Wednesday, January 14, 2009

The Globe's Andy Willis, quite rightly, gets reamed out by his readers

It’s ludicrous to think that Andy Willis (Jim Flaherty apologist) claims to speaks for investors, with this logic (or complete lack thereof):

Will Tories tinker with trust tax deadline?

Andrew Willis
Globe and Mail

There's speculation in the oil patch that Finance Minister Jim Flaherty will extend the deadline for onerous new taxes on income trusts to 10 years – it's now four years – as a populist move in the coming federal budget.

The policy shift would make no sense from a capital markets point of view – investors and corporate executives prefer certainty, even if they object to the Oct. 31, 2006, decision to shut down the sector.

But the Conservatives may decide tinkering with trust taxes fits their political agenda: the party would be seen as doing something for hard-pressed companies. Extending the grace period on the structure would have the greatest impact in the oil patch, where energy trusts remain major players, and resentment over the Tory's broken promise on trusts persists.

Just what Mr. Flaherty would say to trust owners who have rearranged their affairs based on the existing 2011 deadline is hard to imagine. Acting in good faith, many trusts have already been through an expensive and time-consuming conversion to common stock structures. It's also not clear there's political hay to be made here. Vague Liberal promises to tinker with trust taxes in the last election campaign played poorly.

In sum, any Conservative move on trusts would be blatant pandering, and lousy public policy. But that's not stopping talk of a new, more liberal deadline on taxes from making the rounds in Calgary.

1. peter san from ottawa, writes:

No they should do something to correct the damage done based on a bad analysis.

2. Master Blaster from Toronto, Canada writes:

Only an idiot would change the rules this late. A Trusts biggest asset right now is the forced re-org that must occurr before 2011, & the positive change that comes with it.

For those with a depleting asset base we need a better tax structure, & the fed has 2 years to find it. Preferably with a different finance minister.

3. dominic costanzo from Canada writes:

Income trusts should be allowed to survive.There are important investments vehecles that provide jobs,and help seniors,who do not have a company pension to sustain themself, instead of relying on the Gov.The tax leakage is a myth.As of to-day the Gov. has not been able to show that income trusts cause tax leakage.The only analysis provided by the Gov. is 18 pages of blacked out documents.

4. Harper has to go from Canada writes:

Globe and Mail November 2, 2006: by Sinclair Stewart & Andrew Willis Do you remember writing this Mr Willis?

“High-profile directors and CEOs, meanwhile, had approached Mr. Flaherty personally to express their concerns: Many felt they were being pressed into trusts because of their duty to maximize shareholder value, despite their misgivings about the structure. Paul Desmarais Jr., the well-connected chairman of Power Corp. of Canada, even railed against trusts in a conversation with Prime Minister Stephen Harper during a trip to Mexico, and told him he should act quickly to stop the raft of conversions, according to sources.”

What do you suppose shutting down the competing product known as income trusts was worth to Paul Desmarais Jr. and the lessened competition in the financial products market meant to his personal holdings in Power Corporation, Power Financial, Great West Life, London Life, Investors Group, Mackenzie Financial, Investment Planning Council?

5. Kublah Khan from Canada writes:

REITS and Oil and Gas trusts had existed and performed an excellent contribution to the Canadian economy for many years. It was only after other businesses started to convert to the trust structure that some became concerned. Why the Conservatives allowed REITS to continue, but closed down Oil and Gas trusts is beyond reason. Flaherty's policy should have dealt with only the business trusts and if he was concerned about the size of O&G trusts he could have limited their size. Flaherty had many options that would not have been as harmful to thousands of citizens of Canada, no Western democratic government has ever treated its citizens in such a manner.
I find it amazing that Flaherty was able to settle the ABCP situation so quicly with a large infusion of taxpayers dollars.

6. David Armitage from Deseronto, Canada writes:

Andrew come on your wrong on this for the simple fact it would free up mor money for anyone holding trust to spend based on distrubutions they receive. That to me would be a good thing in these times.

