure. Best of all, the plan ends what has long been a source of distortion in the Canadian corporate tax system, the double taxation of corporate profits that are distributed to Canadian investors.
As Mr. Lever puts it, a merger of the Mintz and PWC plans "will eloquently solve both issues." All Canadians can come out of the trust policy fiasco as winners.
Trusts and corporations could then exist side by side as far as the tax rates are concerned, all other things being equal. There may, of course, be other reasons for investors and corporate managers to favour one structure over another, but at least the investment and structural decisions will not be dictated by distortions in the tax system.
To download the RBC Capital Market research papers on corporate taxation, check the online "extras" at www.nationalpost.com. As the government and the Commons finance committee review the income trust issue, they should know that they have a solution at hand that transcends the political grandstanding and hysteria-mongering that now dominate the debate.
© National Post 2007
BY Terence Corcoran,
Financial Post
Published: Thursday, January 25, 2007
Eventually we may get to a rational point in the income trust debate, some higher plain where we can no longer hear the juvenile caterwauling that currently drowns out sensible discussion. We got a glimpse of what that point might look like in Jack Mintz's commentary on this page yesterday reiterating his proposal to end the double taxation of corporate dividends.
Prof. Mintz's ideas and views on trusts, published in detail in the Canadian Tax Journal last year, are a good start, but maybe there's more to be done. An RBC Capital Markets analyst has done just that, taking up the Mintz plan and merging it with another to create a tax regime for both corporations and income trusts that would resolve the current cause of the clash between the systems.
The Mintz plan aims to end the core corporate tax problem that still exists in the Canadian system. Corporations are taxed on their income, but dividends paid to investors in RRSPs and pension plans are subject to tax again when the dividends are distributed as retirement income. To end that double taxation, Prof. Mintz proposes that Finance Minister Jim Flaherty introduce a refundable dividend tax credit for all Canadians.
An example: If a corporation earns $100 in profit, it pays $32 in tax at the corporate level. If it pays a dividend of $68 with the remaining cash, the $68 will eventually become taxable again in the hands of a retired person. If we assume a top tax rate of 43%, that leaves only $38 in the hands of pensioners. That's not fair.
To fix that double taxation problem, Prof. Mintz proposes a dividend tax credit that would refund the original $32 paid by the corporation to the pension fund or RRSP holder. The pensioner would then effectively receive $100 and pay tax only after the money is distributed as retirement income some time in the future. All investors would be in the same after-tax position.
The Mintz plan, thus oversimplified, ends there. The expectation is that the plan, which effectively standardizes the corporate tax rate across all Canadian taxpayers, would end the demand for income trusts since there would be no tax advantages to the trust structure.
Dirk Lever, at RBC Capital Markets, takes the Mintz plan further by incorporating another idea, first suggested in December by PricewaterhouseCoopers. The PWC proposal was aimed at neutralizing the double taxation effect of Mr. Flaherty's new tax on income trusts. It follows the same track as the Mintz plan. The tax paid by an income trust under the Flaherty plan would be reimbursed to pension funds and RRSPs on distribution. The income therefore enters a pension fund tax free and would then only be taxable when it is paid to the final recipient of retirement income.
The PWC proposal, therefore, only aims to fix the double taxation of income trust distributions, while the Mintz proposal aims to fix the same problem on corporate dividend payouts. The RBC Capital Market plan joins the two proposals, creating many benefits for the whole Canadian corporate tax system.
First, the RBC plan puts income trusts and corporations on the same tax footing. Second, it means that existing income trusts may not have to go through costly conversions from the income trust structure back to corporate structure. Best of all, the plan ends what has long been a source of distortion in the Canadian corporate tax system, the double taxation of corporate profits that are distributed to Canadian investors.
As Mr. Lever puts it, a merger of the Mintz and PWC plans "will eloquently solve both issues." All Canadians can come out of the trust policy fiasco as winners.
Trusts and corporations could then exist side by side as far as the tax rates are concerned, all other things being equal. There may, of course, be other reasons for investors and corporate managers to favour one structure over another, but at least the investment and structural decisions will not be dictated by distortions in the tax system.
To download the RBC Capital Market research papers on corporate taxation, check the online "extras" at www.nationalpost.com. As the government and the Commons finance committee review the income trust issue, they should know that they have a solution at hand that transcends the political grandstanding and hysteria-mongering that now dominate the debate.
© National Post 2007
DIANE FRANCIS TELLS IT LIKE IT IS!
PROVE THE CASE OR DROP THE TAX
-- Finance Minister Flaherty Hasn't Done His Research On Income Trusts
BY Diane Francis
Financial Post
Wednesday, January 24, 2007
The only fair resolution to the Tory income-trust mess is to compensate every investor who held onto, or bought, income trusts after Stephen Harper uncategorically promised they would remain untouched eight months ago.
That, or they must abandon their proposed tax on existing trusts.
The stupidity of this trust tax is why the issue hasn't and won't go away. It's why Opposition parties have correctly forced a hearing for next month at the finance committee in the House of Commons.
Personally, I am offended by the actions and attitude of rookie Finance Minister Jim Flaherty.
He was twice a rookie for: (a) not crafting an income-trust reform that would respect his Prime Minister's promise to leave existing income trusts alone; and (b) for not doing his homework in an area that he obviously doesn't understand - - thus the fact that he has parroted a number of obvious inaccuracies.
On the first gaffe, Mr. Flaherty should have known there were dozens of alternatives that would have stopped the proliferation of income trusts and, at the same time, surgically reformed existing ones without damaging investors. This is what the Americans and Australians did when they embarked on reforms.
But Mr. Flaherty did not do his research. He could not have because he said publicly that the Americans and Australians had shut down all their trusts except for real-estate ones. That's totally wrong.
The U.S. energy/infrastructure trust sector is now equivalent in size to 20% of the entire Toronto Stock Exchange, or more than US$480-billion. Whoops.
Then there's the tax leakage myth.
Department of Finance officials convinced, and gave Mr. Flaherty, the false information that registered retirement savings plans (RRSPs) and pension payments were tax-exempt. Too bad they aren't.
So the question that begs an answer is, why didn't this Finance Minister know this was untrue? Is it because he is not an investor and won't rely on his RRSP like 70% of Canadians must? Instead, he and his spouse are professional politicians with defined-benefit pension plans.
Another piece of "work" cited by government officials that tax leakage was an issue was done by Toronto academic Jack Mintz, who has been going around ever since distancing himself to paying customers on Bay Street from this research.
So there you have it: an academic allegedly unwilling to publicly come out defending or recanting, as well as civil servants and a minister who apparently don't even understand how RRSPs or the tax system operates.
It's little wonder we have this mess -- which comes to my last, and possibly most important, point for the House of Commons committee members to consider and pursue.
About the only excuse I can think of to account for this $30- billion mistake is that securities laws prevented Flaherty from talking with knowledgeable industry sources ahead of time. There were leaks when the Liberals looked at income trusts and the Tories made an unholy fuss about that.
But that doesn't matter. Mr. Flaherty had plenty of experts to consult outside the Department of Finance, which has been gunning for this tax for ages.
If he wanted to understand the nature of RRSP and pension tax treatments, he could have called former finance minister Michael Wilson, who invented RRSPs in the 1980s.
He is now on the government payroll as U.S. Ambassador and, therefore, securities law safe.
More important, Flaherty could have, and should have, picked up the phone and called the most knowledgeable man in the country -- Bank of Canada governor David Dodge.
If he did not do that, it's recklessness. If he did, and didn't listen, he was irresponsible. If he listened and rejected, then he had better tell the committee why the man who really runs the economy was wrong last summer when he defended income trusts after a bank study.
Here is what Dodge said in 2006:
"The work we have done in terms of capital markets, per se, is that probably, on balance, income trusts make capital markets somewhat more complete and somewhat more efficient," Dodge told a news conference held as part of the bank's quarterly economic outlook. The bank studied trusts.
"Limited evidence suggests that income trusts may enhance market completeness by providing diversification benefits to investors and a source of financing to firms that might not otherwise have had access to markets," the bank's study said.
That's why it is no wonder people who understand capital markets are furious.
Now, firms like PriceWaterhouseCoopers and various prestigious money-management firms are joined in the Canadian Association of Income Trust Investors.
And their bottom line is the same as mine. This Finance Minister must prove his case or drop the tax.
"If the government's actions cannot be fully substantiated by independent experts with proven expertise in the workings of the Canadian capital markets, then our Association will be calling for the repudiation of the Tax Fairness Plan in the name of fairness and good governance."
It all proves that being Finance Minister of Canada requires a lot more sophistication and a lot more experience than just paying bills, cutting costs and tinkering with local taxes as a provincial treasurer.
-- Finance Minister Flaherty Hasn't Done His Research On Income Trusts
BY Diane Francis
Financial Post
Wednesday, January 24, 2007
The only fair resolution to the Tory income-trust mess is to compensate every investor who held onto, or bought, income trusts after Stephen Harper uncategorically promised they would remain untouched eight months ago.
That, or they must abandon their proposed tax on existing trusts.
The stupidity of this trust tax is why the issue hasn't and won't go away. It's why Opposition parties have correctly forced a hearing for next month at the finance committee in the House of Commons.
Personally, I am offended by the actions and attitude of rookie Finance Minister Jim Flaherty.
He was twice a rookie for: (a) not crafting an income-trust reform that would respect his Prime Minister's promise to leave existing income trusts alone; and (b) for not doing his homework in an area that he obviously doesn't understand - - thus the fact that he has parroted a number of obvious inaccuracies.
On the first gaffe, Mr. Flaherty should have known there were dozens of alternatives that would have stopped the proliferation of income trusts and, at the same time, surgically reformed existing ones without damaging investors. This is what the Americans and Australians did when they embarked on reforms.
But Mr. Flaherty did not do his research. He could not have because he said publicly that the Americans and Australians had shut down all their trusts except for real-estate ones. That's totally wrong.
The U.S. energy/infrastructure trust sector is now equivalent in size to 20% of the entire Toronto Stock Exchange, or more than US$480-billion. Whoops.
Then there's the tax leakage myth.
Department of Finance officials convinced, and gave Mr. Flaherty, the false information that registered retirement savings plans (RRSPs) and pension payments were tax-exempt. Too bad they aren't.
So the question that begs an answer is, why didn't this Finance Minister know this was untrue? Is it because he is not an investor and won't rely on his RRSP like 70% of Canadians must? Instead, he and his spouse are professional politicians with defined-benefit pension plans.
Another piece of "work" cited by government officials that tax leakage was an issue was done by Toronto academic Jack Mintz, who has been going around ever since distancing himself to paying customers on Bay Street from this research.
So there you have it: an academic allegedly unwilling to publicly come out defending or recanting, as well as civil servants and a minister who apparently don't even understand how RRSPs or the tax system operates.
It's little wonder we have this mess -- which comes to my last, and possibly most important, point for the House of Commons committee members to consider and pursue.
About the only excuse I can think of to account for this $30- billion mistake is that securities laws prevented Flaherty from talking with knowledgeable industry sources ahead of time. There were leaks when the Liberals looked at income trusts and the Tories made an unholy fuss about that.
But that doesn't matter. Mr. Flaherty had plenty of experts to consult outside the Department of Finance, which has been gunning for this tax for ages.
If he wanted to understand the nature of RRSP and pension tax treatments, he could have called former finance minister Michael Wilson, who invented RRSPs in the 1980s.
He is now on the government payroll as U.S. Ambassador and, therefore, securities law safe.
More important, Flaherty could have, and should have, picked up the phone and called the most knowledgeable man in the country -- Bank of Canada governor David Dodge.
If he did not do that, it's recklessness. If he did, and didn't listen, he was irresponsible. If he listened and rejected, then he had better tell the committee why the man who really runs the economy was wrong last summer when he defended income trusts after a bank study.
Here is what Dodge said in 2006:
"The work we have done in terms of capital markets, per se, is that probably, on balance, income trusts make capital markets somewhat more complete and somewhat more efficient," Dodge told a news conference held as part of the bank's quarterly economic outlook. The bank studied trusts.
"Limited evidence suggests that income trusts may enhance market completeness by providing diversification benefits to investors and a source of financing to firms that might not otherwise have had access to markets," the bank's study said.
That's why it is no wonder people who understand capital markets are furious.
Now, firms like PriceWaterhouseCoopers and various prestigious money-management firms are joined in the Canadian Association of Income Trust Investors.
