Thursday, August 21, 2008

My question for Stephane Dion.....was a gift



Garth Turner holding the mike. CAITI President Brent Fullard speaking

Last night I along with over 1,000 of my closest friends attended the Stephane Dion presentation in Oakville hosted by Liberal MP Garth Turner. (DUI was also there, but I have excluded her from the aforementioned total).

My question for Stephane Dion was a gift. By that I don’t mean that my question was a lay-up softball question, but rather that I presented Stephane with a gift as opposed to a question per se. The gift I provided to Stephane consisted of four documents:

(1) 18 pages of blacked out documents that allegedly are the “proof” of tax leakage
(2) A letter from the Department of Finance requesting the 18 pages of blacked out documents be returned immediately
(3) A Department of Finance memo dated October 31, 2006 stating, in effect, that the double taxation of income trusts will lead to leveraged buyouts of the vulnerable trusts by private equity, which will lead to a loss of tax revenue to Ottawa, as the memo acknowledges the tax advantages to leveraged buyouts
(4) A memo describing to the Liberal Party how they should message this income trust issue in terms of the broader issues involved: broken promise, false pretense for broken promise, complete lack of transparency, no consultation, no accountability, reverse outcome of what policy ostensibly was supposed to achieve, foreign takeovers, displacement of Canadian investors, two tiered pension system, special tax carve out for pension funds., major loss of tax revenue costing all tax payers Etc

These four documents constitute a how to guide for Stephane Dion to win the next election. In Garth’s portion of the presentation he made the point about the loss of jobs under Stephen Harper and used the layoffs at GM’s truck assembly plant in Oshawa as emblematic of job losses. I made the point to Stephane that the layoffs at GM are not something that can be laid exclusively at the feet of the Harper government, whereas the 2,500 layoffs at BCE are the sole cause of the LBO of BCE which was the sole outcome of the income trust double tax that precluded BCE from becoming an income trust. I said these job losses also came with the loss of $800 million a year in taxes to Ottawa from the LBO of BCE.

I encouraged the Liberals to use the income trust failed policy as the basis to point out the incompetence of the Harper government and reveal their deceitful practices concerning the manufactured concept known as tax leakage.

Stephane Dion responded by saying that Liberal Party is committed to its 10% Plan, for which the 10% tax is fully refundable to all Canadians, including RRSPs. As you may know, CAITI has not supported this plan since there it does not jive with the fact that there is no tax leakage and hence why disfavour foreign investors and since the Liberals have not been explicit on whether new trusts will be allowed and whether existing trusts will be constrained as to their growth. That said, the Liberals have taken this issue a long way towards the proper policy position.

6 comments:

Robert Gibbs said...

Brent:

Once again, on behalf of income trust investors, I sincerely thank you for your time and tireless efforts.

I would state, though, that given the reprehensible and intransient CON-job position, the alternative Liberal plan provides the most hope.

Many regards,

Robert Gibbs

Les P said...

Brent:

Let me echo Robert's comments. Thank you for your continued efforts to try and resolve this issue of taxing the income trusts. The lies of "tax leakage" by Flaherty et al will come home to roost come election time. I was encouraged to hear Dion's response regarding the tax.

I was doubting the Liberal's sincerity regarding this issue and now there is no question that I will vote Liberal for the first time in 40 years.

Former Conservative
Les P

Anonymous said...

Thanks Brent for going full out on our behalf. Can,t say enough for how fortunate we are to have you representing us. Without you we,d be lost and stumbling in the dark. You,re our greatest hope for justice.

Robert Gibbs said...

Liberals Propose New Income Trust Policy to Counter Conservative Mismanagement

February 13, 2007

Ottawa – The Liberal Opposition has a plan that could return as much as two thirds of the losses suffered by investors in the wake of the Conservatives’ broken promise on income trusts, Liberal Opposition Leader Stéphane Dion and Finance Critic John McCallum said today.

“When this minority Conservative government undertook what it knew would be a harmful action to Canadians, it should have taken the utmost care to minimize the damage it would cause its citizens,” said Mr. Dion. “The government broke a promise and imposed a radically higher tax that resulted in a $25-billion blow to the savings of hard-working Canadians.”

After hearing from numerous witnesses at the Standing Committee on Finance, the Liberal Opposition has a plan. It is proposing that the government repeal its planned 31.5 per cent tax regime and replace it with a modest 10 per cent tax, to be paid by the companies, that would be refundable to Canadian residents. The tax would be imposed immediately with the revenue shared equitably with provincial governments.

“Rather than considering what is best for Canadians, the Prime Minister simply decided that he was going to put an end to the income trust sector,” said Mr. McCallum. “After hearing from dozens of expert witnesses we have developed a proposal that is fair to Canadian investors, to corporations and the income trust sector as well as federal and provincial governments.”

