Monday, March 24, 2008

Canada’s Parliament is a joke. A virtual Salem witch trial, court of injustice


How many democratic institutions around the world pass major legislation into effect without even lifting a finger to determine whether the assertions upon which they are based are true or false?

Well, that’s exactly what happened in Canada when Parliament passed into law the double taxation of “public” income trusts. All other income trusts were left unaffected, thereby targeting only average Canadians seeking to provide for their retirement through use of their RRSPs.

The premise upon which this tax measure was based was the premise that income trusts cause tax leakage. No evidence has been provided by the government to support that thesis. As such, the notion that income trusts cause tax leakage is as credible as a UFO sighting or something akin to the Salem Witch Trials.

Back in the late 1600’s there was much angst on the part of puritanical Massachusetts that their community had been invaded by members of the occult. It was believed that witches had entered their midst. The legal courts of the day sentenced 19 men and woman to be hung for being witches. This was known as the Salem Witch Trials.

The popular techniques of the day for determining whether someone was a witch, was based on the diagnosis of a single doctor’s theory. William Griggs. On that basis these accused individuals were sentenced to death by hanging.

The allegations and theories that income trusts cause tax leakage are as well founded in science as the Salem witch trials. Except this is 2008 and tax leakage is as easily determined a concept as balancing one’s cheque book.

Rather than answer the question of tax leakage head on, and releasing the data behind the 18 pages of blacked out documents, we had the Finance Minister and senior members of the Department of Finance advancing a number of highly spurious and occult-like arguments to “prove” the existence of tax leakage. They divined their occult arguments this way:

Hon. Jim Flaherty (Minister of Finance):
“The market reaction to a policy that levels the playing field between income trusts and corporations, that makes them equal, not worse, shows that a built-in tax advantage existed. Otherwise, the investors would not have reacted the way they did. There would have been no market correction.”

So that’s Flaherty’s witch hunt rationale: If you tax something, like an income trust or a house, and it’s market value goes down, it is proof that there is tax leakage. Would the same hold true if the dividends of TD Bank or Power Corporation were double taxed at an additional 31.5%, would their precipitous decline in value prove their was tax leakage from TD Bank or Power Corporation?

What utter spurious nonsense being advanced by people who should know better or who do know better.

The income trust issue is not without its Dr William Griggs. Foremost of whom is Dr. Jack Mintz, a self appointed expert in all things tax leakage related. His independence on this matter is highly suspect, as he is a part of the corporation food chain and a former member of the Department of Finance, and remains part of that food chain as well..

Here was the manner in which Jack Mintz’s logic was invoked by Flaherty at the public hearings. How’s this for lackadaisical logic?

“On October 19, 2006, Mr. Mintz said and I quote: “It is silly to argue that there isn't any tax loss. Everyone knows the reason people go into income trusts is because there are tax benefits. That's the way the law is.”

Silly? Here's what's really silly. Rather than the calculation of alleged tax leakage being some lame exercise in “he said, she said”, the matter of alleged tax leakage needs to be proven in a manner consistent with the important role that Parliament plays in every Canadian’s life.

Alleged tax leakage needs to be raised to the standard of the Auditor General who proclaims that “Parliamentarians need objective fact based information on how well the government raises its funds [taxes].”

So where’s the proof? The Green Party and the Liberal Party are demanding the truth be told about alleged tax leakage.

Prove the case or drop the tax This isn’t Salem Massachusetts 1692. Or is it?

Do Canadians really benefit when lies become enshrined in sweeping tax legislation?

12 comments:

Dr Mike said...

My God , what a freaking joke !!!!

We have Jim Flaherty , Jack Mintz , & the rest of the crew at finance basing tax policy which affects people`s lives on the concept of a "notion".

A synonym for notion is "whim".

And that just about sums up this whole mess in one word.

Tax leakage is their un-fact based idea of what was occurring--they subsequently based their tax policy on their concept or idea or whim of what they perceived was happening.

Idiots!!!!!

Open your eyes boys & do the math.

We are not a bunch of unwashed simpletons who will accept what you say at face value only.

