Today's Globe: BCE's Ironic End Run

Gearing up for the next trust boom
Marzena Czarnecka
Globe and Mail
April 30, 2008


BCE’s Ironic End Run:

Jim Flaherty may not know this, but the privatization of BCE, Inc. by Ontario Pension Plan and company – amounts to an income trust. At least, it does if you talk to John Brussa, one of the so-called fathers of the income trust structure.

“If you look at the BCE transaction, it is an income trust in everything but name,” says Mr. Brussa, a tax partner with Calgary law firm Burnet Duckworth & Partner LLP. “From a pure tax leakage point of view, the tax leakage in the current structure is probably more than it would have been had BCE become an income trust.”

The irony is sweet. After all, BCE’s trust plans were one of the triggers behind the federal government’s move – in the persona of Mr. Flaherty, Minister of Finance – to close the “loophole” that gave income trusts their tax advantage.

Marzena Czarnecka
Globe and Mail

Vancouver Income Trust Breakfast with Liberal Finance Critic John McCallum

What: Income Trust Breakfast with Finance Critic John McCallum and Vancouver Quadra MP Joyce Murray.
A discussion on betrayal of public trust by the government and possible solutions moving forward.

Join a small group of Vancouver business leaders to hear Mr. McCallum speak about the Liberal approach to fiscal and economic issues facing Canada today. Learn about the Liberal plan for income trusts and John’s view of Canada’s fiscal priorities during these uncertain economic times. There will be plenty of questions and discussion, to draw on John’s unique expertise in government, the banking industry, and academia.

When: Tuesday, April 22, 8:00 to 9:30 am

Where: Fairmont Waterfront Hotel
Private dining room at Heron’s
900 Canada Place Way.

***Please confirm your attendance by email including your name, address and phone number to:

murraj1a@parl.gc.ca

Robert Kraljii
Special Assistant to Joyce Murray,
Member of Parliament for Vancouver Quadra

office: 604 664 9223
mobile: 604 318 8419

Jim Flaherty condemns tax leakage. Jim Prentice condones it.

Flaherty's rationale for killing income trusts:

November 2, 2006: “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.”

Prentice's approval of same:

April 9, 2008: “Federal Industry Minister Jim Prentice has given his approval to the proposed takeover of BCE by a group led by the Ontario Teachers' Pension Plan, the company said Wednesday.”

The utter stupidity and hypocrisy of the Harper government:

April 18, 2007: FLAHERTY'S TAX CONUNDRUM

BCE Privatization Could Cost Him $800-Million In Tax Leakage; More Tax Loss Than From BCE & Telus As Trusts!

Paul Vieira,
Financial Post
OTTAWA - Jim Flaherty, the Minister of Finance, could face another major tax loss headache --on the scale of what he attributed to income trusts -- should a buyout deal be reached between BCE Inc. and a consortium of private-equity investors.

Financing experts say a buyout of BCE -- led by tax-exempt pension funds Caisse de depot et placement du Quebec and the Canadian Pension Plan Investment Board -- would produce virtually the same results, taxwise, had the Montreal-based company converted to an income trust as planned.

"It is basically income trusts revisited," said Laurence Booth, an expert in structured finance at Toronto's Rotman School of Management. "And the implications for Ottawa are pretty much the same".

Yesterday, BCE confirmed it was in talks with the Caisse and CPPIB about taking the publicly traded company private. If successful, it would result in the largest buyout in Canadian corporate history.

It has been estimated the conversions of BCE and competitor Telus Corp. would, collectively, shrink corporate tax revenue by $800-million a year. David Lambert, a telecom analyst at Canaccord Adams, said yesterday he estimates that BCE alone pays, on a per-share basis, about $1 per share from its free cash flow toward taxes.

BCE has 808 million shares outstanding, which would translate into an annual $808-million tax bill under Mr. Lambert's calculations.

Last year, BCE had announced its intentions to convert to an income trust. But those plans were killed when Mr. Flaherty slapped a tax on income trust distributions to put an end to the popular corporate structure that allowed companies to avoid tax by dishing out most of the cash flow to investors [who paid the tax personally].

Mr. Flaherty said he decided to act because the investment vehicles were costing Ottawa $500-million in lost revenue annually, and warned that planned conversions would further threaten federal finances. [He failed to mention that individual trust investors would have paid even more taxes than the trusts would have, by way of the personal tax imposed on the distributions they received from the trusts.]

Under private-equity transactions, or leveraged buyouts, the investors finance the acquisition mostly with debt and a small equity component. The interest payments on that debt allow the private-equity investors to avoid, or greatly reduce, the amount of tax paid. [And there are no longer any trust investors to pay personal taxes on the revenues generated by the new company].

Further compounding possible problems for Mr. Flaherty is that pension funds can defer taxes owed. So if they own equity, dividends from those shares flow through without facing a tax hit.

"Financial markets are getting more innovative and you are getting some very low-risk businesses that can support more debt, and [investors] are finding ways of having them carry more debt in order to avoid the corporate income tax," Mr. Booth said.

He likened the Finance Minister's efforts to stem tax leakage to the title character in a Dutch legend. "[He] is a bit like the Dutch boy who has his finger in the dyke. He plugs one hole but then, bingo, another hole pops up."

Flaherty needs to work on his timing

Real world:

"Canada's six-year housing market boom is officially over," BMO Nesbitt Burns deputy chief economist Doug Porter declared yesterday, commenting on the lacklustre numbers. "Sales are melting faster than this year's snow pack."

Fantasy land:

Minister of Finance to Address the Durham Region Association of Realtors

The Honourable Jim Flaherty, Minister of Finance, will be the guest speaker at a luncheon hosted by the Durham Region Association of Realtors on Friday, April 18, 2008. The Minister will speak at approximately 1:00 p.m.

The Minister will discuss Canada’s strong economic and fiscal fundamentals, and how well Canada is positioned to meet the global challenges ahead.

The event will take place in the Guild Hall of the Oshawa Holiday Inn, 1011 Bloor Street East, Oshawa, Ontario.