And their bottom line is the same as mine. This Finance Minister must prove his case or drop the tax.
"If the government's actions cannot be fully substantiated by independent experts with proven expertise in the workings of the Canadian capital markets, then our Association will be calling for the repudiation of the Tax Fairness Plan in the name of fairness and good governance."
It all proves that being Finance Minister of Canada requires a lot more sophistication and a lot more experience than just paying bills, cutting costs and tinkering with local taxes as a provincial treasurer.
Wednesday, January 24, 2007
UNHOLY NDP/TORY ALLIANCE -- PROMOTING INEQUALITY
The NDP/TORY Plan:
Propping Up The Privileged On The Backs Of Average Retirees
Who'd a thunk? The NDP in bed with the most right-wing political party in Canada's history -- allied in a stubborn legislative effort to bring more perks and privileges to the affluent while kicking a vulnerable segment of Canada's seniors while they're down.
Congratulations, Jack Layton. You (and your abrasive NDP finance critic) have enhanced the election prospects for the Liberal and Green Parties for years to come.
So what's the story behind the story of the NDP sell-out to establishment interests? Well, obviously Mr. Layton so strongly fears another election that he foolishly has put the full weight of the NDP behind Stephen Harper's heartless plan to enrich his wealthy allies on the backs of ordinary Canadian retirees, via a non-stop war on income trusts. Not to mention that Mr. Harper's proposed Machiavellian legislation appears designed to impoverish already-vulnerable seniors in order to enrich the most privileged groups of seniors (the uber wealthy in Rosedale and other gilded ghettos of privilege, and retired government employees and politicians receiving their over-generous guaranteed indexed pensions).
Whether by destroying publicly-traded investment trusts as a source of retirement income for ordinary seniors, or by enshrining the "sacred' role of private family trusts for the wealthy, the planned Layton/Harper legislation can only create and perpetuate new social and class divisions among Canada's seniors.
The new order of the day, for the NDP and their Conservative friends, appears to be glaring social and economic inequality among Canada's retired seniors, and perpetuation of the economic dominance of Canada's affluent ruling classes.
Quite a day's work for a political party like the NDP, which still talks the socialist/democratic talk, but now walks the elitist Rosedale/Rockcliffe walk -- thanks to the party's alliance with Jack Layton's newest best friend, Stephen Harper.
Imagine what the dynamic duo have planned for Canada's environment once they're done with income trusts. Perhaps Mr. Layton would consider appointing Rhona Ambrose as his deputy leader for this next big push.
In the meantime, please read on for more unpleasant truths about the social inequality being promoted by Canada's most deceitful politicians, in the name of "fairness":
***********
NDP'S BLIND ADHERENCE TO CONSERVATIVE'S INCOME TRUST AGENDA PROMOTES FURTHER INEQUITY IN CANADA'S TWO TIERED PENSION SYSTEM, SO SAYS CAITI
TORONTO, Jan. 23 /CNW/ - The Income Trust issue is one that profoundly affects the ability of senior Canadians to provide for retirement income. It materially affects Canadian's standard of living during their retirement years.
The Conservative's Income Trust agenda is being advanced for the benefit of narrow corporate interests. It is being falsely advanced on unproven assertions of tax leakage and other unproven, yet quantifiable, assertions contained in the Notice of and Means Motion to Amend the Income Tax Act. These measures will eliminate this popular retirement investment choice for the average Canadian.
This policy eliminates important retirement investment choices for Canadians, both now and in the future. To make this very same point, Stephen Harper himself quoted CARP (Canadian Association of Retired Persons) in his opinion editorial which appeared in the National Post on October 25, 2005: "Seniors are actually enraged frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living."
Of course, during the autumn of 2005, Mr. Harper was promising to "protect seniors" and to "NOT tax income trusts." Would you buy a used car from this politician?
Well, perhaps NDP leader Jack Layton would. After all, by blindly adhering to the Conservative's newly-minted policy to eliminate income trusts as a means to provide retirement income, the NDP is helping foster financial uncertainty and unnecessary hardship on those of retirement age and the most vulnerable members of Canadian society -- namely seniors.
Many long standing NDP supporters are bewildered by this unholy alliance between the NDP and the Conservatives on this issue: "We are shocked that the NDP has supported the Harper government on its attempts to steal our retirement monies. My parents and relatives helped found the CCF and the NDP. I am sure they are turning over in their graves at what seems to be an illogical political move by the NDP. "
Canada has a two-tiered retirement system, which is evolving into an unanticipated underpinning of new social and class divisions in the senior years (in other words, new social and economic inequities).
30% of Canadians are members of defined benefit pension plans [generous guaranteed pensions], whereas 70% are not. Those who are in the first privileged category include our elected representatives in Ottawa and the 280,000 members of the public civil service in Ottawa whose pension assets are managed by the Public Sector Pension Investment Board. These generous pension arrangements are accorded to all Members of Parliament, regardless of their political party affiliation.
The other 70% must provide for their retirement through payouts from RSP-style savings plans (what they receive will depend upon how much they were able to save).
At present, Canadians are generally acceptant of this seeming disparity in the manner in which certain Canadians' financial security is assured, while other's financial security is based on virtual self reliance. Others consider it an inequity.
The Conservatives' Income Trust policy, and the NDP's adherence to it, dramatically exacerbates this inequity in the minds of the many Canadians who are members of the 70% majority who do not have a guaranteed pension. That is because, on the Income Trust issue, the majority is now being treated like a minority.
Under the proposed Tory/NDP trust tax legislation, important choices will be taken from the majority and be preserved and enhanced for the privileged minority.
Unlike the changes contemplated a year ago by the Liberals, the Conservatives have implemented a subtle yet profound change to their proposed trust tax policy. Mr. Flaherty's brand of so-called tax fairness "carves out" the ability of Canada's largest pension funds to replicate the current tax-free benefits of income trusts (for the trusts themselves, not their investors who pay tax) by holding private trusts in their private equity portfolios.
So the 70% majority (the rest of us) will no longer be able to invest in the original beneficial "flow-through" trust tax structure. But privileged politicians and bureaucrats still will be able to enjoy the benefits this "flow-through" structure via the private trusts that their pension plans create and invest in.
Our question to the Stephen Harper and Jack Layton: "How can something that is being denied the average Canadian, on the basis of its presumed negative effect on Ottawa's tax base, be allowed to persist for the benefit of those in our public civil service and others so advantaged?"
Not being slow to take advantage of this "carve out", the Public Sector Pension Investment Board (PSP) is already making good use of this exception through the recently announced purchase of Telesat Canada from BCE Inc for $3.4 billion. Telesat will be the financial equivalent of an income trust and will be held in the public-sector pension plan's growing private equity portfolio.
Talk about tax leakage, tax unfairness and political inequities. PSP's investment in Telesat will not be taxed in the manner that Flaherty would tax such an investment in an individual Canadian's RRSP.
This is a gross inequity that only serves to exacerbate the two tired pension system in Canada, making things harder for the marginalized 70% and better for the privileged 30%.
Consequently, The Canadian Association of Income Trusts Investors (CAITI) calls upon the NDP to fundamentally rethink its irrational adherence to Finance Minister Flaherty's inherently unfair and unjustified legislative proposal to erode ordinary Canadians' ability to fund their retirements, while enhancing the options available to Canada's most privileged seniors.
Not to mention the Conservative government's decision to continue to permit private tax-advantaged family trusts for the wealthy, while denying similar benefits to those who most desperately need such tax relief in their senior years. -- Excerpted from a press release from CAITI
*********
FEDERAL TRUST TAX PROPOSALS: TAX UNFAIRNESS
Propping Up The Privileged On The Backs Of Average Retirees
Who'd a thunk? The NDP in bed with the most right-wing political party in Canada's history -- allied in a stubborn legislative effort to bring more perks and privileges to the affluent while kicking a vulnerable segment of Canada's seniors while they're down.
Congratulations, Jack Layton. You (and your abrasive NDP finance critic) have enhanced the election prospects for the Liberal and Green Parties for years to come.
So what's the story behind the story of the NDP sell-out to establishment interests? Well, obviously Mr. Layton so strongly fears another election that he foolishly has put the full weight of the NDP behind Stephen Harper's heartless plan to enrich his wealthy allies on the backs of ordinary Canadian retirees, via a non-stop war on income trusts. Not to mention that Mr. Harper's proposed Machiavellian legislation appears designed to impoverish already-vulnerable seniors in order to enrich the most privileged groups of seniors (the uber wealthy in Rosedale and other gilded ghettos of privilege, and retired government employees and politicians receiving their over-generous guaranteed indexed pensions).
Whether by destroying publicly-traded investment trusts as a source of retirement income for ordinary seniors, or by enshrining the "sacred' role of private family trusts for the wealthy, the planned Layton/Harper legislation can only create and perpetuate new social and class divisions among Canada's seniors.
The new order of the day, for the NDP and their Conservative friends, appears to be glaring social and economic inequality among Canada's retired seniors, and perpetuation of the economic dominance of Canada's affluent ruling classes.
Quite a day's work for a political party like the NDP, which still talks the socialist/democratic talk, but now walks the elitist Rosedale/Rockcliffe walk -- thanks to the party's alliance with Jack Layton's newest best friend, Stephen Harper.
Imagine what the dynamic duo have planned for Canada's environment once they're done with income trusts. Perhaps Mr. Layton would consider appointing Rhona Ambrose as his deputy leader for this next big push.
In the meantime, please read on for more unpleasant truths about the social inequality being promoted by Canada's most deceitful politicians, in the name of "fairness":
***********
NDP'S BLIND ADHERENCE TO CONSERVATIVE'S INCOME TRUST AGENDA PROMOTES FURTHER INEQUITY IN CANADA'S TWO TIERED PENSION SYSTEM, SO SAYS CAITI
TORONTO, Jan. 23 /CNW/ - The Income Trust issue is one that profoundly affects the ability of senior Canadians to provide for retirement income. It materially affects Canadian's standard of living during their retirement years.
The Conservative's Income Trust agenda is being advanced for the benefit of narrow corporate interests. It is being falsely advanced on unproven assertions of tax leakage and other unproven, yet quantifiable, assertions contained in the Notice of and Means Motion to Amend the Income Tax Act. These measures will eliminate this popular retirement investment choice for the average Canadian.
This policy eliminates important retirement investment choices for Canadians, both now and in the future. To make this very same point, Stephen Harper himself quoted CARP (Canadian Association of Retired Persons) in his opinion editorial which appeared in the National Post on October 25, 2005: "Seniors are actually enraged frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living."
Of course, during the autumn of 2005, Mr. Harper was promising to "protect seniors" and to "NOT tax income trusts." Would you buy a used car from this politician?
Well, perhaps NDP leader Jack Layton would. After all, by blindly adhering to the Conservative's newly-minted policy to eliminate income trusts as a means to provide retirement income, the NDP is helping foster financial uncertainty and unnecessary hardship on those of retirement age and the most vulnerable members of Canadian society -- namely seniors.
Many long standing NDP supporters are bewildered by this unholy alliance between the NDP and the Conservatives on this issue: "We are shocked that the NDP has supported the Harper government on its attempts to steal our retirement monies. My parents and relatives helped found the CCF and the NDP. I am sure they are turning over in their graves at what seems to be an illogical political move by the NDP. "
Canada has a two-tiered retirement system, which is evolving into an unanticipated underpinning of new social and class divisions in the senior years (in other words, new social and economic inequities).
30% of Canadians are members of defined benefit pension plans [generous guaranteed pensions], whereas 70% are not. Those who are in the first privileged category include our elected representatives in Ottawa and the 280,000 members of the public civil service in Ottawa whose pension assets are managed by the Public Sector Pension Investment Board. These generous pension arrangements are accorded to all Members of Parliament, regardless of their political party affiliation.
The other 70% must provide for their retirement through payouts from RSP-style savings plans (what they receive will depend upon how much they were able to save).
At present, Canadians are generally acceptant of this seeming disparity in the manner in which certain Canadians' financial security is assured, while other's financial security is based on virtual self reliance. Others consider it an inequity.
The Conservatives' Income Trust policy, and the NDP's adherence to it, dramatically exacerbates this inequity in the minds of the many Canadians who are members of the 70% majority who do not have a guaranteed pension. That is because, on the Income Trust issue, the majority is now being treated like a minority.
