Friday, April 18, 2008

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."

6 comments:

Robert Gibbs said...

Conservatives & "Friends Of Science" Anti-Climate Change Group To Be Investigated For Elections Financing Corruption

"In summary, this Conservative-linked "Friends of Science" funny business saw tax-deductible money flow from a community charity group through a University of Calgary trust fund, to mysteriously pay for anti-Kyoto, anti-Liberal radio ads in Ontario."

Mike De Souza , Canwest News Service
Published: Monday, April 14, 2008

OTTAWA - A radio ad campaign that attacked the former Liberal government during the 2006 election campaign was funded through so-called "research" accounts at the University of Calgary, a newly released audit has concluded.

The internal audit by the university revealed that the accounts, which received money from a community charity organization, collected more than $500,000 in tax-deductible donations.

The money was then spent to promote the activities of Conservative-linked anti-climate change group "Friends of Science", a Calgary-based group that includes former oil industry insiders.

Several sections of the audit, released to Canwest News Service under the Freedom of Information and Privacy Act, were blacked out by the university on the grounds that they may "harm an ongoing law enforcement investigation."

According to the audit, the radio ads ran in five markets of Ontario: Peterborough, Ottawa, Kitchener-Waterloo, London and Thunder Bay. The ads "were paid for from the accounts," and "may be considered third-party advertising under the Elections Act," said the audit.

The "Friends of Science" pledged in its own newsletters before the election to have "a major impact" on the vote, and it boasted that its campaign to change public policy "was working," after Prime Minister Stephen Harper's minority Conservative government was elected.

Complaints to Elections Canada have been filed, asking for an investigation into whether the "Friends of Science" should have registered as a third-party advertiser, as required by law.

The audit also revealed that some of the money was used to pay lobbyists and staff of the "Friends of Science".

"These payments should be further assessed to determine whether the activities of the consultants were political," said the audit.

Canwest News Service previously revealed that a Conservative spokesperson during the 2006 election campaign, Morten Paulsen, was also on a paid contract to do communications work for the "Friends of Science".



"In summary, this Conservative-linked "Friends of Science" funny business saw tax-deductible money flow from a community charity group through a University of Calgary trust fund, to mysteriously pay for anti-Kyoto, anti-Liberal radio ads in Ontario."

Robert Gibbs said...

Flaherty’s Tax Policies Are Designed With His Own Personal Circumstances In The Forefront Of His Mind
-----------------------------------

- Flaherty, as Ontario Treasurer, on the one hand advocated jailing the homeless, while at the same time introduced tax credits for private school just as his children were entering private school.

- Flaherty, as federal Finance Minister, breaks a Conservative election promise and drops a bombshell on October 31, 2006 with his new trust tax, ruining the savings and futures of ordinary average Canadians and retirees, yet exempts privately owned trusts and flow through entities such as his and his wife's law firm Flaherty Dow Elliott.

- Flaherty, as federal Finance Minister, introduced income splitting for seniors, but just for those with pension income like himself, and not for the other 85% of seniors without pensions or who won't benefit from such a measure.

- Flaherty, as federal Finance Minister, introduced the Registered Disability Savings Plan with tax deductible contributions of up to $200,000, for persons just like himself, his family and his third son who is developmentally challenged.

- Flaherty wanted to resurrect the Ottawa to Whitby-Oshawa Via train service, even though it was considered highly uneconomic, yet beneficial to him and his election prospects.

- Flaherty commits millions of dollars to a new Toronto to Peterborough Via train service, even though it is considered highly uneconomic, yet beneficial to him and his fellow Conservative MPs.

- Flaherty creates a new Tax-Free Savings Plan, which won't benefit most individuals who have little left to save, but will benefit wealthy people like himself and his wife.

- Flaherty introduces a $45 million program tailor-made to channel funds to his wife's pet project in their Whitby-Oshawa riding, with criteria that leaves no time for any other organization to come up with a proposal for a project.


Meanwhile, here is a story that some enterprising journalist may wish to track down.

Apparently, when Flaherty was part of Mike Harris's Ontario Cabinet, a number of schools across the province were deemed redundant, including one in Whitby. This property was purchased from the province by Flaherty’s wife after the town declared it had no interest in purchasing the property. One year later, apparently the town had a change of heart and purchased the land portion of the property from Flaherty’s wife at a price equal to what she paid for the land and building, leaving her with zero cost 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 centre for handicapped children.

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

[With files from Brent Fullard and CAITI]

Robert Gibbs said...

New Documents Reveal Flaherty Intentionally Ignored Rules To Award Speech Contract To Conservative Friend

DANIEL LEBLANC
From Thursday's Globe and Mail

April 17, 2008 EDIT

OTTAWA — Conservative Finance Minister Jim Flaherty ignored the warnings of bureaucrats last year who said there was no "reasonable rationale" to direct a $122,000 contract to a Conservative friend and speechwriter without going to tender, documents show.

A senior Finance Department bureaucrat told Mr. Flaherty on Jan. 22, 2007 that federal rules call for a competitive process to hire a communications firm for such a major undertaking.

"A competitive process is necessary to meet a requirement of this nature," Mike Giles, head of the department's corporate services branch, said in an e-mail to Mr. Flaherty's then-chief of staff.

But Minister Flaherty entered into a "verbal agreement" with Conservative friend Hugh MacPhie three days later to write the 2007 budget speech.

The terms of Mr. MacPhie's work were finalized in February of 2007 and the untendered contract was signed by Mr. MacPhie and Mr. Flaherty's then-chief of staff, David McLaughlin, on March 2. The contract was "not to exceed" $98,580, but the total cost [mysteriously] increased to $122,000.

Documents released under the Access to Information Act show that Mr. Flaherty justified the decision to hire Mr. MacPhie by pointing to his past work for the government and the fact he was "knowledgeable of the Minister's speaking style and approach."

However, federal rules state that the government must seek multiple bids for contracts worth more than $25,000.

When news broke earlier this year of the existence of the untendered contract, Mr. Flaherty was forced to acknowledge the "administrative function was not followed."

The newly released documents prove that the breach rested directly with Mr. Flaherty, and not with the bureaucracy.

"Mr. Flaherty gets a double blame for knowingly breaking the rules, and for implying it was not his fault."

The Access to Information documents show that Mr. Flaherty told civil servants of the desire to issue "a sole source contract" on Jan. 19. Three days later, Mr. Giles warned that it was not the appropriate process for this type of work.

"A contract over $25K would have to meet the contracting policy," Mr. Giles said. "Communications is a fairly widely available commodity, and therefore, it would be difficult to come up with a reasonable rationale that would allow you to proceed on a sole-source basis."

Robert Gibbs said...

The Flaherty, Prentice, Harper and CON hypocrisy and stupidity shouts so loud, it's defining.

Do you think the Canadian public at large will pick up on this? I highly doubt it.

And I'll bet that this personally benefits O'Flaherty somehow, beyond the obvious.

Unbelievable!!!
Truly unbelievable!!!

Robert Gibbs said...

The Tim Hortons FAQ webpage asks: "Do I get a discount when I use a travel mug?"

The Conservative Party FAQ webpage asks: "Do I get an enema when I vote Conservative?"

Robert Gibbs said...

***Breaking News***

CON Jobbers Create New 10 Per centers...

Authored By Deceivin' Stephen Harper


Hey, I may be a LYING, DECEIVING, FASCIST Dictator.

I may not "ply by the rules".

I may take every opportunity to try to create the impression of a widespread "foil hat" conspiracy against my CONservative brethren.

But, hey, at least my CONservative government is the only one that SUCKS and BLOWS at the same time!

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