A media availability will follow.

Jack Layton thinks the Liberal Party is the source of tax leakage?

Jack Layton is unable to connect the dots or get the facts straight.

In his comment below he connects tax leakage with the Liberal Party, instead of connecting bad tax policy with the absence of transparency on alleged tax leakage. Jack Layton is the problem, not the solution.

Hon. Jack Layton (Toronto—Danforth, NDP)

Mr. Speaker, Liberal Party activities resulted in several RCMP investigations into the sponsorship scandal and tax leakage from income trusts. During their campaign, the Conservatives called for greater transparency and criticized Liberal scheming. They were right to do so. However, when the Prime Minister says that he will keep his hands perfectly clean, then proceeds not to do so, we have a problem. As it happens, there is a problem: RCMP officers are at Conservative headquarters.

Why did Elections Canada have to ask—

http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&Parl=39&Ses=2&DocId=3424172

Harper’s raid on income trusts is a clandestine raid on RRSPs

As smug as some people may be that they didn’t own income trusts on that fateful Halloween, they shouldn’t be so smug if they own an RRSP, since Harper’s raid on income trusts was actually the first raid on RRSPs. The recently introduced TFSA is Harper's second raid on RRSPs.

Why? Because the Harper government and the devious civil servants in the Department of Finance are highly covetous of the half trillion dollars of tax deferred savings that are presently "tied up" in RRSPs. They want to get their greedy hands on these tax dollars at the earliest opportunity. Flaherty's recently introduced Tax Free Savings Account is merely a coy diversionary tactic to get Canadians' eye off the real prize, namely RRSPs.

One need only look at the income trust tax to get a sense for the broader tactical mission that is afoot by these insurgents in office.

The popular premise upon which the income trust double taxation was introduced was the notion that income trusts cause tax leakage. Such a conclusion can only be achieved if the taxes paid on income trusts held in RRSPs are ignored. By ignoring 38% of the taxes paid on income trusts, Harper and his gang of thugs lead by Mark Carney and Jim Flaherty were able to concoct a false story that income trusts cause tax leakage. They backed up this fraudulent claim with 18 pages of blacked out documents.

They subsequently demanded that these documents be returned. How very self-incriminating. Much like the tape with Harper’s acknowledgment that Chuck Cadman was offered (but declined) a $1 million life insurance policy.

By ignoring the taxes that are ultimately paid from withdrawals from RRSPs, the Harper government is seriously undermining the entire Registered Retirement Savings Plan system. The only benefit that the government confers upon Canadian taxpayers under the RRSP system is the ability to defer the payment of taxes on that limited portion of pretax income that can be contributed annually to an RRSP. For the government to then ignore these taxes that are being ultimately paid makes a complete policy mockery of what the RRSP is.

It is a diametrically opposed notion that on the one hand the government establishes a policy, namely RRSPs, that encourages Canadian taxpayers to save for retirement with pretax income, and then to establish a policy, namely that double taxation of income trusts, that can only be rationalized if the taxes paid on a popular RRSP savings vehicle are totally ignored.

The hypocrisy of the situation is made even more flagrant when the new taxation only applied to “public” income trusts and not all income trusts, including those that are private, like Jim Flaherty’s own law partnership of the purchase of Thunder Energy Trust by the Public Sector Pension Plan, who will hold Thunder Energy Trust as a private income trust and arbitrarily be free of the 31.5% tax and free of any of the arbitrary growth restrictions that would apply of it were “public”.

The ultimate hypocrisy of the situation was highlighted when Flaherty was attempting to justify the sale of BCE to Ontario Teachers’ and US private equity, an outcome that occurred as a direct result of his preventing BCE from becoming a tax maximizing public income trusts. His wise words of hypocrisy and selective justification were: "The purpose of the pension funds, ultimately, is to ensure they can honour their pension obligations. And there is taxation, of course, when pensions are paid out."

So why do the taxes paid by Ontario Teachers’ pension plan retirees get counted and the taxes paid by RRSP holders do not?

Why does the government permit pension plans to own income trusts free of tax and yet RRSPs can not?

Why does the government then permit pension plan retirement income to be eligible for income splitting and RRSP income to not be eligible?

There is something very inconsistent and highly insidious going on here, especially when it is acknowledged that only 25% of Canadian have employer pension plans and 75% of Canadians do not. Which group do you suppose the architects of this disparity, people like Jim Flaherty and Mark Carney belong to? The 25% of the 75%?

Elections Canada is serious in a way the Auditor General is not

Recently the four Liberal members of the Finance Committee wrote to Canada’s Auditor General and asked her to determine whether the foundation of the income trust tax, namely the unproven assertion that income trusts cause tax leakage, is true or false.

Evidently these elected members of Parliament took the Auditor General at her word and the mantra posted on her website that “Parliamentarians need objective fact based information on how well the government raises its funds (taxes).”

Sheila Fraser has proven herself to be derelict in her duty to Canadians and to Parliamentarians when she refused to perform this audit of alleged tax leakage. So which Parliamentarians is she referring to in her statement above if not the four Liberal members of the Finance Committee? Perhaps it's time for Stephane Dion to write a follow-up letter to Sheila Fraser and rattle her chain and demand that she perform her role.

Perhaps Sheila Fraser has become politicized in her role as Canada’s Auditor General. Meanwhile other groups joined in the Liberals call to the Auditor General to perform her role, like the Coalition of Energy Trusts, who represent 20% of Canada’s oil patch and the Canadian Association of Income Trust Investors, who represent the interests of the 2.5 million investors who lost $35 billion. Separately the Green Party had called for a public inquiry into alleged tax leakage.

And what does Sheila Fraser do? Nothing. Nada. Squat. SFA: Sweet Fraser All.

Perhaps she needs to take a lesson from Election Commissioner William Corbett and conduct a raid of the Finance Department and get the numbers behind the 18 pages of blacked out documents as proof of alleged tax leakage. Is Sheila Fraser not just a little bit curious that these 18 pages provided under the Access to Information Act were demanded too be returned by the Finance Minister?


