Jack Layton, better known as Jack Layoff, should take some of his righteous indignation, normally reserved for trivial undertakings like ATM fees , text messaging fees and pay day loans and direct it towards himself. The reason for this is simple, Jack Layton is as responsible for the 2,500 layoffs at BCE as its new owners, Ontario Teachers’ Pension Plan, Providence Capital, Madison Dearborn Capital and Merrill Lynch Capital Partners, are.
The cause and effect of Jack Layton’s role in these 2,500 layoffs is irrefutable. You see Jack Layton and his party are the champions of the income trust double tax. The income trust double tax that prevented BCE from converting to an income trust to satisfy its need to maximize shareholder value. What naive Jack falls to understand is that BCE is worth more when it distributes it earnings to its shareholders rather than blowing $8 billion on another Teleglobe, hence the value bump from an income trust. Meanwhile tax revenue to Ottawa would have been maximized since BCE's shareholders used to be taxable Canadians. Now they are not.
Jack Layton also fails to understand cause and effect.
You see, Jack Layton’s blind support of Stephen Harper’s Halloween massacre, resulted in BCE becoming a highly desirable and highly vulnerable target for foreign private equity, Sure enough, three days later BCE’s CEO Michael Sabia was on the phone with New York based private equity powerhouse KKR discussing that very alternative......taking BCE private by way of a leveraged buyout. That was November 3, 2006.
Now it's August 9, 2008. Not only was the leveraged buyout of BCE a highly predictable, cause and effect, outcome of Jack Layton’s blind support of the income trust tax, so too were the many adverse outcomes. In the case of BCE alone, here were the predictable outcome
Job losses (2,500 to date)
Tax losses ($800 million less per year in taxes from BCE as a private LBO as opposed to a public LBO
Foreign takeover (BCE used to be Canada’s most widely held public company with 600,000 shareholders, versus 4, three of whom are US)
Debt binging (BCE will now have $44 billion of debt and $8 billion of equity, instead of the near reverse)
Debt binging will lead to higher service costs (what does Jack think the text messaging fee increase is for, if not to service BCE’s new mountain of debt)
Breaking of pension rules (how can Teachers’ own 50% of BCE when pension rules restrict it to 30%, what scheme is being used to circumvent federal legislation?)
Creating a two tiered pension system (why can pension funds own trusts privately and not be subject to the trust tax, when the 75% of Canadian without pensions have to pay a 31.5% tax? In their RRSPs?)
When it comes to his blind support of this policy to double tax businesses as trusts held in RRSPs, Jack Layoff has a lot of supporters. Normal NDP folk like Paul Desmarais Jr., Gwyn Morgan, Dominic D'Allesandro and John Manley. Also Jack has a lot of support from the blind media in Canada who feel, like Jack Layoff, that 18 pages of blacked out documents is ample “proof” of this policy’s central rationale, namely alleged tax leakage. Jack Layton along with Canada’s media are taking this country into the dark ages, which suits Bay Street just fine. Blacked out documents are Jack Layoff idea of transparency. Ditto the Toronto Stock Exchange and TD Bank.
And here’s the cause and effect of that:
Permanent job layoffs
Massive losses in tax revenues
Two tiered pension system
Pension funds gone wild
Zero withholding tax paid by foreigners on leveraged buyout loans
Lessened competition in key sectors like telecom
Higher cost of capital for Canadian businesses
Less choice for investors
Goldman Sachs would be proud of Jack Layton. I know Manulife’s CEO is. He said as much, at the public hearings on Income Trusts. Go Jack Layoff, go. You are destined for greatness, as enumerated above.
PS: Did I mention the other 44 trust takeovers that have resulted in an additional $1.2 billion in annual tax losses. I wonder how many layoffs? Maybe Jack Layoff can tell us?
Saturday, August 9, 2008
Posted by Fillibluster at 9:11 AM