Underpinning the Liberal proposals are four main policy objectives that should have been considered by the government:

• minimizing the loss of savings for Canadians who invested in income trusts;
• preserving the strengths of the income trust sector, notably a high-yield instrument for savers and for the energy sector;
• creating tax fairness by eliminating any tax leakage caused by the income trust sector; and,
• creating tax neutrality by eliminating any incentive to convert from a corporation to an income trust purely for tax purposes.

The Liberal Opposition also proposes that the ban on new trust formations be continued, but that the government should commit to considering representations from sectors which can conform to the policy objectives listed above.

The proposal has already received support from Gordon Tait, an analyst with BMO Capital Markets, who had previously told members of the Finance Committee that extending the phase out period to ten years would likely return one-third of the investors lost savings.

“This new proposal would likely return at least of two-thirds of the losses experienced by the holders of income trusts after the October 31 announcement,” said Mr. Tait. “It would also ensure that Canadian investors continue to have a high-yield investment vehicle available to them.”

Dirk Lever, Managing Director for RBC Capital Markets, agreed with that assessment.

“I would concur with Gordon Tait’s view that at least two thirds of the lost value will be recovered,” said Mr. Lever. “It could be more.”

Yves Fortin, a noted economist who formerly worked for the Department of Finance, indicated that the proposal would put an end to any tax leakage alleged by the government.

“While I am not convinced that there is tax leakage, and expert opinions differ as to the existence or the extent of the tax leakage, this proposed 10 per cent tax would more than cover the problem,” said Mr. Fortin.

Robert Gibbs said...

A year of lost income and trust

October 31, 2007

National Post
Section: Editorial
By Ralph Goodale

It's Oct. 31st -- the first anniversary of the "Halloween Massacre" of income trusts by Stephen Harper's Conservative government.

One year ago today, Finance Minister Jim Flaherty announced that a big Conservative election promise was being violated. Contrary to the Prime Minister's personal pledge, income trusts were going to be taxed, and at a punitive rate of 31.5%.

In the following 48 hours, trust values on the stock market suffered a massive $35-billion meltdown. They have rebounded a bit, but the losses still total some $20-$25-billion.

The investors and savers who are the victims of this massacre are not just "fat cats" as Mr. Flaherty likes to characterize them. The losers include more than a million ordinary Canadians who thought they were acting prudently by putting their savings into income trusts to provide for their retirements.
Their only mistake was thinking Mr. Harper would keep his word.

It's now clear that his "no-tax" promise was sheer campaign opportunism. It was a convenient gambit to buy a few votes.

Once in office, the new Prime Minister feigned surprise at the sudden surge in income trust investment activity that rapidly became unsustainable. What did he expect? He was the one who promised this form of investment would never be taxed. So naturally, investment volumes soared. All that was the logical and inevitable consequence of Mr. Harper's pledge.

He likes to boast about his credentials as an economist. Surely he knew exactly what his "no tax" promise would trigger. It was a cold, hard political calculation.

But in addition to the dishonesty inherent in the government's behaviour on income trusts, there is also fundamental incompetence. It's a classic case of overkill. By imposing a huge unexpected 31.5% tax, to become effective in four years, the Conservatives have:

-destroyed the retirement savings of a lot of innocent Canadians;
-eliminated this capital-raising vehicle across the board, without regard to those enterprises and circumstances for which an income trust would be the most appropriate tool;
-created a large number of "sitting ducks" among existing trusts which will be increasingly vulnerable to foreign takeovers, adding to the "hollowing-out" of Canadian ownership (with at least 32 such foreign takeovers already completed);
-and exacerbated the government's tax-loss problem, because former trust entities are ending up in the hands of new U.S. owners or others who simply do not pay any Canadian tax at all.

The Liberal Official Opposition has offered a well-received policy alternative. We would reduce the tax rate from 31.5% down to 10%, effective immediately. We would make that tax fully refundable to all Canadian unit-holders. The remaining tax proceeds would be shared equitably with the provinces.

Tax policy experts believe our approach would facilitate a recovery in trust values of about two-thirds of what the Conservatives destroyed, while still stopping any actual tax leakage. It would also minimize the hollowing-out consequences and help keep Canadian tax revenues in Canada.

Some observers argue that it's now too late. Don't reopen this debate, they say. But with the greatest respect, it should be reopened. The Harper government's approach is rooted in election dishonesty and that should not be brushed aside. More important, there is a better solution readily available which could provide hope and fairness to a lot of innocent victims of last year's Halloween Massacre.

-RalphGoodaleistheMPforWascana, House Leader for the Official Opposition and a former federal minister of finance.

Acid Reflux (acidrefluxweb.com) said...

I was there last night but had to leave early, so I did not get to hear off of the discussion. It would have been nice to actually know who wrote which blogs. I'm glad you are working hard on this issue, even though I am not touched by the income trust issue, it is a broken promise that could translate to any other commitment these con-artists have made.