Under the proposed Tory/NDP trust tax legislation, important choices will be taken from the majority and be preserved and enhanced for the privileged minority.
Unlike the changes contemplated a year ago by the Liberals, the Conservatives have implemented a subtle yet profound change to their proposed trust tax policy. Mr. Flaherty's brand of so-called tax fairness "carves out" the ability of Canada's largest pension funds to replicate the current tax-free benefits of income trusts (for the trusts themselves, not their investors who pay tax) by holding private trusts in their private equity portfolios.
So the 70% majority (the rest of us) will no longer be able to invest in the original beneficial "flow-through" trust tax structure. But privileged politicians and bureaucrats still will be able to enjoy the benefits this "flow-through" structure via the private trusts that their pension plans create and invest in.
Our question to the Stephen Harper and Jack Layton: "How can something that is being denied the average Canadian, on the basis of its presumed negative effect on Ottawa's tax base, be allowed to persist for the benefit of those in our public civil service and others so advantaged?"
Not being slow to take advantage of this "carve out", the Public Sector Pension Investment Board (PSP) is already making good use of this exception through the recently announced purchase of Telesat Canada from BCE Inc for $3.4 billion. Telesat will be the financial equivalent of an income trust and will be held in the public-sector pension plan's growing private equity portfolio.
Talk about tax leakage, tax unfairness and political inequities. PSP's investment in Telesat will not be taxed in the manner that Flaherty would tax such an investment in an individual Canadian's RRSP.
This is a gross inequity that only serves to exacerbate the two tired pension system in Canada, making things harder for the marginalized 70% and better for the privileged 30%.
Consequently, The Canadian Association of Income Trusts Investors (CAITI) calls upon the NDP to fundamentally rethink its irrational adherence to Finance Minister Flaherty's inherently unfair and unjustified legislative proposal to erode ordinary Canadians' ability to fund their retirements, while enhancing the options available to Canada's most privileged seniors.
Not to mention the Conservative government's decision to continue to permit private tax-advantaged family trusts for the wealthy, while denying similar benefits to those who most desperately need such tax relief in their senior years. -- Excerpted from a press release from CAITI
*********
FEDERAL TRUST TAX PROPOSALS: TAX UNFAIRNESS
Dirk Lever, et al
RBC Dominion Securities
January 23, 2007
We believe the Federal Government’s trust tax proposals do not meet its own goal: tax fairness. The proposals only address 1 of 4 tax fairness tests. There is a better way!
A Summary Of This Report
Double Taxing Pension Benefits – Canadian corporate dividends received by Canadian pensioners through a pension plan or fund are taxed twice; once at the corporate level and again in the pensioners’ hands. Yet interest from a Canadian corporation or government is only taxed once. We believe it is not fair to tax Canadian corporate dividends a second time. The trust tax proposals tax Canadian corporate dividends twice. [More tax unfairness]
U.S. Investors in Canadian Trusts Benefiting -- Currently, U.S. investors in Canadian trusts obtain preferential tax treatment when compared to Canadian investors in equivalent U.S. investments (U.S. investors pay approximately half of what Canadians pay the U.S.)
The trust tax proposals will lower the benefits derived by U.S. investors and put them on similar footing to Canadians investing in U.S.trust-like investments. [The one example of fairness in the new trust tax legislation]
Some Canadian Pension Funds More Equal Than Others – We believe Canadian pension funds should be able to invest in the pre-tax cash flows (interest income is such an investment) of a business, regardless of the size of the pension fund. The tax trust proposals would eliminate the ability of small pension plans (including RRSPs) to invest in business pre-tax cash flows, yet large pension funds would be allowed to continue in certain industries. Tax fairness should mean equality for all, regardless of size. [More Tax Unfairness]
Canadians Stripped of Private Equity Financing Techniques – With the Federal Government’s trust tax proposals, small Canadian taxpayers (who have paid their fair share of taxes) would be stripped of their ability to structure a Canadian business in a manner that Foreign Private Equity investors will likely utilize to fund the take-over of Canadian trust businesses. How can a proposal that puts Canadian taxpayers at a disadvantage to Foreign Private Equity investors be considered “fair”? [Even more tax unfairness]
Confusing Expedience with Fair – We believe that merely adding the words “fair” to the Federal trust tax proposals does not make them “fair”. It is a form of false advertising that is being foisted on the Canadian public for the sake of expedience. There are better alternatives.
Tuesday, January 23, 2007
LEST WE FORGET #3
The Evil Wrought By Machievellian Politicos
As a Canadian, I have never felt so abandoned by my government. My MP only sings the Harper spin story and the press seems to have given up. How can a government in Canada betray the people and turn a deaf ear to the hardship it has created? Harper and Flaherty stand firm in their fight against the allegedly evil trust companies and they don't care about the individuals they have hurt. They refuse to listen to facts from experts and they refuse to produce any facts of their own. They are the most ruthless uncaring poliicians Canada has every seen in power. If this is the future for Canadians then we better watch out. If Harper achieves his goal of a majority government there will be no stopping his hidden agenda. What will he betray Canadians on next? Those who support him better watch out because no one is safe with this guy...Canadians can't trust him...he has shown that. -- Abandoned By Our Government, January 05, 2007
Liars are in power and they have stolen money from my grandchildren, my daughter, my family and friends. I just don't care about MY money. I suffer when others lose money only because thay have followed me and believed in a clear promise made by longnose Harper. In this country, we hate liars. In this country, citizens with no honour and heart, don't deserve appreciation. How come we have elected a Prime Minister of that kind? Please God, HELP US! -- Jean-Marie Lapointe, November 26, 2006
The Sad Truth Behind Their Lame Lies
“The story of the staggering loss of corporate tax revenues that circulated before Flaherty's announcement now appears to have been flat wrong. The truth, it seems, is that whatever leakage of corporate tax dollars the trusts caused was more than offset by the increased tax collected from individuals who were recipients of trust distributions” -- Brian Flemming, Halifax Daily News
"You may be right about tax leakage. It may be small to non existent." -- Eric Reguly, Globe & Mail, 9th January online chat
“It wasn’t just that the Composite Index dropped almost 300 points, shedding $26 billion in capitalization in one day (and $36.3 billion in the trust sector in two days!). The real story was the people who took the biggest hit. They weren’t cigar-smoking Wall Street moguls, they were ordinary folks. Many retirees and 50+ baby boomers saw a big chunk of their life savings melt away before their eyes” -- Gordon Pape, GlobeInvestor
"The majority of Canadians believe the federal government is unjustified in slapping a levy on income trusts. About 55 per cent of those surveyed in the national poll, conducted for CanWest News Service over the last week, said the reasons given by the Conservatives for changing the way income trusts will be taxed do not justify breaking their campaign promise on the issue." -- Jack Aubry, CanWest News Service, November 08, 2006
"Last night in Ottawa, the 'Dishonorable' Minister of Finance Jim Flaherty announced his proposal for a Tax Fairness Plan for Canadians. The plan allegedly seeks to restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations. I call him "the dishonorable" because I stood in a room with him nine months ago when he told a group of us that 'You can rest assured that the Tories will NOT go after the energy trust business like our predecessors.' But now we have what may be the single-stupidest economic policy move I've ever witnessed."-- Jim Tobin, Fox News Conributor, November 2006
"We looked at 126 businesses that converted from equities to trusts between 2001 and 2005 to prove that Ottawa reaped more, not less, tax revenue after firms converted to income trusts...We found that on average the government stood to collect 2.2 times more in taxes by taxing the distributions of the trust than had been paid by the corporations prior to their conversion." -- GORDON TAIT -- Research Analyst, BMO Nesbitt Burns
"Among other CCET findings:
-- Energy trusts do not cause federal tax leakage.
The report claims that energy trusts in fact pay more tax revenues than conventional oil and gas companies. Many of those conventional companies wind up paying little corporate tax, if any, the report said.
The report said energy trusts acquired more than $35 billion worth of mature oil and gas assets in the past five years and spent another $15 billion to develop them. In addition, they repatriated $10 billion worth of assets from foreign control over the past decade.
-- Canadians' retirement plans are "tax-deferred" not "tax-exempt" creating a huge savings account for the government that will eventually lead to higher tax revenue as those funds are withdrawn.
-- Dielwart fears the tax changes will lead to lower reinvestment in aging energy assets and ultimately, lower oil and gas production. The changes could also result in lower retirement income for investors, higher energy prices for consumers, and reduced efforts to capture and store greenhouse gas emissions in old oilfields, he added.
-- This is not just about taxes. It's about the environment, personal investments and Canada as an energy leader." -- © The Calgary Herald 2006
As a Canadian, I have never felt so abandoned by my government. My MP only sings the Harper spin story and the press seems to have given up. How can a government in Canada betray the people and turn a deaf ear to the hardship it has created? Harper and Flaherty stand firm in their fight against the allegedly evil trust companies and they don't care about the individuals they have hurt. They refuse to listen to facts from experts and they refuse to produce any facts of their own. They are the most ruthless uncaring poliicians Canada has every seen in power. If this is the future for Canadians then we better watch out. If Harper achieves his goal of a majority government there will be no stopping his hidden agenda. What will he betray Canadians on next? Those who support him better watch out because no one is safe with this guy...Canadians can't trust him...he has shown that. -- Abandoned By Our Government, January 05, 2007
Liars are in power and they have stolen money from my grandchildren, my daughter, my family and friends. I just don't care about MY money. I suffer when others lose money only because thay have followed me and believed in a clear promise made by longnose Harper. In this country, we hate liars. In this country, citizens with no honour and heart, don't deserve appreciation. How come we have elected a Prime Minister of that kind? Please God, HELP US! -- Jean-Marie Lapointe, November 26, 2006
The Sad Truth Behind Their Lame Lies
“The story of the staggering loss of corporate tax revenues that circulated before Flaherty's announcement now appears to have been flat wrong. The truth, it seems, is that whatever leakage of corporate tax dollars the trusts caused was more than offset by the increased tax collected from individuals who were recipients of trust distributions” -- Brian Flemming, Halifax Daily News
"You may be right about tax leakage. It may be small to non existent." -- Eric Reguly, Globe & Mail, 9th January online chat
“It wasn’t just that the Composite Index dropped almost 300 points, shedding $26 billion in capitalization in one day (and $36.3 billion in the trust sector in two days!). The real story was the people who took the biggest hit. They weren’t cigar-smoking Wall Street moguls, they were ordinary folks. Many retirees and 50+ baby boomers saw a big chunk of their life savings melt away before their eyes” -- Gordon Pape, GlobeInvestor
"The majority of Canadians believe the federal government is unjustified in slapping a levy on income trusts. About 55 per cent of those surveyed in the national poll, conducted for CanWest News Service over the last week, said the reasons given by the Conservatives for changing the way income trusts will be taxed do not justify breaking their campaign promise on the issue." -- Jack Aubry, CanWest News Service, November 08, 2006
"Last night in Ottawa, the 'Dishonorable' Minister of Finance Jim Flaherty announced his proposal for a Tax Fairness Plan for Canadians. The plan allegedly seeks to restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations. I call him "the dishonorable" because I stood in a room with him nine months ago when he told a group of us that 'You can rest assured that the Tories will NOT go after the energy trust business like our predecessors.' But now we have what may be the single-stupidest economic policy move I've ever witnessed."-- Jim Tobin, Fox News Conributor, November 2006
"We looked at 126 businesses that converted from equities to trusts between 2001 and 2005 to prove that Ottawa reaped more, not less, tax revenue after firms converted to income trusts...We found that on average the government stood to collect 2.2 times more in taxes by taxing the distributions of the trust than had been paid by the corporations prior to their conversion." -- GORDON TAIT -- Research Analyst, BMO Nesbitt Burns
"A new report by a major accounting firm disputes the conventional view of income trusts as mature, plodding cash cows. According to a study released Thursday by PricewaterhouseCoopers Canada, trusts have been expanding their businesses and reinvesting their capital at 'impressive' rates, boosting economic growth even as they were making payments to investors.
Income trusts are valued for their ability to churn out regular payouts, but critics say they tend to place growth on the backburner.
Federal Finance Minister Jim Flaherty, who stunned investors with a Halloween announcement that trust distributions will be taxed in 2011, raised concerns that further trust conversions would hurt productivity by holding back investment in productivity-enhancing tools.
Ross Sinclair, national leader of the PricewaterhouseCoopers income trust practice, said stereotypes about trusts have formed amid an absence of facts.