7. Robin GTA from Canada writes:

"2001 deadline is hard to imagine" did you mean 2010 Andy?

I agree with Kublah Khan, energy trusts should have been exempted like the reits because they exist south of the border. Restrictions on reits should be relaxed to ensure they are competitive with the U.S. reits.

What would happen if some of the U.S. MLP's started moving into Canada and scooping up our energy trusts? All energy companies are on the hunt for reserves . . . Canada is fertile hunting ground.

8. Robin GTA from Canada writes:

"Vague Liberal promises to tinker with trust taxes in the last election campaign played poorly."

Now exactly what do you base this observation on Andy. I can assure you that millions of trust investors are supporting the Liberal proposal of a refundable 10% withholding tax even though most feel there should be NO tax on trust distributions.

Something is better than nothing for those of us who are retired and have NO private or public sector pension plan. That is about 75% of retirees Andy.

The government is looking to help out pension plans . . . what about the other 75% of us who are also getting trashed in this economic mess?

9. Harper has to go from Canada writes:

"Just what Mr. Flaherty would say to trust owners who have rearranged their affairs based on the existing, 2001 deadline is hard to imagine" - Willis What did Harper say to millions of investors who bought trusts based on his election promise "never to tax trusts"? Squat.

10. Robin GTA from Canada writes:

"In sum, any Conservative move on trusts would be blatant pandering,"

What's one more Andy to the Cons 'will never tax income trusts' list of broken promises?

11. Plus 8 from Mont Tremblant, Canada writes:


It would be good of the G&M to find a few writers for the business section with some training in economics or business. It would make the columnists and news more worthy of the time spent reading them.

The Income Trust provided an excellent vehicle to attract both the savings or the retiring generation and foreign investors interested in a return ALL while keeping Canadian management control.

The alleged tax loss they were supposed to create has been shown to a trumped up illusion to justify the quick betrayal of a solemn Conservative campaign promise. (I voted Con only because they promised to keep Income much more the fool I was!) Billions were lost with that failure in Harper/Flaherty integrity..and much more of the same has followed.

However, I do agree that only delaying the taxation of Income Trusts is a pandering move. Either get rid of the threats to this respected and beneficial investment tool or get rid of them as stupidly planned. Nothing will be helped with delays and even more uncertainty from Ottawa and Flaherty. I hope they take the first route.

I AM convinced any decision taken will not be made based on good sense..only the contemptible drive to gain political advantage.


12. tom morton from Northern Ontario, Canada writes:

......Mr. Willis said.."Vague Liberal promises to tinker with trust taxes in the last election campaign played poorly.".. Actually Mr. Willis the Liberal position, during the last election campaign, on the taxation of these BUSINESSES was quite clear...not at all vague. Why would you even say such a thing? And how would you know the Liberal position "played poorly". Can you back this statement up with any facts or, like the Cons...are you going to show us a bunch of blacked out pages as your proof... just as the Cons showed us 18 blacked out pages as their proof of tax leakage. Last election the Green Shift played poorly. But the Liberal position on the taxation of income trust BUSINESSES played very well for my wife and myself. For the first time ever we gave money to a political party and worked on the Liberal campaign. And we used to be Conservatives!

13. Island Man from Victoria from Canada writes:

Income Trust investors deserve a bail out more than ABCP investors. Income Trust investors had their eyes open and did their homework before investing, only to be blindsided by Harper's broken promise to protect their investments. A broken promise based on 18 blacked out pages of 'evidence' regarding mythical tax leakage. If Harper can bail out ABCP then Income Trusts deserve a bail out too.

Andrew, how you can define doing the right thing as lousy public policy. Lousy public policy was formulating major tax changes with no consultation, no factual basis and no thought of mitigating damages to stakeholders...that was lousy public policy and that happened on Halloween 2006.

