Thursday, December 11, 2008

Failed BCE deal allows Flaherty the chance to recoup $2.6 billion in foregone tax revenue



We have a Finance Minister who can’t even read income statements or cash flow statements. Were Flaherty able to do so, he would never have attempted to justify his income trust tax back on November 1, 2006 by saying (in the Globe):

“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.”

Not pay taxes? Wake up Finance Minister Jim Flaherty. You were being gamed by the folks who were running BCE at the time. Neither BCE nor Telus were paying taxes at the time. Can’t you even read an income statement? Do you not read these companies forward looking statements at the time before making such ridiculous statements to the Globe. BCE for example was reporting at the time that:

"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."

If in doubt, you could have simply made a phone call to CRA and ask them how much tax BCE was remitting to the government. They would have told you that BCE wasn’t paying a plug nickel in taxes and hadn’t for over 10 years.

Then you could have asked that boy wonder from Goldman Sachs. Mark Carney, to do an analysis of how much tax Ottawa would have collected from BCE and its owners if it had been allowed to become an income trust. Even you could have understood this very simple math: (from http://www.caiti.info/resources_it_mythbusters.php#myth3 )

BCE Ownership:

15% foreign
35% Canadian tax deferred
50% Canadian taxable

Tax Rates:

38% blended tax on income as per Department of Finance Consultation Study dated Sept 28, 2005
19% blended tax on dividends

Distributions on 900 mm shares outstanding

Trust distribution rate: $2.55 per unit
Corporate dividend rate: $1.46 per share

Federal Taxes (including deferred taxes paid on retirement accounts):

BCE as an Income Trust: $793 million per year federal tax
BCE as a Corporation: $240 million per year federal tax

Foregone Federal taxes: $553 million per year

Foregone Taxes over BCE's 4 year corporate tax holiday: $2.2 billion

Foregone Capital Gain on Conversion to Trust: $428 million (based on $5.00/share gain)

Total Foregone BCE Taxes: $2.6 billion

4 comments:

Dr Mike said...

This guy is a freaking joke.

How many lawyers does it take to balance a checkbook---none , they hire accountants.

That , as they say , says it all.

Dr Mike Popovich.

Transcanada said...

Late 2006 was a time when the CLOWNservatives were trying to brand themselves 'decisive' and instead rebranded themselves as 'idiots'.

In December 2008, 'decisive' isn't anywhere in the picture as the tidal wave of previous screwups and outlight lies are piling up on top of these fools.

And the biggest fools of all are the PM who handpicked Flaherty and the Finance Minister who thought he was the smartest guy in the room.

Watching Mutt and Jeff wallow in the mess they created would be very satisfying if it wasn't for the fact that they have destroyed so many Canadians while being in power.

Lycan Stark said...

A joke, eh? How about this -

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20081211/scoc_ei_081211/20081211?hub=TopStories

Well well well. The Liberals as stewarts of good governance and fiscal prudence? Deficit slayers? Yet another Liberal talking point totally and utterly discredited.

Ha!

Anonymous said...

Far, far too many silly numbers for FlawHurty to comprehend in one go... gotta break it down to one simple talking point for him.

fr33king dweeb.

m.