'The surprise is the amount of spending in capital they [trusts] are in fact doing,' he said in an interview.
The study of more than 250 income trusts concluded that last year $26.5 billion went towards capital spending -- 230 per cent of profit. In 2004, capital spending was $21.8 billion -- 376 per cent of profit.
In addition, Canada's income trusts reported a 62 per cent increase in profit and a 54 per cent rise in sales in 2005, the report said.
Sinclair said the findings confirm that companies that converted to trusts continued to invest in productivity-enhancing projects and technologies, and to raise cash for capital spending and acquisitions. -- Canadian Press, December 2006
"Among other CCET findings:
-- Energy trusts do not cause federal tax leakage.
The report claims that energy trusts in fact pay more tax revenues than conventional oil and gas companies. Many of those conventional companies wind up paying little corporate tax, if any, the report said.
The report said energy trusts acquired more than $35 billion worth of mature oil and gas assets in the past five years and spent another $15 billion to develop them. In addition, they repatriated $10 billion worth of assets from foreign control over the past decade.
-- Canadians' retirement plans are "tax-deferred" not "tax-exempt" creating a huge savings account for the government that will eventually lead to higher tax revenue as those funds are withdrawn.
-- Dielwart fears the tax changes will lead to lower reinvestment in aging energy assets and ultimately, lower oil and gas production. The changes could also result in lower retirement income for investors, higher energy prices for consumers, and reduced efforts to capture and store greenhouse gas emissions in old oilfields, he added.
-- This is not just about taxes. It's about the environment, personal investments and Canada as an energy leader." -- © The Calgary Herald 2006
Monday, January 22, 2007
TWENTY QUESTIONS -- FOR CANADA'S ALLEGED CHAMPIONS OF SOCIAL JUSTICE
Here's a number of salient questions about social and economic justice in Canada, worth pondering by Jack Layton and his NDP caucus:
What's happened lately to Canada's alleged political champions of social justice -- the left-wing NDP? Why do they continue to support Canada's most far right conservative political party in the Conservative's war on dispossessed seniors and struggling income-trust investors?
Why are these allegedly left-wing politicians still stubbornly supporting a Conservative legislative initiative that is designed to squelch the only viable competition left to Bay Street's banking and mutual-fund interests, and thus pour even more obscene profits into the financial establishment's corrupt coffers?
What about all the ordinary Canadians whose lives have already been destroyed by this clumsy Conservative initiative? Don't they count as much, to the NDP, as increased profits for Canada's greedy financial institutions?
Why has the social conscience of the Left conveniently fled the scene of the crime? And why has Canada's self-described ultimate Machiavelli (with his cold heart of industrial steel), Stephen Harper, become the NDP's best political friend?
Doesn't Jack Layton, the NDP Leader, realize that you are judged by the company you keep, as well as the misdeeds you sanction, as much as by empty political rhetoric about saving the world?
Isn't time for the Hon. Jack Layton to finally signal that he no longer will play the repugnant role the obedient lackey of Stephen Harper and his minions, enabling so much destructive mischief in Parliament?
And by the way, who's running the NDP, these days? Mr. Layton, or his finance critic?
Isn't it time for the NDP to demand, from the Conservatives, a moderate, reasonable compromise/solution to the current Tory income-trust screwup -- e.g., full-pledged consultations and/or a permanent or ten year tax moratorium for existing trusts (particularly energy trusts)?
And if the Conservatives won't consider a moderate solution to the mess they have created, then shouldn't the NDP let Mr. Harper know that they will join with the Liberals (and possibly the Bloc) and vote against Mr. Harper rigid foolishness in the House of Commons?
Reminders To Jack Layton & His Fumbling Finance Critic
(1) Any compromise trust solution (as advocated by the Bloc and Liberal opposition) -- such as a ten-year or permanent moratorium on existing trusts -- will more benefit individual investors than it will benefit Bay Street itself.
In past, the way that Bay Street's rapacious financial institutions and corporate lawyers made their biggest profits from income trusts was in stage-managing corporate conversions into trusts. But as long as the final "adjusted" trust legislation puts a stop to the further conversion of publicly-traded corporations into income trusts, then this Bay Street cash cow will be ended.
(2) Under this same compromise trust legislation, proposed by the Bloc and Liberal parties and opposed by the Harper/Layton alliance, the kind of cataclysmic tax leakage prophesied by the current Finance Minister -- allegedly the result of too many corporate conversions into trusts -- will not happen. Federal tax revenues will be safe.
However, if existing trusts -- especially energy trusts -- are spared from destruction by adjustments to the original legislation, then some equilibrium can be re-introduced into the income trust market -- meaning ordinary investors will see some of their lost equity restored.
Not only that, but retired seniors will again have the opportunity to invest in the alternative source of extra income provided by income trusts, beyond the usual low-interest savings vehicles offered by the financial establishment (with huge profit margins and management fees built into these limited saving vehicles offered by greedy financial institutions).
Not only that, but the economic threat now hanging over rural Western towns and small cities -- where most of Canada's energy trusts are exploring and drilling -- will be lifted by a compromise initiative that recognizes their pivotal role of these trusts in the economy of Western Canada.
For example, restoring the viability of Canada's energy trusts will avoid the potential loss of local jobs, investment, infrastructure spending, and tax revenues that the current rigid Conservative/NDP trust tax legislation threatens to unleash on rural areas of Alberta and Saskatchewan.
(3) If the NDP or any other political party is worried about misleading or inaccurate financial reporting by income trusts -- a problem that is much more serious in regard to small-cap common stocks on the Canadian Venture exchange -- then they can push for more rigorous accounting standards for both income trusts and common stocks.
(4) Based on his political beliefs and past political record, why would Stephen Harper be so anxious to destroy the income-trust market unless there was a hidden benefit to the Bay Street financial special interests that have long supported the Conservative Party. Even though a popular financial investment option (trusts) will go the way of the dinosaur (if Mr. Harper and Mr. Layton currently have their ways), surely there must be a big financial payoff for the monopolistic Bay Street financial interests who secretly have been cheerleading the Harper administration's extreme war on income trusts. Read on.
(5) To enable the Tory trust legislation to pass is to reward the many big-business interests who secretly pushed Stephen Harper and Jim Flaherty to take such extreme action in the first place -- such as (1) the Power Corporation mutual fund empire which lost significant business to competition from income trusts, and (2) the many CEOs of common stocks who feared losing their huge salaries, bonuses, stock options and other luxury perks if their companies were forced to turn into income trusts.
In other words, rather than being an initiative to save the nation's finances, is this just another Conservative measure to further boost the already obscene profits of Canada's monopolistic financial establishment -- and eliminate any competition to the traditional financial instruments offered by Canada's banks and mutual funds?
Is the war on income trusts really about "tax leakage" from Canada's treasury, or protection of the excessive profit margins and management fees so loved by Bay Street's financial institutions?
Is this Tory initiative really about saving Canada's seniors from themselves, or about saving the over-generous salaries, bonuses, stock options and severance settlements of Bay Street CEOs?
(6) This is a legislative proposal created in haste, without prior consultation with the parties affected. As a result, it will have many unanticipated consequences -- such as ravaging the Western oil patch and leaving many energy trusts open to takeovers by foreign private-equity firms (vulture capitalists) who intend to never pay a cent in taxes to the Canadian government.
In addition, the formal announcement of this legislation has already lopped billions of dollars off the retirement savings of millions of Canadians. And it threatens to deprive retirees of an important high-income savings instrument required in today's high-cost-of-living economic environment.
What other disastrous unintended economic consequences of this trust legislation will negatively affect Canadians, because an impulsive and badly-brief Finance Minister refused to carry out the due diligence required before initiating legislation of this magnitude?
(7) With its potential negative impact on Western-based energy trusts, and its hidden rewards for Toronto's financial establishment, this legislation recklessly threatens to pit Western Canadian interests against those of the Central Canadian establishment (as in the case of the NEP)-- and again with Central Canada designed to be the winner.
In sum, where is the alleged political conscience of Canada hiding? Come out, come out, true NDPers, wherever you are!
What's happened lately to Canada's alleged political champions of social justice -- the left-wing NDP? Why do they continue to support Canada's most far right conservative political party in the Conservative's war on dispossessed seniors and struggling income-trust investors?
Why are these allegedly left-wing politicians still stubbornly supporting a Conservative legislative initiative that is designed to squelch the only viable competition left to Bay Street's banking and mutual-fund interests, and thus pour even more obscene profits into the financial establishment's corrupt coffers?
What about all the ordinary Canadians whose lives have already been destroyed by this clumsy Conservative initiative? Don't they count as much, to the NDP, as increased profits for Canada's greedy financial institutions?
Why has the social conscience of the Left conveniently fled the scene of the crime? And why has Canada's self-described ultimate Machiavelli (with his cold heart of industrial steel), Stephen Harper, become the NDP's best political friend?
Doesn't Jack Layton, the NDP Leader, realize that you are judged by the company you keep, as well as the misdeeds you sanction, as much as by empty political rhetoric about saving the world?
Isn't time for the Hon. Jack Layton to finally signal that he no longer will play the repugnant role the obedient lackey of Stephen Harper and his minions, enabling so much destructive mischief in Parliament?
And by the way, who's running the NDP, these days? Mr. Layton, or his finance critic?
Isn't it time for the NDP to demand, from the Conservatives, a moderate, reasonable compromise/solution to the current Tory income-trust screwup -- e.g., full-pledged consultations and/or a permanent or ten year tax moratorium for existing trusts (particularly energy trusts)?
And if the Conservatives won't consider a moderate solution to the mess they have created, then shouldn't the NDP let Mr. Harper know that they will join with the Liberals (and possibly the Bloc) and vote against Mr. Harper rigid foolishness in the House of Commons?
Reminders To Jack Layton & His Fumbling Finance Critic
(1) Any compromise trust solution (as advocated by the Bloc and Liberal opposition) -- such as a ten-year or permanent moratorium on existing trusts -- will more benefit individual investors than it will benefit Bay Street itself.
In past, the way that Bay Street's rapacious financial institutions and corporate lawyers made their biggest profits from income trusts was in stage-managing corporate conversions into trusts. But as long as the final "adjusted" trust legislation puts a stop to the further conversion of publicly-traded corporations into income trusts, then this Bay Street cash cow will be ended.
(2) Under this same compromise trust legislation, proposed by the Bloc and Liberal parties and opposed by the Harper/Layton alliance, the kind of cataclysmic tax leakage prophesied by the current Finance Minister -- allegedly the result of too many corporate conversions into trusts -- will not happen. Federal tax revenues will be safe.
However, if existing trusts -- especially energy trusts -- are spared from destruction by adjustments to the original legislation, then some equilibrium can be re-introduced into the income trust market -- meaning ordinary investors will see some of their lost equity restored.
Not only that, but retired seniors will again have the opportunity to invest in the alternative source of extra income provided by income trusts, beyond the usual low-interest savings vehicles offered by the financial establishment (with huge profit margins and management fees built into these limited saving vehicles offered by greedy financial institutions).
Not only that, but the economic threat now hanging over rural Western towns and small cities -- where most of Canada's energy trusts are exploring and drilling -- will be lifted by a compromise initiative that recognizes their pivotal role of these trusts in the economy of Western Canada.
For example, restoring the viability of Canada's energy trusts will avoid the potential loss of local jobs, investment, infrastructure spending, and tax revenues that the current rigid Conservative/NDP trust tax legislation threatens to unleash on rural areas of Alberta and Saskatchewan.
(3) If the NDP or any other political party is worried about misleading or inaccurate financial reporting by income trusts -- a problem that is much more serious in regard to small-cap common stocks on the Canadian Venture exchange -- then they can push for more rigorous accounting standards for both income trusts and common stocks.
(4) Based on his political beliefs and past political record, why would Stephen Harper be so anxious to destroy the income-trust market unless there was a hidden benefit to the Bay Street financial special interests that have long supported the Conservative Party. Even though a popular financial investment option (trusts) will go the way of the dinosaur (if Mr. Harper and Mr. Layton currently have their ways), surely there must be a big financial payoff for the monopolistic Bay Street financial interests who secretly have been cheerleading the Harper administration's extreme war on income trusts. Read on.
(5) To enable the Tory trust legislation to pass is to reward the many big-business interests who secretly pushed Stephen Harper and Jim Flaherty to take such extreme action in the first place -- such as (1) the Power Corporation mutual fund empire which lost significant business to competition from income trusts, and (2) the many CEOs of common stocks who feared losing their huge salaries, bonuses, stock options and other luxury perks if their companies were forced to turn into income trusts.
