Tuesday, April 28, 2009

Ignatieff’s words of wisdom, inscribed at the Whitby Public Library

During the last election, in which I ran as the Liberal candidate against the incompetent and deceitful Jim Flaherty, a number of senior Liberals graciously offered to come out and campaign with me. Michael Ignatieff was the first to come and was followed by Bob Rae, Carolyn Bennett, Scott Brison and John McCallum. Rather than campaigning door to door, I thought a more effective use of Michael Ignatieff’s time would be if we held a press conference to re-announce the Liberals commitment of $1 billion to the Advanced Manufacturing Prosperity Plan (AMP) that had been announced in February 2008, but which didn’t have much profile during the election itself.

It was under the AMP that I had been successful in securing from the Liberal leadership a commitment to match the automotive commitments that had been opportunistically announced by Harper in the days leading up to the election, in the ridings of Windsor (Ford Essex engine plant). St. Catharines (GM Transmission Plant) and Oshawa (GM Car Assembly, where I myself had worked upon first graduating from university). Michael Ignatieff announced that the Liberals would do likewise and unlike the Harper CONservatives, we were actually good for our word, when making such commitments that affect people's lives.

The press conference was very well attended by both local and national media, and I had the opportunity to introduce Michael Ignatieff after first being introduced myself by Liberal MP Mark Holland. My introduction was completely ad-libbed and ended with me saying words to the effect of : “it is my privilege to introduce you to a person who is not only a man of words, but also a man of his word....Michael Ignatieff”

This is all a very long winded way of saying that I truly believe in that today, that Michael Ignatieff is a man of his word.

After the event had finished, a small group of us headed off to the beautiful new Whitby Public Library where I told Michael we had a small surprise for him there, as I wanted to show him something that he was completely unaware of and which predated his entering public life. Handsomely inscribed in the glass transom over the inner doorway to the Library appears the following (see attached):

“We need words to keep us human” Michael Ignatieff (1947 - )

How could Michael not have been impressed, which he clearly was. Here was this beautiful edifice to learning and to books that had been recently built in Whitby and his words had been selected by the Librarian’s board to welcome all visitors to the Library with Michael’s statement on the importance of words in keeping us human.

Just as we need words to keep us human, so too do we need numbers to keep us honest. This has been my personal pursuit since the afternoon of November 1, 2006 after making but ONE phone call to a former colleague of mine at BMO Capital Markets and asking the question: “What ever became of the study on tax leakage that was commissioned last year during the Goodale round? Did it ever get published? What did it show?”.

To my amazement and initial disbelief, he told me that it did get published and that it showed that income trusts do not cause tax leakage. I was not inclined to believe him and so asked him to courier it to me, whereupon I received it on the afternoon of November 1, 2006. Upon reading the report entitled: ”The tax revenue implications of income trusts”, I learned that the authors (HLB Decision Economics) had worked collaboratively with the Department of Finance to create the tax leakage model. They agreed on everything, data, assumptions, methodology etc. etc., but differed on only one key thing.....the treatment of the taxes collected by Ottawa on the 38% of income trusts held in RRSPs. HLB gave value to these taxes, whereas Finance assigned ZERO value. This one difference between HLB and Finance was the SOLE SOURCE of Flaherty’s and Harper’s allegations of tax leakage and the sole argument for why they broke their solemn promise to “never raid seniors nest eggs by taxing income trusts.”

Rather than flying off half cocked with this enormous revelation, I then tracked down the lead author of the study, Dennis Bruce, who I spoke with the next day and confirmed that my interpretation was correct, in that Finance assigns zero value to this certain stream of tax payments. This is so fundamentally wrong on so many levels including the most fundamental precepts of finance. However you don’t even have to know anything about finance to conclude that this is fundamentally wrong, when you stop and ask yoursel what does an RRSP actually confer on taxpayers apart from the ability to defer taxes on monies contributed to them? Nothing. That is the sum total of what an RRSP is, the ability to defer taxes on monies that have been set aside to save for retirement. That is the entire social purpose of an RRSP, to encourage Canadians to save for retirement by setting aside a limited amount of their earnings and defer the payment of taxes on those limited amount of earnings.

To create tax policy that deny this policy intention of RRSPs, is to render RRSPs invalid. Furthermore, in the act of not acknowledging the taxes collected by Ottawa from RRSPs, the government then turns around and taxes them a second time at the whopping 31.5%, such that income trust distributions get double taxed at rates as high as 62%. This is both an absurdity and a deliberate attempt to kill income trusts for a bunch of nefarious reasons advanced by the managers of businesses whi don;t want to follow the direction provided to them by their true owners, the shareholders. Meanwhile Flaherty then gave the pension funds a distinct advantage over RRSPs with respect to income trusts, as they can own these very same trusts privately and NOT pay the 31.5% tax/ This is grossly discriminatory and completely contradicts why RRSPs came into existence in the first place.

Therefore, we need the tax leakage numbers to keep us honest and to keep all of Ottawa honest and to restore true tax fairness and to make Parliament function like a democracy and not the cleptocracy that this bespoke policy represents, and for whom the real beneficiaries had been pre-ordained from the outset.

We also need to heed these other wise words of wisdom of Michael Ignatieff’s that I will close with. I hope the point being made here is obvious to all of you as it pertains to this income trust rip off, when Michael states:

"Successful countries knock down the barriers -- of red tape, regulation, and monopoly -- that divide citizens, confer unfair advantages or prevent people from working together" Michael Ignatieff

Please Michael, stop this absurdity of a policy, and pursue the truth about tax leakage. We need numbers to keep us honest, otherwise we are conferring unfair advantages on certain people to the detriment of others, in which case we have no hope of being a successful country, free of barriers, free of red tape, regulation and most of all, free of Manulife and Power Financial’s intended monopoly over our investment savings.

Please give them and their corporate ilk the royal boot, and give Canadians the truth that you say that Canadians so richly deserve.

We accept no substitutes for the truth, in either time, substance or commitment. This is a huge opportunity for you to define yourself and free yourself from the corporate shackles of past governments. The global financial meltdown provides you with the opportunity to define these self interested corporate managers for who they truly are......hangers on and opportunists seeking to exploit others for their nefarious ends.

We need numbers to keep government honest.

1 comment:

Dr Mike said...

Trust investors do not want anything exceptional , just the truth.

If the truth turns out to be that income trusts caused excessive tax leakage then so be it , let them be subjected to new rulings which would decrease this tax loss to an acceptable level.

If no leakage exists , then we need to have an apology from the gov`t for the terror wrought upon us--this must be followed-up by the repealing of the tax legislation , followed by a round of consultation with all parties involved in order to formulate the proper legislation this time around.

Michael Ignatieff is the man to do the deed.

Dr Mike.