Gaming the system via contrived circumstances

In many respects the powers of democratic governments are very limited. However the ability of governments to contrive circumstances is quite extensive, at least for those willing to take this unfortunate route to governing. Stephen Harper is one such person.

The incident reported on yesterday involving the alleged infiltration of a group of peaceful demonstrators at the SPP meetings in Montebello with members of the police force whose clear rock-toting intent was to transform a peaceful protest into a violent protest is very revealing indeed and quite disturbing. Two things about this incident are quite certain. First is that the security protocols for a summit of this sort would be as tightly managed and highly choreographed as it gets. It is impossible to imagine that any member of the security detail would be given the discretion or latitude to adopt rogue procedures that would allow a peaceful demonstration to morph into a violent one. Therefore the approvals for such a tactic would go very high up within the chain of command. Second, these three alleged demonstrators whose actions were caught on a YouTube video were clearly members of the police force as judging by their mock arrest (as a result of no provocation and to simply allow them to comfortably exit the scene) and the fact that they wore the exact same footwear as the police themselves, as made abundantly obvious by the identical yellow logos on the soles of their boots caught on video.

I wonder how many people were sitting around the boardroom table discussing the use of this tactic for the upcoming Montebello meeting? More to the point, which members of the trilateral security detail thought it would be a good idea to contrive such a set of circumstance that would foment violence among an otherwise peaceful group of protestors? What twisted logic was used as the justification for contriving these circumstances and whose approval was given to implement such a tactic?

This willingness to contrive circumstances is not a new tactic for Canada’s New Government. The income trust betrayal was probably the first such situation that gained prominence. Stephen Harper had significantly limited his options when he was voted into office on an explicit promise to never tax income trusts. This was a  very successful strategy at garnering votes and helped install Stephen Harper as Prime Minister. Having entered the heady realm of high office, Stephen Harper found himself being fawned over by Canada’s corporate elite who had been unsuccessful in the previous government under Finance Minister Ralph Goodale in their efforts to eliminate income trusts in order to preserve the status quo as they knew it and as benefited them as issuers in the capital markets and as  sellers of competing financial products like life annuities etc.

This created a problem. How do I, Stephen Harper, reverse such an explicit promise in order to ingratiate myself with my new friends in high places? Nothing like a contrived set of circumstance to offer the opportunity to game the system. Eventhough we knew that our promise to never tax income trusts was highly likely to provide corporations with the necessary confidence to proceed with conversion into income trusts in an atmosphere of fiscal certainty, we will use this very outcome of our promise as the rationale for totally reversing our promise. We will simply say that the  circumstances have now changed. To add fuel to this fire we will contrive an analysis that concludes that these conversions will result in a significant loss of taxes to Ottawa. We will contrive this tax leakage result by totally ignoring in our analysis the taxes that  are paid by RRSPs which hold 38% of all outstanding income trusts, by assuming they never pay taxes. We will cite National Security as the rationale for why we deliver 18 pages of blacked out documents to Gordon Tait in response to his request under the Access to Information Act. We will further contrive the circumstances by ignoring the known fact that neither BCE nor Telus actually pay any taxes as the corporations that they will be forced by out actions to remain. We will ignore the fact that any experienced person would know that this policy will make BCE and Telus and the entire $200 billion income trust market highly vulnerable to leveraged buyouts by foreign private equity which will have the result that virtually no Canadian taxes are paid by either the companies themselves OR their new owners.

Canada’s New Government will employ a tactic of contriving circumstances to free ourselves from the constraints of the electorate and our election promises, in order that we can game the system to our political advantage. Wouldn’t it be just great if we could get Michael Sabia who has resisted at every opportunity converting into a trust, to announce BCE”s conversion to an income trust? That would be the perfect trifecta of contrived circumstance to reverse our income trust promise. Changed circumstances, tax leakage, BCE and Telus. That way the Globe could report that: “ Amid this escalating tension, Mr. Sabia's phone call became a flashpoint, prompting the federal government to accelerate its crackdown on the sector. Mr. Flaherty was convinced the twin conversions of icons such as Telus and BCE would incite other corporate titans to follow in their wake.” and Flaherty could be quoted as saying; ““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.”

The fact that this whole premise is blatantly false, doesn’t seem to matter, with the Canadian press at least. However, it is to the exception of a handful of journalists and about 2.5 million Canadians who were robbed by their own government and the 70% of Canadians who were betrayed by losing an important investment choice that they had been assured would be available to them as they undertake the difficult task of providing for their own retirement income in a protracted low interest rate environment.