RCMP raids Tory office for election file

GLORIA GALLOWAYAND CAMPBELL CLARK
Globe and Mail
April 16, 2008

Canada’s Who’s on first Government?

Bernier: “Time for Karzai to replace Kandahar Governor”

Bernier, who’s on first: “Bernier backs off Kandahar comments”

Prentice: “Changing the rules in the middle of the game is not how this country does business. ...”

Prentice, who’s on first:"This [MDA] decision ... reflects pretty unique circumstances."

Blackburn: “The Conservative government is promising Quebec it is willing to reopen the Constitution to allow the province’s recognition as a nation within Canada if they win a majority in the next election.

Blackburn, who’s on first: “Mr. Cannon said Mr. Blackburn's comments were his personal views, suggesting they were not those of the government.”


Lukiwski: “The As are guys like me. The Bs are homosexual faggots with dirt on their fingernails that transmit diseases."

Lukiwski, who’s on first: "I was stupid, thoughtless and insensitive,"

Harper: "When Ralph Goodale tried to tax Income Trusts ... don't forget, don't forget this ...they showed us where they stood. They showed us about their attitudes towards raiding seniors hard earned assets and a Conservative government will never allow either of these parties to get away with that"

Harper, who’s on first:“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.”

Actual Outcome: “It is estimated Ottawa stands to lose over $1-billion in annual tax revenue should Bell Canada be privatized.” Financial Post

Flaherty, who's on first: "It's not my fault", even though, like Lukiwski, he was "stupid, thoughtless and insensitive,"

There are the A’s and then there are the B’s.

There are the A’s and then there are the B’s when it comes to government handouts.

Red Wilson’s Historica Foundation received a $17 million grant from the Harper government, and Flaherty’s wife’s pet project has been engineered to get megabucks. Why should the Windsor Engine Plant that employs 600 workers expect to receive $30 million in assistance? After all, that would mean 600 more taxpayers?

Jobs, votes on the line
The Chatham Daily News
Posted -39 sec ago
Geographically, southwestern Ontario is a long ways from Quebec, but politically, it is light-years away.

That is especially true at the federal government level. Employees of the Ford Essex Engine Plant saw that recently when the federal government, led by Finance Minister Jim Flaherty, balked at the notion of committing $30 million to Ford to help bring the development of a new fuel-efficient V-8 engine to the plant and get 600 laid off employees back to work.

Flaherty said in January his government's position is to not subsidize individual corporations.

Yet federal Public Works Minister Michael Fortier said last week that as much as $350 million could be forthcoming to support the assembly of a new fuel-saving airliner built by Bombardier in Montreal.

"I can't give details, but we want that project to land in Montreal," Fortier said.

On top of this potential federal investment, The Canadian Taxpayers Federation says Ottawa paid out $350 million to Pratt and Whitney Canada - based in Quebec - and handed a Quebec ski resort $47.5 million. And that was just during the government's first fiscal year in office.

Add to that $500 million in grants and loans to businesses in La Belle Province in 2006 and 2007.

Perhaps Flaherty's comment on not subsidizing individual companies only applies to corporations not headquartered in Quebec. Or is it that the federal government has a hate on for the Windsor area?

Quebec has long been a political hand grenade for federal governments. Winning Ontario may get a political party into power in Ottawa, but spurn Quebec and a party will pay for it for years to come.

As for the political landscape in southwestern Ontario, Windsor and Essex County ridings are historically NDP and Liberal dominated. Judging from the government's tough position on the Ford Essex Engine Plant, Essex Conservative MP Jeff Watson must feel like he's on an island. That's 600 key jobs in his riding.

Watson's island is sinking. It will submerge when the next federal election occurs.

Jim Flaherty: Corruption’s constant cohort

Corruption takes many forms. Some more studied and subtle than others.

The most common form of corruption is that practiced by the likes of Brian Mulroney in which cash is exchanged for influence peddling. Stephen Harper’s attempt to bribe Chuck Cadman is another good example of this form of corruption

Then there is the form of corruption known as intellectual corruption. A good example of this would be the fraudulent notion advanced by Mark Carney that income trusts cause tax leakage. Jim Flaherty wasn’t the architect of this fraudulent concept, since it predated his arrival as Finance Minister, as Mark Carney had previously tried to hoist this false notion on Ralph Goodale in Mark’s first attempt to set the world straight for all of Goldman Sach’s best clients. Jim Flaherty was however a very eager and willing accessory-after-the-fact to the notion that income trusts cause tax leakage in what can be best described as Tax Unfairness 2.0

Then there is the third form of corruption, what I term as tangential corruption. This is a form of corruption in which the sun always seems to be shining in the place where the instigator is standing, and it isn't the result of serendipity.

Tangential corruption is also known as pigs feeding at the trough or pork barrel politics. Usually it is practiced with some finesse. However such is not the case with Jim Flaherty. To get ahead in society, one can do no better than to be a cohort of the Flaherty family circumstances. Cohort being defined as a group of persons similarly aligned. Oh to be the parent of a child in private school.

Better it is to be the parent of a child affected by developmental difficulties than childhood leukemia, since the former is a cohort of the Flaherty’s in a way that the latter is not. The former gets special tax dispensation in the way that the latter does not.

Jim Flaherty is the ultimate ambulance chaser.

I wrote about this very thing back in May of last year in a piece entitled The Self Benevolent Tax Policies of Jim Flaherty

Many more data points have since been observed, and this thesis is in need of an update. As such I ask the questions:

- Was it not strange that Jim Flaherty as Ontario’s Treasurer introduced tax credits for private school just as his children were entering private school?

- Was it not strange that Jim Flaherty as Finance Minister introduced income splitting for seniors, however just those with pension income like himself?

- Was it not strange the Jim Flaherty as Finance Minister introduced the Registered Disability Savings Plan, and tax deductible contributions of up to $200,000, for persons just like himself and his family?

- Is it not strange that Jim Flaherty was going to resurrect the Ottawa to Whitby-Oshawa Via train service, even though it was considered highly uneconomic, yet beneficial to him?