In other words, rather than being an initiative to save the nation's finances, is this just another Conservative measure to further boost the already obscene profits of Canada's monopolistic financial establishment -- and eliminate any competition to the traditional financial instruments offered by Canada's banks and mutual funds?
Is the war on income trusts really about "tax leakage" from Canada's treasury, or protection of the excessive profit margins and management fees so loved by Bay Street's financial institutions?
Is this Tory initiative really about saving Canada's seniors from themselves, or about saving the over-generous salaries, bonuses, stock options and severance settlements of Bay Street CEOs?
(6) This is a legislative proposal created in haste, without prior consultation with the parties affected. As a result, it will have many unanticipated consequences -- such as ravaging the Western oil patch and leaving many energy trusts open to takeovers by foreign private-equity firms (vulture capitalists) who intend to never pay a cent in taxes to the Canadian government.
In addition, the formal announcement of this legislation has already lopped billions of dollars off the retirement savings of millions of Canadians. And it threatens to deprive retirees of an important high-income savings instrument required in today's high-cost-of-living economic environment.
What other disastrous unintended economic consequences of this trust legislation will negatively affect Canadians, because an impulsive and badly-brief Finance Minister refused to carry out the due diligence required before initiating legislation of this magnitude?
(7) With its potential negative impact on Western-based energy trusts, and its hidden rewards for Toronto's financial establishment, this legislation recklessly threatens to pit Western Canadian interests against those of the Central Canadian establishment (as in the case of the NEP)-- and again with Central Canada designed to be the winner.
In sum, where is the alleged political conscience of Canada hiding? Come out, come out, true NDPers, wherever you are!
Sunday, January 21, 2007
HARPER GOVT ON THE DEFENSIVE
How the haughty have fallen.
Just last autumn, Canada's minority Conservative government felt it could do no wrong. Polls showed the Harper government held a healthy lead over a leaderless and demoralized Liberal Party. Canadians appeared to be viewing leader Stephen Harper as a credible, trusted leader for the first time. And a majority government appeared to be in the haughty Harperites' grasp.
And it was in such a heady political environment that the Harper Conservatives decided to roll the political dice and break a popular electoral promise to Canada's seniors' not to tax income trusts.
Influenced by the strident calls of Canada's Establishment newspaper of record, the Globe & Mail -- and various self-interested special-interest groups -- Finance Minister hastily unveiled a destructive new income-trust tax policy that was clearly not ready for prime time.
Nevertheless, despite an avalanche of credible evidence that the blundering Finance Minister had been misled by misinformation supplied by his bureaucrats and Bay Street banking buddies, the Harperites decided to forge ahead -- confident that the Conservative's heady poll numbers and popularity would nullify any loss of votes, political donations and election volunteers from the seniors and other investors hurt by this impetuous new trust tax proposal.
My, how things change. Canada's miscalculating Machievellians now find their backs to the electoral wall. And unless they can show a bit of humility and flexibility, on the issue of income trusts, electoral defeat looks like a near certainty for the Conservatives this spring.
How bad have things gotten politically for the gang that couldn't shoot straight, enviromentally and otherwise? Please read the following Toronto Star analysis below, and then ponder the question of whether their electoral prospects will be even worse once seniors and other disillusioned income-trust investors jump onboard the 'Anybody But Harper' express and take their electoral revenge (not to mention the drop-off in individual political donations to the Conservative Party because of Little Jimmy's mishandling of the income-trust issue).
Most important, why wouldn't Mr. Harper consider a bit of flexibility and compassion on this issue, to at least give him a fighting chance in the next election?
Check out the Toronto Star analysis of the Conservatives' potential electoral woes below, and ponder the question of whether Jim Flaherty and Stephen Harper really are Canada's latest incarnation of Dumb and Dumber?
OH, HOW THINGS CHANGE
Les Whittington and Allan Woods
Ottawa Bureau
Toronto Star
January 20, 2007
OTTAWA – Stephen Harper, who flew to Victoria this week to personally take part in the Conservatives' bid to play the "green" card they discarded months ago, is struggling to find a way to appeal to the mainstream as his reckoning with voters draws ever nearer.
A year ago, in the aftermath of an election that ended 13 years of Liberal power, it seemed the newly chosen prime minister and his band of Conservative MPs had nowhere to go but up.
"Tonight, friends, our great country has voted for change," a beaming Harper told supporters in Calgary on Jan 23. "We will honour your trust and we will deliver on our commitments."
It was a heady time for the Conservatives. Paul Martin, his government mortally wounded by Liberal scandals, was out after fizzling in the prime minister's job. And as the Tories got down to work, Canadians seemed impressed with Harper's activist agenda and the targeted tax cuts in Finance Minister Jim Flaherty's sure-footed first budget. By May, many Liberals were talking dispiritedly about five or six years in the political wilderness.
But Harper's upward trajectory was short-lived. And now the government faces a shifting political landscape that is forcing it to redefine its priorities and adjust to pockets of adverse regional reaction that threaten to undercut its game plan for re-election.
As Canadians' concerns have evolved, Harper finds himself fighting to keep the public onside in a bloody conflict in Afghanistan and overcome a glaring failure to anticipate the emergence of the environment as an overriding national issue. As well, the government has been weighed down by controversies over Middle East policy, accusations of a Mike Harris-like tendency to slash social programs and investor anger from the stunning reversal of the Conservative promise not to tamper with income trusts.
Also, the political picture has been greatly altered by a decline in public disgust over the sponsorship scandal, particularly in Quebec, says pollster Frank Graves.
"It's striking how rapidly that's receded and how quickly the issues have shifted to things that are not particularly favouring the Conservatives" such as Afghanistan and the environment, says Graves, president of EKOS Research.
Although the timing of the minority government's defeat in Parliament – and the next election – remain up in the air, the opposition parties are circling for the kill at the most opportune moment to capitalize on the Conservatives' inability to consolidate their strategic advantage.
Invigorated by a scalding-hot leadership contest and newly united under Stéphane Dion, the Liberals are readying for a wide-open election in which they appear likely – according to recent polls – to leave the starting gate at least neck-and-neck with the federal Tories.
Now in full election campaign mode, Harper is trying to airbrush his party's right-wing image and position the Conservatives closer to the centre of the ideological spectrum.
He shuffled Vic Toews, his law-and-order justice minister, out of that high-profile ministry and into the quiet pastures of Treasury Board. Harper also replaced Environment Minister Rona Ambrose, who shouldered the blame for the Conservatives' disastrous handling of the climate change file, with hard-charging John Baird.
As he took on his new post, Baird denied that the Conservatives had totally miscalculated on the environment.
"I think Canadians had a very different set of priorities a year ago," he said this week. "They wanted Canada's new government to come to Ottawa and clean up the ethical mess that the Liberal party left us ... People wanted tax cuts, people wanted child-care programs that are universal for every child in the country.
"Now they've got those and it's natural that they're going to look at new priorities."
But Daniel Bernier, Ambrose's chief of staff in the environment portfolio, says the Tories were not prepared for the explosion of environmental concerns.
"The file evolved rapidly, very rapidly," Bernier says. "When the Tories were elected – look at the priorities – it wasn't there at all. We had discussions about whether we should try to make it a sixth priority..."
Ultimately, the environment did not make Harper's top five issues for action last January, and the government's Clean Air Act was condemned both at home and abroad at a time when Canada, as head of the United Nations Framework Convention on Climate Change, was supposed to be a leader.
Harper has acknowledged it will be a challenge for the Tories to bounce back from their failure to draw up a credible environmental policy. "We don't think that just a communications change will change anything," he has said.
The Prime Minister is putting his own prestige on the line in this recovery effort, personally announcing a $1.5-billion commitment to long-term development of wind power and other renewable energy sources in Victoria yesterday.
It is one of a number of Liberal approaches to climate change – also including clean energy research and conservation incentives for homes – that the Conservatives had killed but are now reviving in an effort to throw a "green" cloak over their government.
"Now, they reiterate (these programs) and pretend it's fresh and new," Dion says.
Retreading Liberal initiatives appears increasingly common as the Harper government courts mainstream voters.
Battered by charges they were neglecting vital relations with economic superpower China, Flaherty and Trade Minister David Emerson, a former member of the Martin cabinet, mounted the kind of trip to Beijing to promote business and commerce that the Liberals once championed.
And the Tories' child-care policy may end up with more resemblance to the Liberal program they rejected as the government tries to cope with businesses' total lack of interest in Harper's offer of a $10,000 tax credit for each daycare space created by the private sector.
Over the past year, both the staying power of the Tories' policies and their political acumen has been put to the test.
Last January, the election of a prime minister from a western riding was seen as a breakthrough for the Conservatives. "The West is now in," Harper famously declared after the votes were counted.
But his government's quest for additional support, particularly in eastern Canada, is starting to expose vulnerabilities on the party's western flank.
It is not a major threat at the moment, but the creation of the Party of Alberta in November – a sort of Bloc Québécois for the oil-rich province – speaks to a frustration that some Tory MPs, and the odd cabinet minister, only whisper about.
It is the slow progress and outright reversals on things like Senate reform, the effect of the income trust tax decision on the development of certain oil sands firms, and the decision to recognize the Québécois as a "nation" that have shaken people's faith in the Tories, says Rhys Courtman, the 26-year-old founder of the fledgling Party of Alberta.
Long-time conservative supporters have discovered that the firm vows made by Harper and by the Conservatives' predecessor parties are no fait accompli now that the party is in power.
"The process which led to the founding of the Conservative party ... along the way something was lost that was important to Albertans," Courtman says.
And Harper's major federal-provincial gambit, his attempt to overhaul the national system of revenue-sharing to address provincial complaints, is in danger of inflaming western resentment if it's seen as mainly a sop to Quebec. The Saskatchewan government is already up in arms over Ottawa's handling of this file.
The changes that have come about in the last year have also registered abroad, which is where the Tory shift is most pronounced.
At times, Harper's performance seemed like the bumbling of an uncoordinated child trying to hog the ball through a schoolyard game. In contrast to Jean Chrétien golfing with Bill Clinton and Martin dancing with Bono, Harper had barely seen the world outside of the U.S. and a Mexican resort town.
He wore a fishing vest on his first outing with his U.S. and Mexican counterparts and sipped root beer in Kandahar.
But more troubling for some is the government's puffed-up policies on human rights in China and Harper's hawkish forays into Middle East diplomacy.
Harper made Canada the first country in the world to freeze funding to the Palestinians after the election victory by Hamas, which Canada had years previously designated as a terrorist group.
He also raised eyebrows by praising Israel's "measured" response to the kidnapping of an Israeli soldier by Hezbollah in Lebanon last summer, which was the spark for a month-long war.
The Liberals criticized the Prime Minister's judgment, but Canada's Jewish community opened their arms to him. Then Harper attacked what he said were anti-Israel positions taken by "virtually all" of the Liberal leadership candidates. The Liberals roundly denounced him.
Paul Heinbecker, a former Canadian ambassador to the United Nations, says the Tories have demonstrated both too little experience and too much certitude on the world stage.
"I would have thought that the job of a Canadian prime minister was to be pro-Canadian," he says.
"It doesn't make sense to pick sides because, from time to time, both sides have been offside with international law."
Canada's foreign policy shift has not gone unnoticed, either. The European Union has criticized the government for abandoning the Kyoto environment treaty, and in October Amre Moussa, secretary general of the Arab League and a former Egyptian foreign minister, lashed out at "a policy based on total and full bias to one party" – Israel. He warned that such an approach by Canada would do "nothing but damage that country's diplomacy."
But Heinbecker says the government's "balance sheet" on foreign affairs is not entirely negative.
Despite major missteps touting the military commitment to Afghanistan, including rushing into a two-year extension of the mission, Canada has earned the respect of its neighbours and allies by taking a stand against the Taliban.
Looking back, it's clear that Canada's political agenda has changed considerably since the night Harper was chosen by the voters nearly a year ago.
The next few months will reveal whether the Prime Minister – and his rivals in the Liberal, New Democrat, Green and BQ parties – will sink or swim in these unpredictable cross-currents.
