Tuesday, April 24, 2007

Canadians must trust

The following text is from a letter dated November 24, 2006 from Stephen Harper. This form letter would have gone to virtually hundreds of thousands of Canadians. Only took the PMO 24 days to get their “messaging” straight. It couldn’t have been very successful, because here we are talking about it some five months later. I know it did nothing for me:

Dear Mr. Fullard:

Thank you for your e-mail message regarding the government's decision on income trusts. I am pleased to have this opportunity to respond.

I understand your disappointment with this decision. We recognize that Canadian investors, including many pensioners and seniors, have made important investments over the years and benefit from the current income trust structure. However, Canadians must trust that their government is watching out for them and is upholding the values that define us, like fairness. They expect us to fix problems, right injustices and close loopholes.

There is more to this letter. I have yet to read it. I got hung up on the concept of “Canadians must trust”. Canadians must trust? What could that possibly mean? Well I guess there are three possible interpretations:

(1) Trust by edict. Is Harper telling us that we must trust him as a form of commandment? A form of edict? This is a very plausible interpretation of Canadians must trust, since we have received nothing that supports any of the five provisions of the enabling legislation, the Ways and Means Motion . Where is the analysis that supports tax leakage? This was the cornerstone assumption behind this policy. Furthermore Harper has chosen to ignore all the recommendations of the Finance Committee. I guess Canadians must trust, it is our solemn duty. More enforceable than solemn pledges evidently, since Harper never delivered on his never tax trusts pledge. He actually said it enough times that people believed him. Hard to believe that will ever occur again, any time soon. Therefore, trust by edict is Harper’s only hope going forward.

(2) Trust by default. Or is Harper simply saying that he is taking our trust for granted. Might have applied to some Canadians at the time of the last election, but you have to think this game is quickly coming to an end. Whatever currency this approach may have had has long since been dispensed. Would you really buy a used car from this guy? Flaherty? Lying and deceiving is seldom a successful long term strategy with an educated electorate in the age of the internet.

(3) Trust by action. This is obviously the high end interpretation of trust. Problem is it has to be earned. It can’t be blithely taken for granted, nor can it be dictated. This is a not a plausible interpretation under the circumstances.

I am looking forward to reading the balance of Harper’s letter that justifies his broken promise and $35 billion of capital decimation. I am really curious what he had to say about the impending foreign private equity takeovers and the hollowing out of Canada. I wonder whether he foresaw the takeout of BCE? He must have, we were predicting these events within the first week of November. I am sure he had reassuring words to say about why it is that average Canadians will no longer be able to hold income trusts in their RRSPs, whereas pension funds can hold the economic equivalent of trusts, free of any new tax. I am looking forward to learning more about the dogmatic distinction he draws between public and private trusts. All of this will reveal itself once I have established what Harper could have possibly meant by Canadians must trust. I know one thing for sure, it wasn’t by his actions.

I trust he will know what I mean.

By the way, what tax loophole is he talking about? I am not aware of any tax loophole. I had the same question for Flaherty at the Public Hearings. He thought that walking away in a huff was a suitable response.

Trust me, it wasn’t.

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Anonymous said...

Hey Brent:

great idea and a very good way to get info out. Any plans to hand deliver one of those big bulletin boards? Probably wouldn't let us take it into House of Commons but would sure look good across the street from 24 Sussex.


Anonymous said...

Great post Brent.

Thanks very much for the work you are doing keeping Income Trusts in the spotlight.


Anonymous said...

for God's sake, let it go already. ALL investments carry risk, INCLUDING political risk. Risk = "something bad might happen". When "something bad might happen", sometimes something bad DOES happen.

Guess what, something bad happened.

If your investment advisor told you that you could have 10% risk free return (when gov't bonds are returning 4.5%) from an obvious tax loophole that could be closed at any moment (and should be), then your investment advisor is an idiot, and if you put all your eggs in that basket, you were criminally misled.

I'm sure you'll delete this comment, because the truth hurts.

Kephalos said...

Anonymous said... "for God's sake, let it go already. ALL investments carry risk, INCLUDING political risk. Risk = "something bad might happen". When "something bad might happen", sometimes something bad DOES happen."

Anonymous, you have a valid point, if you're speaking of an emerging economy. In fact, I don't accept political risk where the Nation's highest leader has made a promise, and when the senior finance official has used patently false assumptions and data, and a corrupt method to justify a bad tax that discriminates between citizens who have a right to be equal.

What's the difference between flawed and corrupt? Flawed is some unintentional mistake. Corrupt is an intentional error. A lawyer, especially a lawyer, should know that the truth must and will be told. But if this Minister of Finance believes that it is his privilege to tell falsehoods, fine. Let him tell it to a Judge.

If this legislation is passed, there's another risk that will reach out over Canada like the rosy red fingers of dawn. That's the legal risk of any government official who knowingly, and with malice of forethought, causes harm to one group of citizens for benefit of another group. That's banana politics at its worst. But look around. Ain't nobody here grows bananas.

Randy Meyer said...

Anonymous said...
for God's sake, let it go already ...

Polical risk in a G-7 nation like Canada means that a party gets elected based on a campaign platform that they may actually implement with policies that may not be favourable to your position. That is an acceptable political risk. Democracy has to speak after all.

What's not acceptable is that it's leader and Finance Minister will lie to the public. To be specific, the Conservative platform and Mr. Harper's repeated promise was not to tax income trusts. Their subsequent actions were not acceptable risk in a G-7 nation as they did the exact opposite of what they campaigned on and for no reason whatsoever.

There was no tax loophole to close as it releates to trusts. I'm not sure that the same thing can be said of corprorations that can go for years without paying any taxes at all. Seems like a lariat to me.

If the tax loophole for trusts is so "obvious" I'd appreciate your explanation of where it is. You'd be doing something that neither the Prime Minister or his Finance Minister has yet been able to do.

Transcanada said...

for God's sake, let it go already. ALL investments carry risk, INCLUDING political risk.

Yep you are right Anon. Down in Venezuela there is political risk to one's investments. I read that Chavez arbitrarily changes the rules to benefit the Government at the expense of it's citizens all the time. Oil Companies, newspapers and TV stations atr not immune.

How are Flaherty's policies that different? He has stripped assets from Canadian Investors (after his party said he wouldn't)and a few months later a Public Service Pension steps in and buys the same assets. Read the story of Thunder Energy.

Only in Venezuela and Canada could this happen.

Chavez + Flaherty = Me + Mini-Me

Sy Schleimer said...

The latest offer to take THY.UN(Thunder Energy) private is a vivid example of the cruel self-interest,real "leakage" where the pension fund that pays the Ca, gvt.retirees(including Harper/Flaherty) their pensions and is excluded from taxation by Flaherty's plan..I happen to own a large position at price 2-3 times higher the current takeover price now decimated by the by the Tory's trust tax plan...

Anonymous said...

Our efforts to educate people as to their involvement with income trusts should come to a head near an election. Most people are unaware that they own income trusts in their portfolios if they have mutual funds .Even pension plans have them. What motivates people most is fear, fear of loss.
Let's bring this potential loss to the forefront.
Take a look at what is already happening to some of the trusts that have been bought by foreign companies ( who now pay less tax ,if any).
I have seen many ads and articles regarding income trusts , but not on the front page daily. That's what it will take.In your face all the time.
What kind of government does this kind of stuff and then expects people in Alberta to vote for them (how many seats did the Conservative Gov't get in Alta?)?