- Is it not strange that the cars and trucks produced in the Oshawa assembly plants are free from the his Green Levy and yet could hardly be considered to be fuel efficient?

- And is it not highly suspicious that the recently introduced $45 million program to fund those with disabilities is tailor made for his his wife’s pet project?. This whole program was contrived, both in scope and timing, to be yet another bespoke tax policy to feather the Flahertys’ nest.

Meanwhile, here is a lead that some enterprising journalist may wish to track down. I am told that while Flaherty was part of the Mike Harris's Ontario Cabinet that a number of schools across the province were deemed redundant, including one in Whitby. This property was purchase from the province by Flaherty’s wife after the town declared it had no interest in purchasing the property. One year later, I am told, the town had a change of heart and purchased the land portion of the school from Flaherty’s wife at a price equal to what she paid for the land and the building, leaving her with zero investment and the sole owner of the building. No doubt land registry office records could verify or deny the veracity of this story.

This building was converted by Flaherty's wife from a school to a center for handicapped children.

Is this the project into which these federal funds will now flow? Who owns the facility itself that will receive federal funding? Flaherty's wife? Inquiring minds need to know.

Harper played the role of Karl Heinz Schreiber to Cadman's Mulroney

The difference of course being that Karl Heinz Schreiber was successful in his influence peddling efforts with Brian Mulroney in a way that Stephen Harper was not with Chuck Cadman.

This difference in influence peddling outcomes can be explained by the difference in the “bribees” and the “bribers” in the two situations.

As a briberer and influence peddler, Karl Heinz Schreiber is charismatic in a way that Stephen Harper clearly is not.

In addition, Chuck Cadman had moral standards that exceeded Brian Mulroney’s. Chuck Cadman was on death’s doorstep and Brian Mulroney had, according to his spokesman Luc Lavoie, "money pressures, since he was "not a rich man" at the head of a young family with certain lifestyle expectations.”

Evidently in Brian Mulroney’s rarified world of “entitlement”, this passes as an acceptable excuse for accepting $300,000 cash payments while in office, or not reporting one’s income or GST with Revenue Canada.

Chuck Cadman on the other hand had different standards and different considerations. His was not a world of entitlement. He entered politics for reasons vastly different that those of Brian Mulroney and Stephen Harper.

Stephen Harper has sought power and influence in much the same way that Karl Heinz Schreiber did. Stephen Harper by his own admission wasn’t beyond attempting to bribe Chuck Cadman with a $1 million life insurance policy to buy Chuck’s vote and bring down the Liberal government and trigger an election.

This incident involving Stephen Harper and his attempt to bribe Chuck Cadman with an insurance policy is not an isolated event. Stephen Harper did the very same thing with the 2.5 million Canadians who were fearful of the Liberals and the Liberal’s review of income trusts in the fall of 2005. Stephen Harper coldly calculated that he could appeal to this block of voters in the 2006 election by offering them an insurance policy by declaring that:

“You know where the Liberals stand on raiding seniors nest eggs, whether it is death taxes or taxing income trusts, a new Conservative government will never let this happen”.

As we all learned to our great dismay, his insurance policy proved to be completely illusory.

This fraudulent income trust promise also tells you a lot about Stephen Harper, which is that he has a hidden agenda ad is willing to sell out to the highest bidder in his quest for power.

Stephen Harper ostensibly changed his stance on income trusts on the false and unproven notion that income trusts cause tax leakage, when in fact he was simply bowing to the pressures of Corporate Canada’s Controlling Elite (CCCE) to shut down the lemonade stand across the street, in order that the status quo would remain unchanged, and Canada thereby fail to evolve in accordance with the clear wishes of the investing public. Great long term policy decision, not. The fact that all Canadians will lose is of no concern to Stephen Harper. since it is not he or his instigators who will be making up for the loss of $1.4 billion in annual taxes. Their world or entitlement remains fully in tact.

The other examples of Stephen Harper’s vote pandering briberous ways are legion. Quebec is the perfect example. Other example take the form of lame initiatives like the Senior’s Council or the recent announcement involving product safety measures are all empty policies that sound great but amount to nothing. For example,

If Stephen Harper weren’t the duplicitous person he is, and was truly concerned about product safety, do you suppose that he would have fired Linda Keen as the head of Canada’s Nuclear Regulatory Safety Association for the mere fact that she was doing her job admirably, but in a way that caused Stephen Harper political harm. The only product safety that Stephen Harper is concerned with, is his product safety. He doesn’t sweat the small stuff, like retirement security, nuclear safety etc. etc.

As influence peddlers go, Karl Heinz Schreiber gets my vote, Stephen Harper does not.

It's high time for Harper to get deported.

Forget about Barbara George, here’s the RCMP's real contempt of Parliament

December 23, 2005 (middle of 2005-2006 federal election)

Dear Ms. Wasylycia-Leis

Further to your letter of November 28, 2005, in which you express your concerns regarding a possible breach of security or illegal transfer of information in advance of the federal government’s announcement of changes to the taxation of Canadian corporate dividends and Income Trusts November 23, 2005.

We would like to advise you that a review of this matter has been completed. Based on the information obtained during the review, the RCMP will be commencing a criminal investigation.

Sincerely,

G. Zaccardelli
Commissioner
Royal Canadian Mounted Police

Green's leader calls for probe of RCMP 'interference'

Apr 10, 2008 11:03 AM
Richard Brennan
OTTAWA BUREAU
Toronto Star

OTTAWA — Green Party Leader Elizabeth May said today Canada cannot tolerate police interfering in a federal election and has called for a public inquiry into allegations that former RCMP commissioner Giuliano Zaccardelli meddled in the 2006 election by naming then-Liberal finance minister Ralph Goodale in a criminal investigation during the midst of the campaign.

"Former Commissioner Zaccardelli's refusal to provide evidence to the internal Commission for Public Complaints against the RCMP is unacceptable," May said.

She said what happened in 2006 was something more akin to a third world country run by a tin-pot dictator.

