Tuesday, April 28, 2009

Only the intellectually corrupt want to change the channel from "tax leakage"

Hello Diane,

Thank you for the article on income trusts. It is one of the few cogent pieces in the press these days not revelling in the froth of panic and disaster.

I wonder how this government can justify throwing billions of taxpayer money at companies who can't make products customers want while squashing a productive income trustsegment of our economy based on a false premise of "tax leakage".

Harry Truderung
private citizen

Talk about intellectually corrupt, here's TD Bank's take on things

This letter from Ed Clark’s office, below, is a very conniving little number.

In it, TD Bank is arguing that their customer, David Marshall should like the trust tax because it brought greater certainty, ignoring completely that the greater certainty that Harper had brought to David Marshall was an era to be forgotten. Huh? Sort of like, like it because you don’t like it. This letter obviously was “lawyered” before it went out.

Notice what is IMPLICIT about the known falsehood on the part of TD Bank on the matter of tax leakage, in the use of the words “plan is based on the assertion that the federal treasury has lost millions in tax revenue.”

Then in the next sentence, the “alleged” tax leakage takes on the form of “likely greater tax loss”? What an intellectually corrupt train of thought!

That pretty much confirms that TD Bank knew that tax leakage was a policy hoax. Remember Ed Clark was also the architect of the NEP. The NEP was intended to increase Canadian ownership of our energy sector, whereas the TFP has had the exact opposite having seen Prime West go to Abu Dhabi Energy and TransAlta Power go to Li Ka Shing. The rest of Canada’s 20% oil and gas sector in trusts is sure to go the same way.

Meanwhile all trusts need to be preserved, provided they don’t cause tax leakage, which Ed Clark is IMPLICITLY saying they don’t. Too bad that TD Bank never invested in a retail distribution network, and therefore was no where in the underwriting of income trust new issues. Is that a valid reason for people, like TD Bank customer David Marshall, to lose $35 billion an be deprived of investment CHOICE?

Dear Mr. Marshall,

Thank you for your recent email addressed to Mr. Ed Clark regarding the
Federal Government’s income trusts proposal and the Tax Fairness Plan.
I understand your concern about the changes affecting income trust
investments, as this is an issue that has been raised by others as well.

As you already know, the Minister of Finance’s plan is based on the
assertion that the federal treasury has lost millions in tax revenue,
and the belief that the growing popularity of income trusts would likely
result in greater future losses of tax revenue to the federal treasury.
As I’m sure you are aware, the Government of Canada began a review of
the income trust sector in September, 2005, leading to a great deal of
uncertainty on this issue. TDBFG considers the fact that there is now a
greater measure of certainty in the marketplace on this issue as being

I would like to thank you for taking the time to share your perspective
with us.


Sarah Kendall
Manager, Executive Response Team


Anonymous said...

Brent, you have done an absolutely fantastic job of keeping the income trust issue alive within the investment community, and through your posts in the TOITS forum and this blog you have provided an invaluable resource. My own ability to argue the case for income trusts has been enormously enhanced by your material, and I'm sure that's true of many others. However, I fear nothing will come of it unless and until we make it a higher profile political issue. Iggy has made some hopeful comments, but clearly the Liberals will only act for political gain, regardless of the justice of our position. At the time of the Flaherty's budget I called the local phone in show. My call was screened, and I was taken aback when the girl taking my call, presumably better informed about public issues than average, had no clue what I was referring to by "income trust tax". I suspect our only realistic chance to advance the cause is to get you elected as an MP.

How about taking a page out of the Tories' book and launching a series of attack ads against Flaherty like their "Dion - Not a Leader" campaign? Obviously a national campaign would be too expensive, but we wouldn't have to go national, just the Whitby Oshawa area. I'm thinking both CAITI and the Whitby-Oshawa Liberal party could fund it. Then individuals who can contribute a few hundred bucks could maximize the tax impact by donating to the party, while those who can afford a few thousand and are in a position to write off the expense can give it to CAITI. With national funding (international?) and local spending we might have enough impact to make the difference.

My preferred slogan or tag line for the campaign would be "FLAHERTY WILL GET YOU NOWHERE!" However, to the general public not as appreciative of puns as I am and more easily offended by the abuse of proper names, maybe "FLAHERTY - NOT A FINANCE MINISTER" would be a better choice. It would certainly preclude any criticism from the Tories!

As for the content of the individual ads, we truly have an embarrassment of riches to choose from. The challenge is to pick 5 or so that are the most important and that can be stated clearly in 60 seconds or less. For examples, here are two of the issues I would vote for and my attempt at the advertising copy to present them:

1) "In 2007, Primewest Energy Trust paid out distributions that generated Canadian tax revenues of over $100 million. Thanks to the Tax Unfairness Plan, in early 2008 it was sold to Abu Dhabi Energy for $5 billion. Since this was a leveraged buyout, the enterprise now has to service that $5 billion, and the interest expense means it will have no net earnings and pay no tax whatsoever for the foreseeable future. Nor will Canada collect any tax on those interest payments. Way to go Mr. Flaherty; thanks to your totally counterproductive plan Canada not only just lost $100 million per year of tax revenue, but ownership and control of a successful enterprise has been transferred from Canadian to foreign control. To date, we have lost over 40 income trusts, resulting in an annual tax loss of over $1billion! When it comes to smart tax policy, FLAHERTY WILL GET YOU NOWHERE!"

2) "Gwyn Morgan, former CEO of Encana Corporation, has bragged that he helped persuade the Tories to slap a tax on Income Trusts to discourage companies from converting. Maybe Mr. Flaherty didn't realize this, but had Encana converted to a trust it would have started distributing all it's income and Mr. Morgan's annual income tax bill would have increased by over $1 million! (Details at [website] ) Instead, Encana remains a corporation paying a modest dividend and retaining the rest of its earnings. If it remains a successful company, Mr. Morgan will eventually collect his share of those retained earnings by selling his shares and triggering a capital gain, which means he will only pay half the tax he would have on income trust distributions. When it comes to smart tax policy, FLAHERTY WILL GET YOU NOWHERE! (unless you are Gwyn Morgan, or some other wealthy and powerful Tory supporter)"

For audio versions of these ads, the obvious choice for background would be something somber and threatening. Given my rather bizarre tastes, I would prefer some kind of generic circus music with plenty of rubber bulb horn blasts, a not-very-subliminal suggestion that Flaherty is a clown. As for visuals for TV or newspapers I'll have to defer to someone with more creativity than me.

In fact, I should disclose that I have zero experience in the advertising business (Maybe that's obvious!) and all of this should be judged accordingly. I'm guessing a pro would insist on some focus group testing of anything before it was used. Even though the Tory ads were very successful, it would be foolish not to acknowledge the current crisis has had an effect on the public psyche, and it may well be that attack ads would now be counterproductive.

But I don't think so. I would like to see them tried.



Dr Mike said...

Why is it that every letter I have seen from Bank heads , corporate heads , talking heads or Con & Dipper MPs say very little & just skirt the issues that are at the basis of the trust tax.

It is like they are all talking from the same play book.

Now how odd is that??

Is it possible that the gov`t takes it`s cue from corporate Canada & not from Joe & Mary on the street.

Certainly makes me wonder about the future.

Dr Mike

CAITI said...


All excellent points and much appreciated! Given this is a public forum I won't provide my direct response, except to say that we are on the very same wavelength.

Your kind and thoughtful words are immensely appreciated.