Friday, April 27, 2007

Fables and Foibles

Killing the Golden Goose

In an April 26 newsletter from RBC Capital Markets, slamming the Conservatives' Trust Tax, they make the apt comparison to the old fable about the Golden Goose.

A man and his wife had the good fortune to possess a goose which laid a golden egg every day. Lucky though they were, they soon began to think they were not getting rich fast enough, and, imagining the bird must be made of gold inside, they decided to kill it in order to secure the whole store of precious metal at once. But when they cut it open they found it was just like any other goose. Thus, they neither got rich all at once, as they had hoped, nor enjoyed any longer the daily addition to their wealth.

Parallels with the Trust Tax are clear. Deferred taxes held in RRSPs were not included in the flawed analysis of tax leakage. The reason given was that these tax dollars where not available now. As Jim Flaherty said, "I cannot, and I will not, fund today's programs from tomorrow's revenues."

But by killing the sector with punitive taxes and limits on growth, there will actually be less tax revenue, as trusts are bought out, leveraged-up and moved to foreign tax jurisdictions. The end result is a shortfall, and guess who will have to make it up?

Flaherty keeps spinning his "tax leakage" fairy-tale but the threads are beginning to unravel. It's becoming obvious that this is pure fantasy, concocted out of wishful thinking and skewed figures, as more and more respected analysts like RBC Capital Markets and CIBC World Markets are saying.

Well done Mr Flaherty. It seems your goose is cooked.

Pork Barrel Politics

You would think that after the Tories rode the Sponsorship Scandal into power they would be extra, extra careful not to start handing out cash to Conservative-friendly organizations lest they be basted with the same brush.

You would think so, but then along comes Bev Oda, and the odious scent of sponsorship is once again in the air.

As Heritage Minister, Ms Oda has been soliciting suggestions from her caucus members to "provide examples of community activities in your riding that you feel should be receiving federal funding." The questionnaire was found by the NDP after it was left behind in a meeting room on Parliament Hill. Oops, guess you should have put that paper in the recycling bin.

Not only does this represent the setting up of a pre-election slush fund, it's also another example of Harper's ideology-driven approach to policy, rather than merit-based. The usual procedure, according to the Canada Council of the Arts, is to set the criteria first, and then invite submissions. Instead, no criteria exist other than that the cash be distributed to Conservative ridings.

It's lucky for Ms Oda that everyone was so focused on the Afghan detainee scandal, trying to keep up with conflicting information that changed by the hour. With that as a diversion, she was able to slip out a back door in the House of Commons. Hope she didn't let it hit her on the way out.


Kephalos said...

Toronto Star said:
Foreign takeovers worthy of debate, April 28, 2007

“Canadian-owned businesses have been falling like dominoes in recent months. Toppled in a frenzy of foreign takeovers are such icons of Canadian commerce as Hudson's Bay Co., Falconbridge, Inco, Dofasco, Four Seasons Hotels, ATI Technologies and Algoma Steel. Next on the list could be venerable BCE Inc., control of which may fall to foreign interests, with some Canadian pension funds playing a facilitating role.

“Why this spate of massive foreign takeovers? More important, is there a point at which Canada should say: "Enough!"

“Canadians should also be asking why Ottawa scrapped the Foreign Investment Review Agency many years ago and replaced it with a rubber-stamp successor, Investment Canada, when other countries are demanding tougher concessions for approving takeovers than FIRA ever did.

Why hasn’t the Star listed the trust business takeovers? What about
Art In Motion Income Fund
Boralex Power Income Fund
CanWest MediaWorks
Cdn. Hotel Income Properties
Chartwell Seniors Housing
Chemtrade Logistics Inc. Fd.
Custom Direct Income Fund
E.D. Smith Income Fund
Foremost Income Fund
Gienow Windows & Doors
Hartco Income Fund
Legacy Hotels Real Estate Tr.
Movie Distribution Income Fund
Osprey Media Income Fund
Specialty Foods Group
Stephensons Rental Services
Thunder Energy Trust
Whiterock REIT
What are these? Chopped livers or businesses?

But, who needs FIRA? Would this Government please sit the fat-backside of James M. Flaherty on a backbench, and then would this Government just get out of the way of Canadian investors? Let us decide how we want to capitalize our investments. Let the Canadian capital markets and Canadian investors be free. Just get out of our way. Please.

cousin it said...

kephalos said:
Why hasn’t the Star liste"d the trust business takeovers?

The answer is actually quite simple. The editorial "freedom" of the Toronto Star or the so called Atkinson principles are assured through the multiple voting shares controlled by descendants of the Atkinson family (read: Honderich et al). The editorial board of the Star is wise to this. They realize that the market would more highly value Torstar Inc if it were a trust. Nothing to do with any tax benefit, because there isn't any tax benefit. This value disparity taht derives from supply and demand places market pressure on companies like Torstar to convert into an income trust. The problem for these "indpendent" editors of the Star is that they would have to leave their multi voting/subordinate voting share structure behind and therefore lose their "independence". Some independence. At what price? Disproportionate voting share structures is just one more corporate model abuse that the income trust market won't tolerate. Torstar knows this, and therefore they are part of the media campaign to mislead the public about the true facts behind this income trust scandal that is being perpetrated for the benefit of Corporate Canada and the likes of Big Life Insurance companies to name a few. The net effect of all this is that the print news media is proving its enormous bias on this issue and many a reader is getting fed up. These internet savvy readers are finding that learning the truth requires going looking for it rather than consuming the spoon fed nonsense these highly commercially biased news sources are offering up.

Thank god for the internet. It's the new age of democracy that serves as an effective antidote to the corporate concentrated ownership of the media in Canada.