"If this train of events had occurred in a developing country, we would be quick to conclude it was a banana republic. Canadians must demand a full inquiry to get to the bottom of this extremely serious interference in our democracy."

Just recently, RCMP public complaints commission Paul Kennedy released a report into his 13-month inquiry into the affair, saying, "I haven't got the slightest idea what was going through the commissioner's mind."

Flaherty: Privatization of BCE will lead to $1 billion in program spending cuts

News item #1:

Paul Vieira, Financial Post
July 04 2007

OTTAWA -- In the interview, the finance minister indicated he was comfortable with the role private equity and pension funds are playing in the economy. As a result, he does not believe Ottawa needs to review either the tax-exempt status of pension funds - which vied to take over Bell Canada - or rules that would apply to leveraged buyouts.

It is estimated Ottawa stands to lose over $1-billion in annual tax revenue should Bell Canada be privatized.

News item #2:

Les Whittington, Toronto Star
Apr 10, 2008
Flaherty says he'd cut to avoid a deficit

OTTAWA -- Finance Minister Jim Flaherty says the Conservatives will cut government spending if need be to avoid a budget deficit caused by the economic slowdown.

"No deficit – balanced budget," he said outside the Commons.

"We're not raising taxes," Flaherty added when asked how the federal Tories can avoid a budget shortfall if the weakening economy deprives Ottawa of expected tax revenues.

"There are other ways that governments can balance budgets, of course," Flaherty continued. "We can always restrain spending if that becomes necessary."

But he said the "cushion" in the Feb. 26 budget should be "adequate" to keep the books balanced.

The Conservatives have ushered in large hikes in program spending, which is expected to rise to $218 billion next year from $201 billion in 2007. At the same time, Flaherty has brought in cuts to corporate and personal taxes and the GST totalling $60 billion over six years.

As a result, the government's forecast surplus is only $2.3 billion for this year, and $1.3 billion next year.

With the Canadian economy performing worse than expected by the Bank of Canada and most private economic analysts, the lower-than-expected tax revenues could put the government on the edge of the first budget deficit in a decade.

"It's a combination of record increases in spending and big tax cuts – especially the GST, which is the biggest cut of the lot – bringing us perilously close to a deficit, so it doesn't take much of a further drop in forecasts to tip us into deficit," said Liberal finance critic John McCallum (Markham-Unionville).

"I hope it doesn't happen, but if it does, he (Flaherty) would have only himself to blame because he didn't leave enough of a cushion."

The Conservatives provoked widespread objections in 2006 when they announced $1 billion in spending cuts to status-of-women programs, as well as a program to help minorities mount court challenges and a range of other social and cultural projects.

Flaherty's comments on Ottawa's fiscal position came as the Washington, D.C.-based International Monetary Fund reduced its economic growth forecast for Canada as a result of the problems in credit markets and the slump in the United States, which buys most of this country's exports.

The IMF said Canada's economy would expand by 1.3 per cent this year, down from its January forecast of 1.8 per cent. The prediction for Canadian growth in 2009 is 1.9 per cent.

Both projections were well below the IMF's forecasts for world growth of 3.7 per cent this year and 3.8 per cent in 2009.

Oh, where to turn for an honest answer?......certainly not Sheila Fraser

BTW....the Auditor General isn’t going to investigate the Finance Minister's unproven allegation of tax leakage from income trusts that she was asked to investigate by the 4 Liberal Members of the Finance Committee, which begs the question: Oh, where to turn for an honest answer?

So much for Sheila Fraser's empty promise that "Parliamentarians need objective fact based information on how well the government raises its funds (taxes)". Turns out, that mantra is nothing more than a PR statement of no real world substance.

I have requested of these Liberal Members that the matter be referred to the new Parliamentary Budget Officer, in our never ending quest for proof of alleged tax leakage for the 2.5 million Canadians who lost $35 billion of their hard earned life savings.

Pox on Sheila Fraser, Auditor General of Convenience. Let me guess, she has a government pension and doesn't have to worry about mundane things like saving for retirement?

Oh, where to turn for an honest answer?
April 08, 2008
James Travers

OTTAWA — Jean Chrétien found a solution to some of his most troubling problems. Having been taught a difficult lesson by public inquiries that were too inquisitive, the former prime minister happily left it to the RCMP to investigate those smells that failed the critical sniff test.

As a political tactic, the Chrétien method offers obvious advantages. Focused on criminal activity, RCMP probes leave ethical judgments to others and have the added benefit of often taking what seems forever to reach unconvincing conclusions.

Sadly for those in power, all good things come to an end. An ever-lengthening list of Keystone Kops pratfalls from the Maher Arar affair to the internal pension scandal is finally forcing Canadians to accept that a national icon is broken. Worse still for ruling elites, former commissioner Giuliano Zaccardelli's pivotal and unexplained intervention in the last election means an RCMP investigation no longer provides political cover.

That new reality casts some light on why Stephen Harper, who once stressed the importance of taking a political punch without complaint, is now suing Liberals for their Chuck Cadman accusations. Even if Conservatives hadn't appointed a new commissioner with old Tory ties, an RCMP probe alone won't clear the air around what was or wasn't offered to a dying man to decide the Martin government's fate.

One alternative is Parliament's committees. But their investigative worth plummeted after failures to pick apart the sponsorship scheme and Brian Mulroney's curious dealings with Karlheinz Schreiber. In any case, Conservatives are now stonewalling justice committee attempts to measure efforts to change Cadman's mind and vote.

Worrying as it is, the Cadman question is a small part of the capital's bigger conundrum. If not the RCMP or MPs, then who can be trusted for honest answers?

It's such a short list that Harper is now relying on Kevin Lynch, the country's top civil servant, to plumb the NAFTA leak that embarrassed Canada and Barack Obama in the Ohio presidential primaries. What makes Lynch a good choice is that he's highly respected and is, by definition, non-partisan. What makes it bad is that he both serves as the Prime Minister's deputy and works closely with Ian Brodie, Harper's very partisan chief of staff who reportedly dripped to reporters the first small NAFTA drop.

