Take your pick of poison, whether it’s the alleged torture of Afghan prisoners, honouring the Atlantic Accord or the taxation of income trusts, Canada’s New Government is working at cross purposes with the interests of the broad electorate, a small percentage of whom were responsible for electing them into office. Recent polls would clearly suggest that an even smaller percent would elect them to office this time around. Yesterday’s New is today’s Old and tomorrow’s Same Old, Same Old.
I have a particular interest in the income trust tax matter, in that it was the original sin of this government of ours. Many had predicted at the outset that the resultant decline in the market value of these public income trusts, combined with the cash flow rich nature of the underlying businesses involved, would ensue in a wave of foreign takeover of these income trusts, lead by foreign private equity. Happy Halloween would be followed by happy hollowing. Sure enough, the pent up demand that resulted was so competitive in nature that many didn’t wait for the ill-conceived legislation to pass and they acted preemptively. To date some 19 income trusts totaling $10 billion have been acquired. !5 by foreigners. Finance Minister Jim Flaherty’s thoughtful response: “it’s not my fault”.
We always knew that this was a preposterous response. We also now know it to be patently false, as documents obtained by Globe and Mail reporter Steven Chase reveal otherwise. In the internal Finance memo to Assistant Deputy Minister of Finance Bob Hamilton, Steven sums up the content of the memo by saying: “ one conclusion that's easily drawn from the memo is that taxing trusts out of existence would likely usher in even more private equity buyouts by Canadian and foreign investors, which is what happened”. What’s the official Finance response? “Finance Canada spokesman David Gamble played down the memo, saying it's merely a summary of one of many conferences attended by his department”.
Well, Milton Friedman warned us about people like David Gamble and Bob Hamilton and others in Finance like ex-Goldman Sachs investment banker Mark Carney who are proponents of taxing the living existence out of public income trusts for the ultimate benefit of foreigners and to the detriment of all Canadians who will have to supplement the loss of some $6 billion in taxes. Milton Friedman said:
“The danger of the Galbraithian view is that it stresses the importance of the expansion of the government's role. Unfortunately, while he assumes that the government is carried out by disinterested intellectuals, it will not be. It will be carried through by very highly interested bureaucrats, and they will run society from the centre, as such societies have always tended to be run: as collectivist societies which reduce and greatly limit the freedom and choices of individuals." How correct he was as this whole situation was dreamt up by a handful of bureaucrats at the DoF who want to impose their view of the "correct form" of business organization on all Canadian businesses.
There are obviously those in Finance who look for ways to benefit from upcoming tax changes. Serge Nadeau, is perhaps the most criminal example. However the greater crime may be those in Finance who look for ways, as Friedman suggests, to bring their vision of correctness to bear, on behalf of those whose agenda they are serving. It is clear whose agenda is being served here by the taxation of public income trusts at five times the effective tax rate of corporations band the double taxation of RRSPs. You need only look at the legislation to find out: Foreign Private Equity. Canadian Pension Plans, large and small. Marketers of competing investment products, most notably life insurance companies, Corporate Canada, and Foreign Oil. How much more at cross purposes can Canada’s New Government be at with the interests of the broad electorate?
Meanwhile the NDP is the all important Enabler of this hoax of a tax policy. Have Jack and Judy figured it out yet, or do they prefer to be educated one all candidates meeting at a time in the next election? So too perhaps the Bloc. So too, the Provincial Finance Ministers like Ontario’s Greg Sorbara who dutifully sent in supportive letters, without even asking for the supporting proof of tax leakage. Whose idea of public service is that?
Wednesday, June 13, 2007
Posted by Fillibluster at 12:20 PM