Just last autumn, Canada's minority Conservative government felt it could do no wrong. Polls showed the Harper government held a healthy lead over a leaderless and demoralized Liberal Party. Canadians appeared to be viewing leader Stephen Harper as a credible, trusted leader for the first time. And a majority government appeared to be in the haughty Harperites' grasp.
And it was in such a heady political environment that the Harper Conservatives decided to roll the political dice and break a popular electoral promise to Canada's seniors' not to tax income trusts.
Influenced by the strident calls of Canada's Establishment newspaper of record, the Globe & Mail -- and various self-interested special-interest groups -- Finance Minister hastily unveiled a destructive new income-trust tax policy that was clearly not ready for prime time.
Nevertheless, despite an avalanche of credible evidence that the blundering Finance Minister had been misled by misinformation supplied by his bureaucrats and Bay Street banking buddies, the Harperites decided to forge ahead -- confident that the Conservative's heady poll numbers and popularity would nullify any loss of votes, political donations and election volunteers from the seniors and other investors hurt by this impetuous new trust tax proposal.
My, how things change. Canada's miscalculating Machievellians now find their backs to the electoral wall. And unless they can show a bit of humility and flexibility, on the issue of income trusts, electoral defeat looks like a near certainty for the Conservatives this spring.
How bad have things gotten politically for the gang that couldn't shoot straight, enviromentally and otherwise? Please read the following Toronto Star analysis below, and then ponder the question of whether their electoral prospects will be even worse once seniors and other disillusioned income-trust investors jump onboard the 'Anybody But Harper' express and take their electoral revenge (not to mention the drop-off in individual political donations to the Conservative Party because of Little Jimmy's mishandling of the income-trust issue).
Most important, why wouldn't Mr. Harper consider a bit of flexibility and compassion on this issue, to at least give him a fighting chance in the next election?
Check out the Toronto Star analysis of the Conservatives' potential electoral woes below, and ponder the question of whether Jim Flaherty and Stephen Harper really are Canada's latest incarnation of Dumb and Dumber?
OH, HOW THINGS CHANGE
Les Whittington and Allan Woods
Ottawa Bureau
Toronto Star
January 20, 2007
OTTAWA – Stephen Harper, who flew to Victoria this week to personally take part in the Conservatives' bid to play the "green" card they discarded months ago, is struggling to find a way to appeal to the mainstream as his reckoning with voters draws ever nearer.
A year ago, in the aftermath of an election that ended 13 years of Liberal power, it seemed the newly chosen prime minister and his band of Conservative MPs had nowhere to go but up.
"Tonight, friends, our great country has voted for change," a beaming Harper told supporters in Calgary on Jan 23. "We will honour your trust and we will deliver on our commitments."
It was a heady time for the Conservatives. Paul Martin, his government mortally wounded by Liberal scandals, was out after fizzling in the prime minister's job. And as the Tories got down to work, Canadians seemed impressed with Harper's activist agenda and the targeted tax cuts in Finance Minister Jim Flaherty's sure-footed first budget. By May, many Liberals were talking dispiritedly about five or six years in the political wilderness.
But Harper's upward trajectory was short-lived. And now the government faces a shifting political landscape that is forcing it to redefine its priorities and adjust to pockets of adverse regional reaction that threaten to undercut its game plan for re-election.
As Canadians' concerns have evolved, Harper finds himself fighting to keep the public onside in a bloody conflict in Afghanistan and overcome a glaring failure to anticipate the emergence of the environment as an overriding national issue. As well, the government has been weighed down by controversies over Middle East policy, accusations of a Mike Harris-like tendency to slash social programs and investor anger from the stunning reversal of the Conservative promise not to tamper with income trusts.
Also, the political picture has been greatly altered by a decline in public disgust over the sponsorship scandal, particularly in Quebec, says pollster Frank Graves.
"It's striking how rapidly that's receded and how quickly the issues have shifted to things that are not particularly favouring the Conservatives" such as Afghanistan and the environment, says Graves, president of EKOS Research.
Although the timing of the minority government's defeat in Parliament – and the next election – remain up in the air, the opposition parties are circling for the kill at the most opportune moment to capitalize on the Conservatives' inability to consolidate their strategic advantage.
Invigorated by a scalding-hot leadership contest and newly united under Stéphane Dion, the Liberals are readying for a wide-open election in which they appear likely – according to recent polls – to leave the starting gate at least neck-and-neck with the federal Tories.
Now in full election campaign mode, Harper is trying to airbrush his party's right-wing image and position the Conservatives closer to the centre of the ideological spectrum.
He shuffled Vic Toews, his law-and-order justice minister, out of that high-profile ministry and into the quiet pastures of Treasury Board. Harper also replaced Environment Minister Rona Ambrose, who shouldered the blame for the Conservatives' disastrous handling of the climate change file, with hard-charging John Baird.
As he took on his new post, Baird denied that the Conservatives had totally miscalculated on the environment.
"I think Canadians had a very different set of priorities a year ago," he said this week. "They wanted Canada's new government to come to Ottawa and clean up the ethical mess that the Liberal party left us ... People wanted tax cuts, people wanted child-care programs that are universal for every child in the country.
"Now they've got those and it's natural that they're going to look at new priorities."
But Daniel Bernier, Ambrose's chief of staff in the environment portfolio, says the Tories were not prepared for the explosion of environmental concerns.
"The file evolved rapidly, very rapidly," Bernier says. "When the Tories were elected – look at the priorities – it wasn't there at all. We had discussions about whether we should try to make it a sixth priority..."
Ultimately, the environment did not make Harper's top five issues for action last January, and the government's Clean Air Act was condemned both at home and abroad at a time when Canada, as head of the United Nations Framework Convention on Climate Change, was supposed to be a leader.
Harper has acknowledged it will be a challenge for the Tories to bounce back from their failure to draw up a credible environmental policy. "We don't think that just a communications change will change anything," he has said.
The Prime Minister is putting his own prestige on the line in this recovery effort, personally announcing a $1.5-billion commitment to long-term development of wind power and other renewable energy sources in Victoria yesterday.
It is one of a number of Liberal approaches to climate change – also including clean energy research and conservation incentives for homes – that the Conservatives had killed but are now reviving in an effort to throw a "green" cloak over their government.
"Now, they reiterate (these programs) and pretend it's fresh and new," Dion says.
Retreading Liberal initiatives appears increasingly common as the Harper government courts mainstream voters.
Battered by charges they were neglecting vital relations with economic superpower China, Flaherty and Trade Minister David Emerson, a former member of the Martin cabinet, mounted the kind of trip to Beijing to promote business and commerce that the Liberals once championed.
And the Tories' child-care policy may end up with more resemblance to the Liberal program they rejected as the government tries to cope with businesses' total lack of interest in Harper's offer of a $10,000 tax credit for each daycare space created by the private sector.
Over the past year, both the staying power of the Tories' policies and their political acumen has been put to the test.
Last January, the election of a prime minister from a western riding was seen as a breakthrough for the Conservatives. "The West is now in," Harper famously declared after the votes were counted.
But his government's quest for additional support, particularly in eastern Canada, is starting to expose vulnerabilities on the party's western flank.
It is not a major threat at the moment, but the creation of the Party of Alberta in November – a sort of Bloc Québécois for the oil-rich province – speaks to a frustration that some Tory MPs, and the odd cabinet minister, only whisper about.
It is the slow progress and outright reversals on things like Senate reform, the effect of the income trust tax decision on the development of certain oil sands firms, and the decision to recognize the Québécois as a "nation" that have shaken people's faith in the Tories, says Rhys Courtman, the 26-year-old founder of the fledgling Party of Alberta.
Long-time conservative supporters have discovered that the firm vows made by Harper and by the Conservatives' predecessor parties are no fait accompli now that the party is in power.
"The process which led to the founding of the Conservative party ... along the way something was lost that was important to Albertans," Courtman says.
And Harper's major federal-provincial gambit, his attempt to overhaul the national system of revenue-sharing to address provincial complaints, is in danger of inflaming western resentment if it's seen as mainly a sop to Quebec. The Saskatchewan government is already up in arms over Ottawa's handling of this file.
The changes that have come about in the last year have also registered abroad, which is where the Tory shift is most pronounced.
At times, Harper's performance seemed like the bumbling of an uncoordinated child trying to hog the ball through a schoolyard game. In contrast to Jean Chrétien golfing with Bill Clinton and Martin dancing with Bono, Harper had barely seen the world outside of the U.S. and a Mexican resort town.
He wore a fishing vest on his first outing with his U.S. and Mexican counterparts and sipped root beer in Kandahar.
But more troubling for some is the government's puffed-up policies on human rights in China and Harper's hawkish forays into Middle East diplomacy.
Harper made Canada the first country in the world to freeze funding to the Palestinians after the election victory by Hamas, which Canada had years previously designated as a terrorist group.
He also raised eyebrows by praising Israel's "measured" response to the kidnapping of an Israeli soldier by Hezbollah in Lebanon last summer, which was the spark for a month-long war.
The Liberals criticized the Prime Minister's judgment, but Canada's Jewish community opened their arms to him. Then Harper attacked what he said were anti-Israel positions taken by "virtually all" of the Liberal leadership candidates. The Liberals roundly denounced him.
Paul Heinbecker, a former Canadian ambassador to the United Nations, says the Tories have demonstrated both too little experience and too much certitude on the world stage.
"I would have thought that the job of a Canadian prime minister was to be pro-Canadian," he says.
"It doesn't make sense to pick sides because, from time to time, both sides have been offside with international law."
Canada's foreign policy shift has not gone unnoticed, either. The European Union has criticized the government for abandoning the Kyoto environment treaty, and in October Amre Moussa, secretary general of the Arab League and a former Egyptian foreign minister, lashed out at "a policy based on total and full bias to one party" – Israel. He warned that such an approach by Canada would do "nothing but damage that country's diplomacy."
But Heinbecker says the government's "balance sheet" on foreign affairs is not entirely negative.
Despite major missteps touting the military commitment to Afghanistan, including rushing into a two-year extension of the mission, Canada has earned the respect of its neighbours and allies by taking a stand against the Taliban.
Looking back, it's clear that Canada's political agenda has changed considerably since the night Harper was chosen by the voters nearly a year ago.
The next few months will reveal whether the Prime Minister – and his rivals in the Liberal, New Democrat, Green and BQ parties – will sink or swim in these unpredictable cross-currents.
Saturday, January 20, 2007
LEST WE FORGET #2
Shameful Moments In Canadian History:
Stephen Harper Sells Out (Yet Again)!
The smoking gun(s):
http://www.youtube.com/watch?v=U9mibZYpVPY
The dirty deed and its aftermath:
TAXING TRUSTS WILL NOT LEAD TO TAX FAIRNESS
by Diane Francis
National Post
December 2, 2006
It's obvious that Prime Minister Stephen Harper, Finance Minister Jim Flaherty and the civil service simply did not do their homework before wreaking $30-billion worth of havoc on the income trust sector. Even worse than the immorality of breaking a promise which people made financial bets on, the Prime Minister et al are absolutely incorrect in assuming their proposal will enhance tax fairness, eliminate tax leakage and increase productivity. It will do the opposite.
The policy is so naive that there should be a full-blown hearing by the Senate into the matter before it's approved. To rush it through, without sufficient examination, would be to exacerbate what can only be described as a massive policy blunder by politicians that clearly don't understand capital markets. The root of the problem is that the decision was based on analysis by federal officials who regard RRSPs and pensions as tax "exempts" even though they are merely deferral mechanisms.
So the numbers were improperly counted when it comes to taxes paid by Canadian income trust unitholders. And the officials apparently missed the real source of leakage -- U.S. income trust owners, who pay only a 15% withholding tax. Not only was this ignored, but Mr. Flaherty even mused aloud that the 15% withholding tax should be even lower than it already is.
It gets worse. New proposed taxes on income trusts will force them to restructure back into traditional corporations. This will increase the tax leakage. A Post reader analyzed taxes paid by a corporation, Manulife Financial, and an income trust, CI Financial Trust. Manulife is a $40- billion market capitalization giant and CI Trust, $7.7-billion.
In 2005, Manulife's pre-tax earnings were $4.3-billion and the cash taxes paid were about 7% of earnings. It paid dividends of $926-million to shareholders, who were taxed at 18% rates. So the combined corporations' and investors' tax rates were equivalent to 25%. By contrast, the CI Financial Income Trust forecasted a 2006 distribution of $570-million and its unitholders would have tax rates of 35%.