That puts Lynch in an impossible position. No matter what the truth or how thorough the investigation, any report minimizing Brodie's role will be met with skepticism.

As always, it's even more complicated. There's deep suspicion here that Conservatives hope to scapegoat foreign affairs bureaucrats they neither like nor trust. But as clerk of the Privy Council, Lynch is also responsible for the civil service and for managing its increasingly strained relations with a Harper administration more interested in aye-aye policy implementation than listening when mandarins speak truth to power.

While there's no quick fix, there is a starting point. A precondition for restoring public trust in the RCMP and its investigations is to pull back the covers on its politicization. That means full examination before the next election of Zaccardelli's motivation in effectively, if not necessarily intentionally, throwing the last one to Conservatives.

Politicians must always be held to a higher moral standard than the criminal law. But every citizen has every right to demand proof that the federal force will conduct its most sensitive investigations without political fear or favour.


James Travers' national affairs column appears Tuesday, Thursday and Saturday.

All bluff and bravado, or is Flaherty willing to defend his actions?

Re: “Income trust lobby not giving up, looking to next election,” (The Hill Times, March 31, Lobbying Page, p. 6).

The story by Simon Doyle, about the advocacy efforts of our association contains a brave statement from an unidentified Conservative from Ontario:

“I don’t think Jim’s losing any sleep over it. As a matter of fact, I’m sure of it. I’m sure he’d love to go a couple of rounds with these guys in a debate situation.”

Well, if that is truly the case, then we would certainly welcome such a “debate situation” ourselves, and have three simple questions for Finance Minister Jim Flaherty, namely: When? Where? And would you like to bring the 18 pages of blacked out documents of alleged tax leakage, or should we?

Perhaps this debate would also allow us to once and for all deal with Flaherty’s communications director Dan Miles’ stated concern that: “It’s regrettable that they can’t move on.” That statement presumes that time will heal all wounds, however, time does nothing to erase the betrayal that this policy represents or the ongoing loss of $1.4-billion in annual tax revenues or the $65-billion in takeovers it has induced.

Perhaps the debate that we are bravely told that Flaherty would love to have with our association could be centered around Flaherty’s premise that, “it’s not my fault,” namely the litany of unintended consequences that his reckless actions have caused.

We await further instructions concerning the debate that has been so proactively proposed.

Brent Fullard
President and CEO
Canadian Association of Income Trust
Investors
Toronto, Ont.

Fast Eddy attempts to rewrite history.

Not so fast Ed Fast, Conservative MP, as you and your operatives attempt to finagle your re-election through revisionist history.

Obviously Fast Eddy has become aware from the Quadra byelection just how sensitive the voting community is to the Harper government’s income trust betrayal decision.

The Conservative candidate in the Quadra byelection cited the income trust betrayal as the one thing that the Harper government did that was likely to harm her chance for victory. The Conservative candidate went on to lose the byelection to the Liberals by a crucial 150 votes.

That admission took place less than three weeks ago. And now we have someone who goes by the alias of Faste0 attempting to rewrite history by removing the section on Conservative MP Ed Fast’s Wikipedia entry on his support of the income trust taxation.

Is this all coincidental, given that Ed Fast is the MO for Abbotsford in the Fraser Valley, or is there a growing awareness amongst the Conservative MPs of the groundswell of betrayal and anger amongst voters who were blatantly lied to in the last election. by Fast Eddy and the other Harper henchmen?

Ed Fast will be happy to learn that the section on his Wikipedia entry has been reinstated and once again reads:

Income Trust Legislation


Ed Fast continues to support the new proposed rules for income trusts introduced by the Conservatives October 31, 2006. [1] The immediate result of the change in tax policy was a loss to Canadian investors of $35 Billion, the largest ever loss attributed to a change in government policy. [2] According to the Canadian Association of Income Trust Investors some 2.5 million Canadian investors were effected by the change in Income Trust Policy. [3]

Educational 'graffiti' beats lying to the voters ....

Letters to the Editor
St. Catharines Standard
April 4, 2008

Educational 'graffiti' beats lying to the voters ....

Re: Political attack ad is nothing more than graffiti, The Standard, March 27.

If David Lewis took the time to review the facts about the Conservative party's so-called Tax Fairness Plan, he might not criticize the four million retail investors (many of whom are retirees) who believed Prime Minister Stephen Harper's promise that he would never tax income trusts - only to lose $35 billion 10 months later when Harper broke his promise.

If Lewis contributes to the Canada Pension Plan or owns any mutual funds, then he participates in the $35 billion loss and perhaps should consider joining the Canadian Association of Income Trust Investors instead of criticizing it.

He better get used to the billboards - at least educational "graffiti" - It is more honest than constant lying to voters.

L. Roberts
York Mills Road
Toronto

Playing field now officially leveled: First quarter IPO activity, lowest in a decade

Just some of the havoc wreaked by Jim Flaherty's rudimentary understanding of finance:

PricewaterhouseCoopers - Lowest in a decade, first quarter IPO market off more than 50%

TORONTO, April 3 /CNW/ - The value of initial public offerings (IPOs) on Canadian equity markets fell to $148 million in the first quarter of 2008, just half of the value of new issues in the same period of 2007 and the lowest quarterly total in more than a decade, the PricewaterhouseCoopers (PwC) survey of Canadian equity markets has shown.

The 20 new issues in the period from January 1 to March 31, 2008, was just less than the 21 IPOs in the same period of 2007 but the value of new offerings was 49.3% of the $300 million recorded in the first quarter of 2007,a period when the IPO market had already started its downward slide, the survey revealed.

Only three new issues were introduced on the TSX during the first quarter, for a value of $113 million. By comparison, five IPOs with a combined value of $191 million made it to the TSX in the same period of 2007, and 18 new issues worth $1.9 billion appeared on Canada's senior exchange in the first quarter of 2006.

Activity on the TSX Venture exchange was up slightly in the first quarter of 2008, when 14 new issues reached the market vs 13 IPOs in the same period of 2007. The value of new offerings on the TSX Venture fell to $31 million in the first three months of the year from the $89 million in the first quarter of 2007.

