Monday, August 25, 2008

Flaherty deliberately misled Parliament on the tax status of BCE and Telus

You'd think if anyone would know if BCE was paying corporate taxes, it would be Canada’s Minister of Finance, wouldn’t you? Think again. Here’s what Flaherty told Parliament on November 9, 2006:

Ms. Judy Wasylycia-Leis:
"While we're on the income trust issue, how much did department officials estimate the status quo on income trusts was going to cost the treasury?"

Hon. Jim Flaherty: "Were TELUS and BCE to convert to income trusts as they had announced they intended to do; and then the corporate income taxes that would not have been paid by those two companies, which they have spoken about publicly, in their own estimates, were together in excess of $1 billion next year."

$1 billion in taxes? BCE and Telus? Sorry Jim, the actual number is zero. How could you as Finance Minister not know that? As follows:

December 12, 2006- Bell announces 2007 business outlook ….Bell expects it will have no significant federal cash taxes through 2010, due to organizational simplification enabling accelerated use of Bell's R&D tax credits…

December 14, 2006 -
TELUS sets 2007 financial and operating targets Based on a an updated review of the company's tax loss position, TELUS now expects minimal cash tax payments in 2007, a preliminary estimate of approximately $100 million in 2008 with the payment of significant cash taxes largely deferred to 2009, rather than 2008 as previously anticipated."

So what is Flaherty talking about when he said: “[BCE’s and Telus’ forecasted taxes] were together in excess of $1 billion next year.”? The Finance Minister is deliberately misleading Parliament on a pivotal issue of fact.

Meanwhile, you’d think if BCE had been serious about converting to an income trust, they’d have been devastated by Flaherty’s Halloween 2006 announcement that prevented BCE's conversion, wouldn’t you? Think again. Here’s what the Globe reported on November 2, 2006:

“At Telus headquarters in Vancouver, where it was still midafternoon, the reaction was disbelief. In Montreal, the mood was decidedly more upbeat..... and “there was dancing in hallways at Bell” after Ottawa's announcement.”

Dancing in the hallways?

Where did Flaherty ever get the notion that BCE was paying corporate taxes or was on the verge of paying taxes? Why did BCE's CEO not properly inform Flaherty of BCE’s true tax position during the many conversations that took place between the two of them in the days and weeks leading up to Halloween 2006? Was Flaherty misled by BCE? Was Flaherty misled by his advisors in Finance like Mark Carney?.....or did Flaherty know the truth and sought to knowingly mislead Canadians?

It would appear that Canada’s Minster of Finance does not know the difference between corporate deferred taxes and corporate cash taxes. BCE and Telus may have been expected to pay $1 billion in taxes in the upcoming year, however all of those taxes were deferred taxes and none of them were cash taxes.......SLIGHT DIFFERENCE! Flaherty is treating corporate deferred taxes like money in the bank, even though they are unlikely to ever be paid, as deferred corporate taxes are somewhat of an accounting artifice.

Meanwhile when it comes to personal taxes, Flaherty’s treatment of deferred taxes is the exact opposite. Flaherty assigns zero value to the deferred taxes on the 38% of income trusts held in RRSPs even though there is absolute certainty that these personal deferred taxes WILL be paid. As such, tax leakage is a manufacture argument, contrived by Mark Carney, exploited by Flaherty.

Perhaps this is why there was dancing in the hallways at BCE......Flaherty had been successfully misled about BCE’s tax status as corporation?

Meanwhile it’s Canadian taxpayers at large who are being snookered by these false claims of BCE’s lost corporate taxes by Canada's Finance Minister as his central justification for the reversal of Harper’s income trust promise.

Thereafter, BCE became the target of a private leveraged buyout.....the ultimate irony, since the LBO of BCE will cost taxpayers $800 million PER YEAR in lost taxes....relative to an income trust or the Catalyst Recap Proposal.....that BCE's CEO went to every length possible to scuttle via non-disclosure.

I guess, when it comes to Finance Ministers and its shareholders, BCE doesn't believe in full, true and plain disclosure. Ditto the Finance Minister himself.

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