You have treated us like a bunch half-wits who could not add 1+1 & come up with 2.

If Flaherty & Mintz are the best we have in this country to run finance , we are indeed up the proverbial creek & there is no hope for the future.

Dr Mike.

Mary the Golfer said...

Surely we deserve better.

If they were to prove us wrong , I could accept what they have done. When they are too cowardly even to do that , then they deserve nothing more than our disdain.

Of course , this gets us nowhere at all other than giving us high blood pressure & sleepless nights. We need proof & it appears that the Auditor general may be our only hope.

Hopefully , she will act sooner than later , or sooner than not at all.

Mary P

No tory like an old fool said...

The House of Commons is a sham for three major reasons.

The Speaker is useless--a cancer on Canadian democracy. Second, in the Mulroney era, Ministers found out that they could deceive the Commons and get away with it. Until then, the Minister who lied on the floor of the House died on the floor of the House.

The third, and the most important, is that the Canadian press is now staffed by a hoard of fat couch eunooks.

Ron said...

I don't think there is anything anyone can say or show that will convince you that it was a good decision - your interest is partisan political, not clear minded economics. You convienently forget the Liberals were wanting to do the same thing but leaked the news beforehand to selected friends and when that became public had to retreat. You convienently forget that the Liberals, while saying mealy mouthed platitudes about looking into it, re-examining the issue etc. they have not come right out an promised to reverse the decision because, even they know it was necessary and the right thing to do - that is the problem with partisan political positions, they don't recognize the right thing to do, they just promote thier version of what they want done.

Anonymous said...

Ron said:

"I don't think there is anything anyone can say or show that will convince you that it was a good decision"

Obviously Ron you didn't read the piece. We simply want the proof. What is partisan about wanting the proof?

Do you accept everything on blind faith in your life? Your bank balance? Your neighbour's excuses?
Your enemies lies?

Where does blind faith end and utter stupidity begin?

Please advise where you presently reside along that blind faith/stupidity continuum.

Brent Fullard

Dr Mike said...

ROn,

Good to hear from you.

Next time get your facts right.

You have stated that our position is not based upon "clear minded economics".

It seems that you have read the 18 blacked-out pages--now that is what I call clear-minded economics--you must find those same pages a huge embarrassment--I now as a life-long Conservative I certainly do.

If you want clear-minded economics , we can show you the many studies completed that show tax leakage to be a myth--contact me at michaelagolf@sympatico.ca & I will be glad to send all this material your way--once you get caught-up on your reading , then we can talk.

I can put you in touch with Liberal officials if you want confirmation of their desire to reverse this decision.

Contact me at your leisure--I am here.

Dr Mike.

truth in trusts said...

Ron

Show us some facts! Let's see your analysis that shows the tax leakage. Use some of your "clear minded economics." While your at it maybe you can ask Flaherty why his law firm does not pay any taxes. And why no accounting firm pays any taxes. Just like income trusts the partners of the law firm pay the taxes. The unitholders of the income trusts pay the taxes. Where's the leakage?

Anonymous said...

March 24, 2008:
Ron, (the financial expert)please answer my question? From 2002 to 2007 my income taxes have risen 40% as a result of income trusts. My neighbour who has GIC's says her income tax is going down along with her income. So, you mathmatical "genius" who is supplying that idiot Flaherty with his monies. The man is bonkers...he is going after the provincial government of Ontario like a Mafia don. I live in
Quebec....if he tried that here, he would be tarred and feathered as he should be. The most inept Minister of Finance in Canada's history.

Robert Gibbs said...

Here's one article worth repeating here, I'd say, as previously published by Brent.

Perhaps Conservative sympathizers can put aside their partisanship for a moment and do some intellectually minded reading.

But then again, this might be asking for too much.
-----------------------------------

Op-ed article written by Dennis Bruce of HDR | HLB Decision Economics Inc.

Trusts Redux: Tax Policy Suitable for Halloween

October 31, 2007

As an economist I welcome Minister Flaherty’s October 30 announced intention to boost Canadian productivity and prosperity by reducing the general federal corporate income tax rate to 15 per cent by 2012. The measure should be embraced by all: It will position Canada favorably in the global economy for decades to come. But while I laud the strategic direction on corporate taxes, I continue to question the government’s consistency on tax policy in general.