The value of IPOs in the first quarter is the lowest result in more than a decade, according to Ross Sinclair, national leader of PwC's IPO and income trust services.
"The same confluence of events that weighed down the market in 2007 continues to be a factor in 2008," Sinclair said.

A lack of investment alternatives to replace the popular income trusts, equity market volatility, credit market turmoil and gloomy economic outlook in the U.S. all appeared to conspire against the market for new issues, Sinclair said. "It is disappointing but I can't say these results are shocking," he added. "It will take the return of solid, established companies with premium issues to show the way out of this phase of the IPO market."

The first quarter results also trailed the final quarter of 2007, when 37 new issues were marketed on Canadian exchanges, including 19 IPOs on the TSX. The total value of fourth quarter offerings was $2.2 billion ($2.1 billion on
the TSX).

The largest new issue on the TSX in the first quarter was the $50 million IPO of Pristine Power Inc. Mining companies accounted for 16 of the 20 new offerings on all exchanges in the first quarter.

Today’s St. Catharines Standard Letter to the Editor

Harper, Flaherty are the ones lacking integrity and accountability
Posted 1 hour ago
April 3, 2008

Re: Political attack ad is nothing more than graffiti, The Standard, March 27.

In this letter to the editor, David Lewis says, "the authors lack integrity and credibility."

Actually, it is the Stephen Harper government that lacks integrity and credibility. Harper clearly stated before the last election that a Conservative government would not change the way income trust businesses were taxed.

Based on this solemn pledge, when Harper was elected many Canadians felt it was safe to invest some or more of their hard-earned dollars into income trust businesses. Also, based on Harper's word, several businesses adopted the income trust structure.

Shortly after being elected, Harper sabotaged these investors and businesses when he did a complete 180 by imposing a draconian new tax on income trust businesses. The announcement of this new tax immediately saw the share value of income trust businesses fall by some 30 per cent causing the loss of $35 billion to those who invested in these businesses. The share prices of most of these income trust businesses have not recovered.

This was the most heinous act ever taken by the Government of Canada directly against a particular type of investment - and it mostly affected senior and retired investors.

The Canadian Association of Income Trust Investors is doing yeoman work fighting to right a wrong. It's the Conservative government that lacks credibility and integrity in the eyes of up to four million Canadians who felt it was safe to invest in income trusts once Harper was elected, only to be stabbed in the back.

Terry Martinson

First Street East

Fort Frances, Ont.

A most revealing visitor to CAITI blog

Obviously someone in the Department of Finance is concerned with the prospect that Jim Flaherty may become politically associated with his devious and underhanded moves to double tax RRSPs.

This is a gold mine for the opposition parties to exploit, which they have not. Flaherty’s idea of "leveling the playing field” is to double tax RRSPs, while giving pension plans like Teachers’ a special break.

I say this because the CAITI blog had a visitor today (3:13 pm) from “Finance Canada and Treasury Board’ who was directed to our blog by way of a Google search, after entering the key words "Flaherty double taxing RRSPs".

It’s about time that people wake up to the reality that Flaherty has begun double taxing RRSPs. What do you think the Tax Free Savings Account (TFSA) is all about? It’s a rear guard attempt to substitute a less attractive vehicle (TFSA) in exchange for a more attractive saving vehicle (RRSP).

The article that this visitor was directed to on our blog were two fold:

(1) The origin of species: RRSPs

(2) The Self Benevolent Tax Policies of Jim Flaherty




-

Pat Martin: Penny wise, pound foolish

How's this for priorities? The NDP’s Pat Martin is more fixated on the penny, than he is in investigating $1 million life insurance bribes made by parties in office,

In paralyzed fear that it may benefit the Liberals more than the NDP, Pat Martin, as a member of the Ethics Committee, voted against an Ethics Committee hearing into the allegation that Stephen Harper had prior knowledge that his party attempted to influence Chuck Cadman's vote with a $1 million life insurance policy bribe.

Turns out Pat Martin is more keen to eliminate the penny than he is keen to eliminate corruption. Which do you suppose costs Canadians more? The penny? Endless corruption?

Why am I reminded of ATM fees? The NDP have a perverse sense of priorities, always starting with the least important and never working up from the bottom of the barrel.


NDP bill would kill penny by next year

April 02, 2008
Richard Brennan
in Ottawa
Robert Benzie
in Toronto
OTTAWA — An NDP MP says the penny is an "expensive nuisance" and should be scrapped this year on its 100th anniversary.
"The penny is of no commercial value, it does not circulate and costs more to produce that its actually worth," said Pat Martin (Winnipeg Centre), who introduced a private members' bill today calling for the penny's demise before year's end.
"There is no business case for continuing to produce the penny. Making cents, in fact, make no sense at all," he told a news conference, adding his bill includes a formula to round off to the near nickel.
Getting rid of the penny has been talked about before, but Martin said recent studies confirm that the "copper" has outlived its usefulness and is actually costing taxpayers money.
He says it costs 4.5 cents to produce each penny.
Each year, Martin said, the government spends $130 million to produce 1.2 billion pennies that end up, for the most part, under beds, in jars and tins and even the gutter.
Other countries have already moved to eliminate the penny, including Australia, New Zealand, France, Spain and the Netherlands "and life as we know it did not come to and end in those countries," Martin said.
"They managed to cope quite well and, in fact, they have introduced a rounding formula," he said. "My bill will also recommend to take care of what we do with the odd number pricing," he said.
Premier Dalton McGuinty added his voice to Martin's call for elimination of the 1-cent coin.
McGuinty said Canadians want change by getting less change in their pockets.
"I just think ... a penny ain't what it used to be," the premier told reporters this morning.
There are 20 billion pennies circulating in Canada.
Martin said this year marks that 100th anniversaryof the pennyin Canada. "We believe at the same time we have a birthday party for the penny, we should have a funeral."

http://www.thestar.com/News/Canada/article/409136

Today's Letter to the Editor, St. Catharines Standard

Billboards let voters know of broken promises .....