Why wouldn't the Department of Finance, the Minister and Prime Minister understand this? Because Ottawa's analysis [regarding alleged 'tax leakage'] dealt with posted tax rates, not with the actual tax rates paid after all the accounting tricks are used.
Corporations duck taxes while income trusts are tax-generating machines because they are constitutionally set up to distribute a majority of their money to unitholders who pay full taxes, except for foreigners. (If Ottawa finally realizes that leakage is about the foreigners, then it should grandfather existing trusts and require future ones to have foreign ownership restrictions.)
On the issue of productivity, Mr. Flaherty and his Finance Department "pencils" get failing grades again. The theory of corporate taxation is that by imposing taxes on corporations, they will be encouraged to avoid them by keeping their cash flow then productively redeploying it. But here's how the real world works: Corporate managements usually deploy their cash surpluses to overpay themselves. Then they often get involved in unproductive, but tax-efficient, endeavours such as buying back stock, which, not coincidentally, also enhances the value of their own wallets. In addition, corporations use surplus cash to make sometimes foolish diversifications, acquisitions or sub-optimal investments in their own businesses. The examples are plentiful of such misadventures by cash-rich managements.
Finally, there's the governance issue. Many of us invested in the trust sector because we were sick and tired of lousy managements getting their sticky fingers on owners' funds. Besides, income trusts have more managerial discipline because they must make regular payments, which imposes on their managements a rigour that is otherwise non-existent.
As one reader summarized: "It is a simple truth that nothing Enron was doing, in terms of reporting as current earnings future questionable returns and concealing liabilities with dubious off-balance sheet debt parking, could have taken place if it was an income or royalty trust and forced to let investors know each and every month how much cash they were going to be getting."
Finally, the biggest blunder of all is that this policy announcement has discounted the income trust sector by $30-billion which represents a huge whack of the economic base of Canada. This confiscation of value will pave the way for traditional corporations and private equity outfits to pick them [income trusts] off cheaply. These potential buyers, often foreign, will turn around and borrow huge sums to buy these trusts -- money which will be written off against profits for tax purposes.
The resulting leveraged buyout of the income trust sector will cost Ottawa dearly, thus putting more pressure on taxes from ordinary Canadian families.
Stephen Harper Sells Out (Yet Again)!
The smoking gun(s):
http://www.youtube.com/watch?v=U9mibZYpVPY
The dirty deed and its aftermath:
TAXING TRUSTS WILL NOT LEAD TO TAX FAIRNESS
by Diane Francis
National Post
December 2, 2006
It's obvious that Prime Minister Stephen Harper, Finance Minister Jim Flaherty and the civil service simply did not do their homework before wreaking $30-billion worth of havoc on the income trust sector. Even worse than the immorality of breaking a promise which people made financial bets on, the Prime Minister et al are absolutely incorrect in assuming their proposal will enhance tax fairness, eliminate tax leakage and increase productivity. It will do the opposite.
The policy is so naive that there should be a full-blown hearing by the Senate into the matter before it's approved. To rush it through, without sufficient examination, would be to exacerbate what can only be described as a massive policy blunder by politicians that clearly don't understand capital markets. The root of the problem is that the decision was based on analysis by federal officials who regard RRSPs and pensions as tax "exempts" even though they are merely deferral mechanisms.
So the numbers were improperly counted when it comes to taxes paid by Canadian income trust unitholders. And the officials apparently missed the real source of leakage -- U.S. income trust owners, who pay only a 15% withholding tax. Not only was this ignored, but Mr. Flaherty even mused aloud that the 15% withholding tax should be even lower than it already is.
It gets worse. New proposed taxes on income trusts will force them to restructure back into traditional corporations. This will increase the tax leakage. A Post reader analyzed taxes paid by a corporation, Manulife Financial, and an income trust, CI Financial Trust. Manulife is a $40- billion market capitalization giant and CI Trust, $7.7-billion.
In 2005, Manulife's pre-tax earnings were $4.3-billion and the cash taxes paid were about 7% of earnings. It paid dividends of $926-million to shareholders, who were taxed at 18% rates. So the combined corporations' and investors' tax rates were equivalent to 25%. By contrast, the CI Financial Income Trust forecasted a 2006 distribution of $570-million and its unitholders would have tax rates of 35%.
Why wouldn't the Department of Finance, the Minister and Prime Minister understand this? Because Ottawa's analysis [regarding alleged 'tax leakage'] dealt with posted tax rates, not with the actual tax rates paid after all the accounting tricks are used.
Corporations duck taxes while income trusts are tax-generating machines because they are constitutionally set up to distribute a majority of their money to unitholders who pay full taxes, except for foreigners. (If Ottawa finally realizes that leakage is about the foreigners, then it should grandfather existing trusts and require future ones to have foreign ownership restrictions.)
On the issue of productivity, Mr. Flaherty and his Finance Department "pencils" get failing grades again. The theory of corporate taxation is that by imposing taxes on corporations, they will be encouraged to avoid them by keeping their cash flow then productively redeploying it. But here's how the real world works: Corporate managements usually deploy their cash surpluses to overpay themselves. Then they often get involved in unproductive, but tax-efficient, endeavours such as buying back stock, which, not coincidentally, also enhances the value of their own wallets. In addition, corporations use surplus cash to make sometimes foolish diversifications, acquisitions or sub-optimal investments in their own businesses. The examples are plentiful of such misadventures by cash-rich managements.
Finally, there's the governance issue. Many of us invested in the trust sector because we were sick and tired of lousy managements getting their sticky fingers on owners' funds. Besides, income trusts have more managerial discipline because they must make regular payments, which imposes on their managements a rigour that is otherwise non-existent.
As one reader summarized: "It is a simple truth that nothing Enron was doing, in terms of reporting as current earnings future questionable returns and concealing liabilities with dubious off-balance sheet debt parking, could have taken place if it was an income or royalty trust and forced to let investors know each and every month how much cash they were going to be getting."
Finally, the biggest blunder of all is that this policy announcement has discounted the income trust sector by $30-billion which represents a huge whack of the economic base of Canada. This confiscation of value will pave the way for traditional corporations and private equity outfits to pick them [income trusts] off cheaply. These potential buyers, often foreign, will turn around and borrow huge sums to buy these trusts -- money which will be written off against profits for tax purposes.
The resulting leveraged buyout of the income trust sector will cost Ottawa dearly, thus putting more pressure on taxes from ordinary Canadian families.
THE TRUTH AOUT INCOME TRUSTS #7
Healing The Wounds:
Recognizing & Restoring The Good In Income Trusts
Canada’s Prime Minister, Stephen Harper, calls his new income-trust proposals "tax fairness". But these measures are actually unfair and regressive, because they unnecessarily take away, from retirees and self-employed workers, an enhanced income source for coping with today's oft-ignored rising costs of living -- for example, escalating costs for fresh food, heating, electricity, education, realty taxes, insurance, and auto fuel.
For retirees, in particular, coping with today's escalating costs of living is particularly difficult in the new financial environment of low interest rates paid by GICs, bonds and other traditional savings vehicles.
As well, the onerous taxation regimen proposed by the Harper government, for energy trusts (originally called royalty trusts), threatens to suppress a key engine of wealth, prosperity and jobs in the Western oil patch -- particularly in local Western rural communities that depend upon energy-trust companies for jobs, spending on equipment, and local tax revenues.
All of these negative consequences contrast strongly with the increased business profits that ultimately will be directed to financial institutions in Central Canada by the Conservative’s hastily-conceived trust legislation.
New Equitable Legislative Adjustments Required
Consequently, new equitable "adjustments" need to be made to the Harper government's current income-trusts tax proposal, whether by the current government or by a brand new Liberal or coalition government.
First of all, it's easy to see why Mr. Harper and his Finance Minister felt it was necessary to end "conversions' of large Canadian corporations into income trusts whenever such conversions are intended strictly for tax-avoidance purposes -- especially in regard to publicly-traded corporations unsuited to the traditional income-trust financial structure.
It's disappointing that the Prime Minister didn't recognize such an eventuality when he originally promised not to tax trusts in any way. But it's not difficult to recognize his present desire to respond to emerging economic realities and take some kind of concerted action.
However, there was, and is, a less destabilizing route which Mr.Harper's government (or a new Liberal or coalition government) could take to achieve the primary goal of preventing further trust conversions by unsuitable corporations seeking only to avoid corporate taxes.
To avoid the financial suffering that has been arbitrarily and retroactively imposed on millions of Canadian investors in existing income trusts (4 million Canadians according to an autumn Ipsos-Reid poll), the government could crack down on future trust conversions for tax-avoidance purposes, but permanently exempt existing trusts from its new tax provisions (often referred to as "grandfathering" existing trusts from the new tax).
Or this government (or a future Liberal or coalition government) could minimally make adjustments to the proposed trust legislation and follow the same path taken by the American Congress when a similar perceived tax-avoidance phenomenon began to occur in the United States in the late 1980's. In the U.S., trust-like entities (public traded partnerships), with a few exceptions, were given a ten-year exemption before they were taxed at conventional corporate tax rates.
And even more preferable treatment was accorded to trust-like, resource-based MLPs in the U.S. (for example, energy MLPs). After industry-wide consultations, legislated criteria were created to exempt, from conventional corporate taxes, “mature” resource MLPs which could benefit from the advantages of the tax-exempt “flow-through” structure.
Australia, in most cases, followed the same path of exempting resource companies (e.g., energy producers) when attempting to end unnecessary corporate conversions into trust-like entities in that country.
End Bay St. Excesses, But Restore Trust Market Stability
Either of the above tax exemption solutions would still allow the government to crack down on conversions of corporations into trusts strictly for tax-avoidance purposes. But each type of tax "moratorium" would also permit the survival of today's existing income trusts and ensure a more equitable outcome for the millions of innocent Canadians who believed Mr. Harper's original promise to protect their savings and not tax income trusts.
In that regard, it's important to remember that most victims of Mr. Harper's present "all or nothing" attack on income trusts are not rich "fat cats". Rather, they usually are ordinary Canadians, from all age groups and walks of life, trying to cope financially with today's very high cost of living -- including cash-starved seniors just trying to scrape by, and desperate young parents saving up for their children's education or for their own retirement.
Both retirees, and the self-employed working class, have found the challenge of generating ample savings income for retirement or education goals difficult to accomplish in today's low interest-rate savings environment.
A truly fair government trust tax policy should enhance the financial well-being of such Canadians -- not penalize or bankrupt them.
A Positive & Fair Solution
In that regard, politicians in Ottawa should permanently extend the exemption of existing income trusts from corporate taxes, or minimally extend the current tax exemption until the year 2017 -- as well as completely exempting traditional energy trusts from corporate taxes (just as the current government has proposed exempting most real-estate investment trusts).
Recognizing & Restoring The Good In Income Trusts
Canada’s Prime Minister, Stephen Harper, calls his new income-trust proposals "tax fairness". But these measures are actually unfair and regressive, because they unnecessarily take away, from retirees and self-employed workers, an enhanced income source for coping with today's oft-ignored rising costs of living -- for example, escalating costs for fresh food, heating, electricity, education, realty taxes, insurance, and auto fuel.
For retirees, in particular, coping with today's escalating costs of living is particularly difficult in the new financial environment of low interest rates paid by GICs, bonds and other traditional savings vehicles.
As well, the onerous taxation regimen proposed by the Harper government, for energy trusts (originally called royalty trusts), threatens to suppress a key engine of wealth, prosperity and jobs in the Western oil patch -- particularly in local Western rural communities that depend upon energy-trust companies for jobs, spending on equipment, and local tax revenues.
All of these negative consequences contrast strongly with the increased business profits that ultimately will be directed to financial institutions in Central Canada by the Conservative’s hastily-conceived trust legislation.
New Equitable Legislative Adjustments Required
Consequently, new equitable "adjustments" need to be made to the Harper government's current income-trusts tax proposal, whether by the current government or by a brand new Liberal or coalition government.
First of all, it's easy to see why Mr. Harper and his Finance Minister felt it was necessary to end "conversions' of large Canadian corporations into income trusts whenever such conversions are intended strictly for tax-avoidance purposes -- especially in regard to publicly-traded corporations unsuited to the traditional income-trust financial structure.
It's disappointing that the Prime Minister didn't recognize such an eventuality when he originally promised not to tax trusts in any way. But it's not difficult to recognize his present desire to respond to emerging economic realities and take some kind of concerted action.