A year ago today the Minister announced in his Tax Fairness Plan his intention to “restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations,” to eliminate tax leakage and to remove distortions in investment decisions. To paraphrase the Department of Finance’s analysis, the avoidance of corporate taxes from entities after conversion to an income trust is not totally offset by the taxes paid on income trust distributions from individual unit-holders; therefore tax leakage. The Minister estimated that annual tax leakage was in the order of $500 million and stated that something had to be done “to restore balance and fairness in the tax system”. The Minister’s solution to create “tax fairness” and eliminate tax leakage was to implement a 31.5% Distribution Tax on trusts in 2011 and to not allow any new conversions to the income trust form. The market response to the “Tax Fairness Plan” announcement was very negative.

Having worked for the income trust industry and with the Department of Finance on determining the appropriate methodologies for tax leakage, I presented evidence on the tax leakage issue to the Parliamentary Standing Committee studying the issue. To be precise, I raised several concerns with the Department of Finance approach – all of which went to a “sharp over-statement” of tax leakage. The major flaw in the Department of Finance analysis was that it did not take a lifecycle view of the tax leakage issue but rather focused on a 2006 “test year”. By failing to account for the reality that corporate tax rates were legislated to be reduced to 19 percent by 2011, the Department took a short-sighted and punitive approach to the issue. Despite the debate and a dissenting Committee Report “Taxing Income Trusts: Reconcilable or Irreconcilable Differences”, the income trust provisions of the Tax Fairness Plan remain in place.

It is regrettable that the October 30 announcement did not occur a year ago. It would have all but eliminated the perceived tax leakage issue without the punitive distribution tax on income trusts. In fact, the Department of Finance’s own Tax Leakage Model would have given an estimate of merely $80 million in tax leakage when accounting for yesterday’s corporate tax cuts instead of the $500 million stated by the Minister at the time. The Department’s own analysis would not have supported a tax on income trust distributions. If the October 30 announcement had been made last Halloween, the billions lost by investors would not have occurred and the playing field would have been leveled by 2011 – all this according to Department of Finance methods of analysis. These losses cannot be recovered and one has to question the path that led us to this point and Finance’s tax policy strategy.

I believe that even the $80 million estimate sharply overstates the leakage. This aside, yesterday’s corporate tax cuts would now allow the abolishment of the income trust distribution tax all together without incurring federal tax leakage – this, again, according to the Department of Finance’s own model.

Dennis Bruce is Vice President with HDR Decision Economics and has studied the income trust tax leakage issue since 2003. He twice testified before the House of Commons Finance Committee on the question Income Trust tax leakage.

Dennis Bruce
Vice President
HDR | HLB Decision Economics Inc.
1525 Carling Avenue, Suite 500
Ottawa, Ontario
Tel: 613-234-0080 Cell: 709-632-1708

HDR - ONE COMPANY | Many Solutions ™

Robert Gibbs said...

In the spirit of Brent's blog here:

CON PIGS
--------

CON cronies gathered in their masses
Just like witches at black masses
Evil minds that plot destruction
Sorcerers of death's construction

In the fields a body's burning
As the CON machine keeps turning
Death and hatred to mankind
Poisoning their brainwashed minds

Randy Meyer said...

Ron,

Show me the numbers. That's all anyone has ever asked. What is so hard about that?

I'd ask the same of the Liberals or any other party. That is not partisan Ron. It is simply seeking the truth.

I'm so sick of the CONservatives trying to justify their actions based on what someone else might have done. What does it matter what anyone else would have done? It's what the CONservatives have done that counts.

Please, we're all begging -- give us the numbers. You know. The ones under the blacked out pages.

Prove the case. Simple.

Robert Gibbs said...

Let Dim Jim Flaherty continue spewing his venom.

Then, perhaps, Ontarians - and indeed all Canadians - will rightfully send him and his intellectually and morally corrupt CON cohorts to the netherworld of political purgatory where they belong.