Re: Political attack ad is nothing more than graffiti, The Standard, March 27.

The real "graffiti" in this issue is the lies the Conservatives have stated regarding income trusts. They lied when they promised not to tax income trusts and they lied when they tried to justify the reasons for breaking this promise.

The unwarranted taxing of income trusts has caused billions of dollars in losses to Canadian and international investors, and especially those senior citizens that Prime Minister Harper and his gang so resolutely promised to protect.

The Canadian Association of Income Trust Investors is only stating the truth and the facts of the matter and is clearly forthright and honest on its advertised website.

I'm sure that if the billboard referred to in this letter had falsely accused our prime minister and his finance minister of lying, actions would have been initiated to have this billboard taken down some time ago.

This is especially true as we seem to have a prime minister who has a tendency to threaten and/or sue when challenged.

Why has he not taken any legal action in over a year? May it be he cannot contest the inferred charge?

Gerry Harley
Carruthers Avenue
Ottawa

Given his penchant for vote rigging, was Stephen Harper behind the Zaccardelli scheme?

In my opinion, there is little doubt from his self incriminating taped confession about Stephen Harper's prior knowledge of the "financial considerations" that were being offered by his party in order to influence Chuck Cadman's vote on a crucial confidence motion that would have brought the Paul Martin government down in 2005.

Which leads one to speculate about what involvement Stpehen Harper may have had in Giuliano Zaccardelli's blatant political interference in the 2006 election that did indeed bring the Martin government down, by announcing a criminal investigation had been launched into the income trust leak.

This blatant political interference took the form of Zaccardelli faxing a personally signed letter to NDP MP Judy Wasylycia-Leis dated December 23, 2005. At 3:00 pm on a Friday, no less. At which point Judy Wasylycia-Leis felt compelled to release it to the media.

To what extent was Judy Wasylycia-Leis simply a pawn and foil for the Conservatives at large? To what extent did Harper conspire and scheme with Zaccardelli, who no doubt would benefit from a "tough in crime" Conservative government being in office?

These are matters that go to the heart of our democratic system and need answers. This is a matter deserving of a full public inquiry. Right after the full public inquiry of the Cadman matter.

CRIMINAL PROBE
Top Mountie ordered trusts alert to include Goodale
Zaccardelli's change deviated from rules, RCMP watchdog says

Globe and Mail
April 1, 2008

OTTAWA, TORONTO -- Former RCMP commissioner Giuliano Zaccardelli approved the release of information about a criminal probe into the income trust leak in the middle of the 2006 federal election campaign and directed that a news release name Ralph Goodale, then Liberal finance minister, an RCMP watchdog report revealed yesterday.

The move to include Mr. Goodale's name - a decision even the police force now says was not in keeping with past practice - was made in the absence of any policies or guidelines on handling such sensitive situations, said the chair of the Commission for Public Complaints Against the RCMP.

Continued here

Harper's desperate attempt to blunt the trauma of his income trust betrayal

Stephen Harper has proven himself to be completely untrustworthy, but that doesn't make him completely stupid. He realizes that 40% of the people who actually show up to vote on election date are over the age of 60.

He also realizes that his income trust promise of the last election will become a major liability for him in the upcoming election, since the income trust promise soon became the income trust lie and the betrayal of a generation for seniors and those saving for retirement across the nation.

The tactic that Stephen Harper is obviously employing is to extol the virtues of the things he professes his government has done for seniors. This is why fliers like the one above are being sent at taxpayers expense to mailboxes across the nation.

Let's evaluate these claims to determine whether these policy measures come anywhere close to compensating seniors for the loss of an essential investment choice, whose sole purpose was to make them more captive to the investment wares of other. The income trust decision was solely motivated by a group pf persons who were intent on closing the lemonade stand across the street, so they could sell more of their own brand of lemonade.

The income trusts issue takes away essential choice in a protracted low interest rate market, all Canadians lose through the $1.4 billion in foregone annual taxes, and the 2.5 million Canadians who had placed their confidence in Mr Harper have lost $35 billion of their life savings and many are faced with losing up to half of their former annual income. So how does this loss stack up against the measures noted above:

2% GST Cut:

This is not a targeted benefit for seniors whatsoever. Those who most benefit from a GST cut are those who are in the consumption phase of their lives, not seniors. Most of the daily necessities of life are GST exempt, and therefore a GST cut does nothing to compensate these seniors for their loss of income. How many of the following essentials cited by Stephen Harper are subject to GST?

“Many seniors feel the government is putting their retirement at risk and have let Ottawa know. In a letter to the Finance Minister, the Canadian Association of Retired Persons said, "Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living." Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine. They also provide tax relief from a government that is addicted to taking too much money from their pockets and spending it without care, and very often without meaningful results.So one must ask, why is the government clamping down on the retirement savings of seniors and investors?”


Age Credit of $2,000:

Puhlease! What's the incremental after tax value of this to the average senior? $140? $240? This is another case of Stepehen Harper being a misleader


Pension Income Splitting:

Stephen Harper the Misleader strikes again. The operative word here is "pension". This income splitting is only available if you have qualifies income from a pension and a spouse. As such you have to be one of the 25% of Canadians with an employer pension and you have to have a spouse, and you have to have a spouse whose income is less than yours. The net effect is that only 14% of seniors will benefit from this measure.

As to whether this measure gives relief to those aggrieved by the income trust tax, you can be assured that it does not, since the very people who owned income trusts are those without pensions and this benefit only accrues to those with pensions, including the corrupt instigators of the income trust tax: Stephen Harper, Jim Flaherty, Mark Carney and every other of the 280,000 federal civil servants.

Bottom line is that these fliers are virtual junk mail, and will do nothing to blunt the trauma of Harper's income trust betrayal. Harper lost the Quadra riding because of his income trust betrayal. Just listen to what the Conservative candidate had to say in the days immediately prior to the election about whether the government had done anything to hurt her chances of election:

Watch and listen here (close to the end of this CPAC interview)

Watch and listen here (close to the end of this CPAC interview)