However, there was, and is, a less destabilizing route which Mr.Harper's government (or a new Liberal or coalition government) could take to achieve the primary goal of preventing further trust conversions by unsuitable corporations seeking only to avoid corporate taxes.
To avoid the financial suffering that has been arbitrarily and retroactively imposed on millions of Canadian investors in existing income trusts (4 million Canadians according to an autumn Ipsos-Reid poll), the government could crack down on future trust conversions for tax-avoidance purposes, but permanently exempt existing trusts from its new tax provisions (often referred to as "grandfathering" existing trusts from the new tax).
Or this government (or a future Liberal or coalition government) could minimally make adjustments to the proposed trust legislation and follow the same path taken by the American Congress when a similar perceived tax-avoidance phenomenon began to occur in the United States in the late 1980's. In the U.S., trust-like entities (public traded partnerships), with a few exceptions, were given a ten-year exemption before they were taxed at conventional corporate tax rates.
And even more preferable treatment was accorded to trust-like, resource-based MLPs in the U.S. (for example, energy MLPs). After industry-wide consultations, legislated criteria were created to exempt, from conventional corporate taxes, “mature” resource MLPs which could benefit from the advantages of the tax-exempt “flow-through” structure.
Australia, in most cases, followed the same path of exempting resource companies (e.g., energy producers) when attempting to end unnecessary corporate conversions into trust-like entities in that country.
End Bay St. Excesses, But Restore Trust Market Stability
Either of the above tax exemption solutions would still allow the government to crack down on conversions of corporations into trusts strictly for tax-avoidance purposes. But each type of tax "moratorium" would also permit the survival of today's existing income trusts and ensure a more equitable outcome for the millions of innocent Canadians who believed Mr. Harper's original promise to protect their savings and not tax income trusts.
In that regard, it's important to remember that most victims of Mr. Harper's present "all or nothing" attack on income trusts are not rich "fat cats". Rather, they usually are ordinary Canadians, from all age groups and walks of life, trying to cope financially with today's very high cost of living -- including cash-starved seniors just trying to scrape by, and desperate young parents saving up for their children's education or for their own retirement.
Both retirees, and the self-employed working class, have found the challenge of generating ample savings income for retirement or education goals difficult to accomplish in today's low interest-rate savings environment.
A truly fair government trust tax policy should enhance the financial well-being of such Canadians -- not penalize or bankrupt them.
A Positive & Fair Solution
In that regard, politicians in Ottawa should permanently extend the exemption of existing income trusts from corporate taxes, or minimally extend the current tax exemption until the year 2017 -- as well as completely exempting traditional energy trusts from corporate taxes (just as the current government has proposed exempting most real-estate investment trusts).
THE TRUTH ABOUT INCOME TRUSTS #6
The Sorrow & The Lack Of Pity:
The Damage Done By Conscience Challenged Politicians
“It wasn’t just that the Composite Index dropped almost 300 points, shedding $26 billion in capitalization in one day (and $36.3 billion in the trust sector in two days!). The real story was the people who took the biggest hit. They weren’t cigar-smoking Wall Street moguls, they were ordinary folks. Many retirees and 50+ baby boomers saw a big chunk of their life savings melt away before their eyes” -- Gordon Pape, GlobeInvestor, Autumn 2006
"I am dismayed at the turn of events. I personally will survive, but tears come to my eyes when I think of all the retired people (both in the US and Canada) who had 50% or more of their "nest eggs" invested in these trusts and had a late night announcement on October 31st destroy their future. They have no capacity to earn income to replace what they have lost. They are helpless, frightened and bewildered. This is not what one would expect from a mature, civilized, democratic, and principled country such as I always considered Canada to be." -- M. K., USA, December 2006
"I do not want to go into the nitty gritty but I was looking forward to doing some traveling before I reach the pearly gates (hopefully). This [the Finance Minister’s new income-trust tax proposal] has now put a big strain on my financial situation and I am afraid that my dream will have to be put on hold. I am however afraid my dream will not be reached due to health problems. If I knew months ago that the government was going to do this, I may have been able to soften the blow. In all my years as a law abiding, tax providing and dedicated hard working Canadian, I have not seen such downright dirty trickery. Is there any hope this may change???? I will pray tonight that I will wake up from this nightmare."-- Anonymous, TRUSTS online forum, November 2006
"With the governments ill-considered action my account has gone down by $55,000 and most likely will not recover given the brutal shock to the royalty trust sector that occurred. I am back to worrying continuously about money, my future, and that of my wife. I do not expect this will be good for my health since I am a cancer survivor, the low grade lymphoma is still with me and might lead to more demands on the government purse, an interesting footnote on the government's concern for alleged tax leakage." -- A. Hurd, Victoria, November 2006
"Mr. Harper, you LIED to us and I take this very personally! I'm not just disappointed that you went back on your word, I'm so angry I can't wait for the next election to get rid of your Conservative government. I don't know who you guys are 'catering to', but it certainly isn't the average lower middle class retired Canadian like myself. I'm NOT rich and because of you I'm going to get a lot poorer now. All I need is income of about $34,000, but it looks like that goal will go up in smoke! I do not know how I will cover my modest cost of living as I face retirement in 2 months, but I guess you think this is OK as billions in [tax] surpluses keep rolling into your coffers." -- MLR, November 2006.
"You have to go some distance to upstage former Prime Minister Pierre Trudeau's heinous NEP, an ill-conceived government initiative that devastated the oilpatch in the early 1980s, in the minds of Calgarians. But Stephen Harper's Tories weren't far off the mark when they decided to renege on an election promise not to tamper with income trusts -- without bothering to warn either the industry or investors that changes were in the air. As a result, The Halloween Day Massacre as it has come to be known, is already inscribed in the annals of political infamy. In the meantime, investors are struggling to recoup the billions of dollars lost following the announcement." -- Columnist Charles Frank, Year-end Review, Calgary Herald, December 31, 2006
"Broken promises have consequences. Just ask any kid in grade school. But when a Prime Minister and Minister of Finance of a modern, Western, democratic society lie to and deceive their people the consequences are far reaching and…sometimes tragic.
"Yesterday, when I read a post on a popular financial forum, it took the concept of “betrayal of trust” to a whole new and tragic level. The poster said that an “old man” who had worked all his life, did the best he could to provide for his family and wife of many years, lost a huge whack of his savings in income trusts, and took his own life in mid-November of 2006.
"We don’t know the 'old man’s' name. We don’t have a picture of him. We don’t know how many grandchildren he had. We don’t know how many years he worked and saved. We don’t know his life’s story. We don’t know if he was like your grandfather or mine. From the post, what we do know is….he was depressed, he lost a large portion of his life savings after Oct. 31, 2006 , and he had most of that savings in income trusts.
"I think it is safe to say the 'old man', like most good, honest seniors….took [Prime Minister] Harper at his word. I know that many politicians, bureaucrats, and media types -- trying to comfort their own guilty (and not so guilty) souls -- will dismiss this financial loss nine ways from Sunday. I can hear it now: 'He should have been diversified.' 'He should have known the Income Trusts couldn’t last.' 'Besides, this action [by the Harper government] was for the greater good of our society'."
"And, this ladies and gentlemen, is where we are with today’s political and bureaucratic mentality….dismiss, deny, obfuscate, blame the victim. They will do anything but confront the real issue….the broken political promise and betrayal of trust.
"On November 1, 2006 , Harper & Flaherty’s premeditated BETRAYAL OF TRUST not only set up this grandfather and every senior/retiree for a financial catastrophe, but also destroyed any remaining faith we ever had in government, politicians, and bureaucrats -- R. Cox, Ph.D., January 2007
The Damage Done By Conscience Challenged Politicians
“It wasn’t just that the Composite Index dropped almost 300 points, shedding $26 billion in capitalization in one day (and $36.3 billion in the trust sector in two days!). The real story was the people who took the biggest hit. They weren’t cigar-smoking Wall Street moguls, they were ordinary folks. Many retirees and 50+ baby boomers saw a big chunk of their life savings melt away before their eyes” -- Gordon Pape, GlobeInvestor, Autumn 2006
"I am dismayed at the turn of events. I personally will survive, but tears come to my eyes when I think of all the retired people (both in the US and Canada) who had 50% or more of their "nest eggs" invested in these trusts and had a late night announcement on October 31st destroy their future. They have no capacity to earn income to replace what they have lost. They are helpless, frightened and bewildered. This is not what one would expect from a mature, civilized, democratic, and principled country such as I always considered Canada to be." -- M. K., USA, December 2006
"I do not want to go into the nitty gritty but I was looking forward to doing some traveling before I reach the pearly gates (hopefully). This [the Finance Minister’s new income-trust tax proposal] has now put a big strain on my financial situation and I am afraid that my dream will have to be put on hold. I am however afraid my dream will not be reached due to health problems. If I knew months ago that the government was going to do this, I may have been able to soften the blow. In all my years as a law abiding, tax providing and dedicated hard working Canadian, I have not seen such downright dirty trickery. Is there any hope this may change???? I will pray tonight that I will wake up from this nightmare."-- Anonymous, TRUSTS online forum, November 2006
"With the governments ill-considered action my account has gone down by $55,000 and most likely will not recover given the brutal shock to the royalty trust sector that occurred. I am back to worrying continuously about money, my future, and that of my wife. I do not expect this will be good for my health since I am a cancer survivor, the low grade lymphoma is still with me and might lead to more demands on the government purse, an interesting footnote on the government's concern for alleged tax leakage." -- A. Hurd, Victoria, November 2006
"Mr. Harper, you LIED to us and I take this very personally! I'm not just disappointed that you went back on your word, I'm so angry I can't wait for the next election to get rid of your Conservative government. I don't know who you guys are 'catering to', but it certainly isn't the average lower middle class retired Canadian like myself. I'm NOT rich and because of you I'm going to get a lot poorer now. All I need is income of about $34,000, but it looks like that goal will go up in smoke! I do not know how I will cover my modest cost of living as I face retirement in 2 months, but I guess you think this is OK as billions in [tax] surpluses keep rolling into your coffers." -- MLR, November 2006.
"You have to go some distance to upstage former Prime Minister Pierre Trudeau's heinous NEP, an ill-conceived government initiative that devastated the oilpatch in the early 1980s, in the minds of Calgarians. But Stephen Harper's Tories weren't far off the mark when they decided to renege on an election promise not to tamper with income trusts -- without bothering to warn either the industry or investors that changes were in the air. As a result, The Halloween Day Massacre as it has come to be known, is already inscribed in the annals of political infamy. In the meantime, investors are struggling to recoup the billions of dollars lost following the announcement." -- Columnist Charles Frank, Year-end Review, Calgary Herald, December 31, 2006
"Broken promises have consequences. Just ask any kid in grade school. But when a Prime Minister and Minister of Finance of a modern, Western, democratic society lie to and deceive their people the consequences are far reaching and…sometimes tragic.
"Yesterday, when I read a post on a popular financial forum, it took the concept of “betrayal of trust” to a whole new and tragic level. The poster said that an “old man” who had worked all his life, did the best he could to provide for his family and wife of many years, lost a huge whack of his savings in income trusts, and took his own life in mid-November of 2006.
"We don’t know the 'old man’s' name. We don’t have a picture of him. We don’t know how many grandchildren he had. We don’t know how many years he worked and saved. We don’t know his life’s story. We don’t know if he was like your grandfather or mine. From the post, what we do know is….he was depressed, he lost a large portion of his life savings after Oct. 31, 2006 , and he had most of that savings in income trusts.
"I think it is safe to say the 'old man', like most good, honest seniors….took [Prime Minister] Harper at his word. I know that many politicians, bureaucrats, and media types -- trying to comfort their own guilty (and not so guilty) souls -- will dismiss this financial loss nine ways from Sunday. I can hear it now: 'He should have been diversified.' 'He should have known the Income Trusts couldn’t last.' 'Besides, this action [by the Harper government] was for the greater good of our society'."
"And, this ladies and gentlemen, is where we are with today’s political and bureaucratic mentality….dismiss, deny, obfuscate, blame the victim. They will do anything but confront the real issue….the broken political promise and betrayal of trust.
"On November 1, 2006 , Harper & Flaherty’s premeditated BETRAYAL OF TRUST not only set up this grandfather and every senior/retiree for a financial catastrophe, but also destroyed any remaining faith we ever had in government, politicians, and bureaucrats -- R. Cox, Ph.D., January 2007
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