It’s no wonder that Stephen Harper didn’t see fit to celebrate or acknowledge the recent 25th anniversary of the Charter of Rights and Freedoms, as it represents just another check and balance that he would rather not subject himself or his government to.
Flaherty’s Tax Fairness Plan to tax income trusts runs afoul of the Charter of Rights and Freedoms, as it is premised on a wholly arbitrary measure that discriminates between those Canadians who are not members of pension plans and those who are. The recently announced purchase of Golf Town Income Fund by OMERS provides a perfect example. This very same business held by Canadians in their RRSP is subject to a 31.5% tax and growth restrictions on its business activities, whereas upon transfer of Golf Town to OMERS in which Golf Town will fully retain its trust structure, no such tax and no such growth constraints will exist. This government has made Golf Town worth more to OMERS (as the buyer) than it’s is worth to average Canadians (as sellers). This government is double taxing the earnings of Golf Town held in RRSPs and not double taxing the earnings of Golf Town held in OMERs. One retiree benefits from the absence of the tax, the other retiree suffers.Beyond that, nothing else is accomplished, as Golf Town continues on as a trust. To the extent that tax leakage existed or reinvestment in the economy is imperiled or that Golf Town was nothing more than a ponzi scheme, none of that will have changed. Only the owners/beneficiaries will have been changed. Strange policy outcome indeed.
Taxes and new tax measures are commonly used by Government to incent certain behaviour among taxpayers and to also discourage other behaviour among taxpayers. Nothing wrong with that. However widely panned that it may be, Flaherty’s “Green Levy” is a good example of the carrot and stick nature of taxation. The Green Levy introduced incentives for certain fuel efficient cars and penalties for certain fuel inefficient cars. Nothing prevents Canadians at large from owning and purchasing a Toyota Prius versus owning a new Hummer. There is nothing inherently discriminatory about that, as all Canadians can freely choose whether they are going to receive the tax incentive or pay the tax penalty. Freedom of choice.
The same however can not be said for the tax on Golf Town Income Fund. Neither I, nor any other Canadian can simply opt to become a member of OMERS. Neither I nor any other Canadian can simply opt to organize myself as a group pension plan. The RRSP was brought into effect in 1957 by Liberal Finance Minister Walter Harris to enable average Canadians to enjoy the same tax deferred savings benefits as those Canadians who were members of group pension plans. This Conservative Government is taking this privilege away, and it is doing it in a way that conveys “lost” value from average Canadians in the form of “found” value to Group Pensioners and more specifically their Plan Sponsors, who for the most part are Governments themselves, like the Government of Ontario in the case of OMERS. This is both discriminatory and an exercise in self dealing, since this practice extends to the Federal Government’s own pension plan, as with the purchase of Thunder Energy by the Public Sector Pension Plan. No doubt, more purchases by government sponsored pension plans will follow those already made by OMERs, PSP, Teachers, Caisse, AIM(Alberta) and BCIMC.
The Charter of Rights and Freedoms holds:
Equality before and under law and equal protection and benefit of law
15. (1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.
Therefore this taxation of Golf Town Income Fund held in RRSPs which does not apply to the very same trust held in a group pension plan, creates discrimination between citizens who save for their retirement and those whose retirement is provided for them. This does not constitute “equal benefit of the law without discrimination”. The Tax Fairness Plan involves arbitrary distinctions amongst Canadians based on their pension arrangements and doing so is inherently discriminatory since I can no sooner become a member of a group pension plan (which benefits under this law), than I can choose to alter my ethnicity or race.
Forgetting the Charter for a moment, let’s examine the legislative policy intent of the income trust tax. Was it explicitly contemplated that the tax was intended to convey benefits to one group of Canadians to the detriment of another group? Was it intended to convey value and restrict investment choice from the 70% of Canadians without group pensions to the 30% with? If so please let me know where this subliminal message appears in the following provisions of the Ways and Means motion. Surely tax fairness did not intend for the wholesale introduction of tax inequity and the arbitrary distinction between Canadians, with the purpose of benefiting those with group pensions and penalizing those without.
If anyone is driving the Hummer in this situation, it’s those who belong to OMERs and not those are denied such post retirement luxuries.
Notice of Ways and Means Motion to Amend the Income Tax Act
That it is expedient to amend the Income Tax Act, in accordance with proposals announced by the Minister of Finance on October 31, 2006, to uphold the value of fairness for Canadians by:
* levelling the playing field between trusts and partnerships and corporations,
* ensuring that taxes are not unfairly shifted onto the shoulders of Canadian taxpayers, especially Canadian families,
* strengthening Canada’s social security system for pensioners and seniors,
* helping corporations make choices that are consistent with economic growth and competitiveness, and
* bringing Canada’s approach to the taxation of trusts and partnerships back in line with other jurisdictions,
Monday, August 20, 2007
Posted by Fillibluster at 2:14 PM