Every Canadian

Halloween 2007 will mark the first anniversary of that day that will live in in fiscal infamy when the country’s Finance Minister was misled into believing the double taxation of income trusts in RRSPs would solve all the country’s problems of presumed tax loss and low productivity and capital reinvestment. As we all now know, the reverse is true and Jim Flaherty’s actions and those of Canada’s Novice Government on this file will be detrimental to every Canadian, on at least one level.

As has been made abundantly clear since Halloween 2006, the world is a more complex place than that which Flaherty beholds when he gazes out from the prism of his sixteen year old childrens’ eyes (Flaherty’s self admitted mindset, behind the income trust tax). Let’s see what others have learned since that fateful Halloween, when Flaherty justified his tax by saying:

“You have to either leave it alone or fix it,” Mr. Flaherty shrugged Wednesday. “We were going to see the two largest telecommunications companies in the country not pay corporate taxes. That's a clear and present danger to fairness in the Canadian tax system. I thought we had to act.”

Perhaps the best advice I can provide decisive Jim Flaherty is that next time he should think before acting or to follow the old adage that “if it ain’t broke don’t fix it”. But fix it he did. Had he followed such wise counsel, we wouldn’t be reading stories like this:


Bell-Teachers deal good for Canada?
Paul Vieira
Financial Post
July 3, 2007

“It is estimated Ottawa stands to lose over $1-billion in annual tax revenue should Bell Canada be privatized. Mr. Flaherty played down those worries, noting the federal government stands to reap a one-time windfall through capital gains taxes”

So lets take a toll of the damage that Flaherty’s policy has inflicted on every Canadian. Someone has to come up with the potential loss of $7.5 billion in annual taxes that will shortly ensue from this policy. What choice do you think a sixteen year old would make? Reduce spending by $7.5 billion? Raise taxes by $7.5 billion? Raise the GST by 1.5%? Sell some government assets for $7.5 billion, this year, next year, ad infinitum? Or just run it up on dad’s tab and increase the federal debt by $7.5 billion a year.? Tough choices for some, but I am sure Jim is up to the task, since he can bring his experience on all possible outcomes from his laudatory days as Ontario’s Finance Minister where he adroitly masked the deficit he created through a host of asset sales at 50 cents on the dollar (read 407, Bruce Power, etc., etc.)

Unfortunately the damage doesn’t end there. Other Canadians are negatively affected on multiple levels. How about the 70% of Canadians who don’t have pension plans who just lost an important investment choice that will leave them more captive to the limited choices out there, as we transition from a “nation of coupon clippers” to a “nation of day traders and stock speculators”. How about the 2.5 million Canadian who sustained a permanent loss in value of their life savings of $35 billion. How about those people for whom a loss of income of some 50% won’t be defined in terms of “under funded pension liability” but rather a dramatically reduced standard of living and confidence in their financial future in old age?

No doubt this array of choices goes way beyond the prism of insight afforded by a 16 year old’s perspective. So what did Flaherty mean when he said that? Did he mean he thought his children would have a better future in what he erroneously thought would be a more economically viable Canada? Or did he simply mean he was hoping to get them summer internships working for some US investment dealer or private equity manager on Wall Street all of whom are the direct beneficiaries of this tax scheme of his? Hard not to be cynical about such unprecedented incompetence on the part of a Finance Minister of an industrialized nation.

We have all become prisoners to Flaherty’s childlike prism mindset.

Did I mention interest deductibility on foreign acquisition debt? Did I mention asymmetric takeover rules? Did I mention bloated budget spending? Did I mention no broad based tax cuts, as distinct from targeted vote motivated tax cuts? Did I mention not honouring written commitments?

Did I mention that it’s time for Canada’s New Government to be as thing of the past before we have nothing left of the future?