Extending the conversion deadline is not enough. Growth restrictions on these companies also need to be lifted so they can operate without government restriction.

Extending the deadline will not only allow Income Trust investors an opportunity to continue collecting distributions, although reduced, during this economic downturn, it will allow enough time for us to get a Liberal government elected to reverse this ill-thought tax law of Flaherty's.

For once I hope the rumour has validity.

14. Island Man from Victoria from Canada writes:

Andrew, even you must realize that forcing struggling companies through conversion during this economic downturn is not a good idea? And have you thought about the massive numbers of capital losses that will be recorded by investors over the next 2 years? Have you considered what that will mean in lost future capital gains taxes? And have you considered how many further foreign takeovers will occur in the oil patch because these companies remain devalued due to Harper and Flaherty's betrayal? And perhaps you can share with us the proof of the need to change the tax rules on Income Trusts? All we have seen is 18 blacked out pages from the government. And perhaps you can explain why Private Pension Plans are excluded from the new tax rules? Why were only individual investors taxed?
There are so many factual reasons to reverse this tax law and no basis to allow it to proceed...unless you can show us some proof that Harper and Flaherty have not shown us? The only certainty is that we were betrayed by our government, shown no compassion or mercy and ignored in our please for mitigation.
So if they found an escape clause to help correct a wrong then why not let them use it? As Harper says, never let a good crisis do to waste.

15. Robin GTA from Canada writes:

Isn't this Andy Willis's Blog? Don't bloggers normally respond to contributors, interact with contributors?

Where are you Andy, step up and answer some of our questions, many great ones posted here in response to your blog.


16. S A from Vancouver, Canada writes:

Andy: Island Man makes probably the best point thus far. This is a tremendous 'escape hatch' for the Finance Minister, and The Conservatives as a party. We all recognize Stephen Harper broke a specific promise which had very real impact on many citizen's investment decisions. It was hastily done, and clearly without consultation or any solid research. It was a hammer approach to the Income Trust problem. As Tip O'Neill famously said "All politics is local". If Stephen Harper ever hopes to regain my vote he will need to employ Island Man's 'escape hatch', to erase the broken promise that me a cost deal of money. What a wonderful opportunity for Mr. Harper to 'help' retirees, without admitting error. Classic 'win-win' situation.

17. Kublah Khan from Canada writes:

Willis says:
"In sum, any Conservative move on trusts would be blatant pandering, and lousy public policy."

K.K. says:
"In sum, any Conservative move on trusts would be a very wise political move and could easily be shown to be in the public's best interests"

18. Alastair james Berry from NANAIMO BC, Canada writes:

"In sum, any Conservative move on trusts would be blatant pandering"


The Pandering may return a few disgruntled Tory sheep to the Harper fold. As such it is POLITICALLY EXPEDIENT.

19. Walter Toronto from Toronto, Canada writes:

We still haven't seen the details of all those tax losses supposedly caused by income trusts. On the other hand we can provide details of tax losses caused by buyouts by private equity, foreign companies, pension plans, etc. And maybe this reversal would play well both in Ontario and Alberta - quite a miracle.

Anyway, Andrew, your comments have been glib and unsupported.


Dr Mike said...

Woweeeeeeeee , I love it.

Flaherty continues to say that no one says anything to him about trusts anymore.

Maybe if he just paid attention a little more , he would see that we are still mad as hell & we are not going anywhere.

Jim , please come & ask my opinion & bring your proof of tax leakage with you.

Dr Mike.

Anonymous said...

Ooooooooooooh and I bet he likes it too

Always wondered a bit about that boy


Anonymous said...

Re: Andy Willis, quite rightly, gets reamed out by his readers
Great Job everyone...let them know we are still out here fighting. Maybe someday guys like Willis will learn a new skill. It`s called investigative reporting. It requires doing some homework before putting pen to paper. In his case he does not even have the guts to respond. His silence says volumes.