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%?
Thursday, April 17, 2008
Posted by Fillibluster at 8:35 AM