After Harper's income trust betrayal, many questions still remain

After Harper's income trust betrayal, many questions still remain

Financial Post
November 3, 2007
Brent Fullard

Stephen Harper broke his election promise to never raid seniors’ nest eggs through taxing income trusts, by doing that very thing on Halloween 2006. One year later the following questions remain:

Where is the government’s proof of alleged tax leakage? How could the proposed conversions of BCE and Telus into income trusts have had any effect on tax revenue when neither were paying taxes as corporations and were not expected to for several years? What policy advantage is there, now that BCE has been taken private through a highly debt-leveraged buyout, and which has caused a loss of the $793 million more per year BCE would have paid as an income trust?

How is the stated objective of tax fairness and levellng the playing field achieved when government-sponsored pension plans are allowed to own trusts, free of tax, in their private equity portfolios, while 70% of individual Canadians are not?

Harper wrote the following in the National Post on Oct. 26, 2005: “Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine”. If so, then why did he so abruptly and without notice or consultation reverse his promise, leaving investors with losses of $35 billion and their incomes reduced by 31.5% and in some cases 50%? How is this socially just or fair?

Meanwhile why are Jack Layton and the NDP supporting this policy when they profess to be against wholesale foreign takeovers of Canadian businesses and supposedly in favour of protecting seniors’ retirement savings? Where is Jack Layton’s and the NDP’s proof of tax leakage?

Taken as a whole, this is a travesty of democracy – starting with the breaking of a promise, the false premise for breaking the promise, the complete absence of consultation and the litany of adverse policy repercussions as the aftermath of a policy borne out of zero accountability and a complete lack of government transparency. Narrow special interests have successfully manipulated Canada’s New Government for their selfish ends.

Transparency and accountability are the cornerstones of a democracy. The real danger to Canadians is that the Conservative government is flagrantly undermining our democratic institution known as Parliament, if major tax laws are bring enacted and passed on the basis of their foundations being assumed to be true, when in fact no proof whatsoever has been provided by the government.

This is an extremely dangerous precedent to have established, since it gives extraordinary powers to the government to pass important legislation by invoking supposedly fact-based arguments that are devoid of fact-based evidence.

Stephen Harper, together with the Jack Layton and the members of their respective parties, are acting in concert to abrogate Canadian’s democratic institution known as Parliament. As such we are calling for a public inquiry to fully examine the matter of alleged tax leakage, particularly in light of the government’s announced reduction in corporate tax rates by a staggering 32%, from 22% to 15%, in 2012. If the original policy intent on income trusts was to “level the playing field” with corporations, then this changed tax regime for corporations announced by the government this week demands a reexamination of the extent to which these most recent measures will have tilted the playing field in favour of corporations and to the detriment of income trusts.

Brent Fullard
President & CEO
Canadian Association of Income Trust Investors