Wednesday, May 13, 2009

Flaherty’s pretense of “leveling the playing field” doesn’t square with his subsequent actions

You really have to hand it to Jim “Plumb Bob” Flaherty. He is so inept at his professed desire to level the playing field as between corporations and income trusts that he should appear as a contestant on Canada’s Worst Handyman. He would no doubt win, as his professed desire to “level the playing field” as a policy goal has been revealed for the inherent lie that it is by all of his own subsequent actions.

Consider this:

(1) First of all, where did 31.5% come from in the first place? Income trust distributions are paid out of what is known in the accounting profession as EBITDA. To tax the EBITDA of an income trust at 31.5% is to create a huge disparity with corporations whose EBITDA is taxed at the average rate of 6.2% according to Statistics Canada. Even Plumb Bob himself has admitted that reality. Therefore this playing field was never level to begin with.

(2) Second, Plumb Bob leaves out a full 38% of the taxes that are collected by Ottawa at a rate of 38%, namely the 38% of income trusts that are held in RRSPs, that are taxes at the average rate of 38% according to Plumb Bob’s own Department of Finance? This is in stark contrast to the manner by which taxes on corporations are evaluated by Plumb Bob, where he counts ALL the deferred taxes at the corporate level. That doesn’t sound very level to me?

(3) Third. Plumb Bob went through a bid song an dance at the Public Hearings on Income Trusts about the fact that distributions paid to foreigners out of EBITDA are only taxed at a 15% withholding tax rate. Two months later we have Plumb Bob announcing that the interest paid by corporations to foreigners out of their EBITDA would be taxed at ZERO, rather than 15% previously. That certainly doesn’t sound very level to me? Does it to you?

Fourth. On the one year anniversary of the income trust tax, Plumb Bob was in a bit of a quandary, as he wanted to deflect attention away from what he had the year previously. So he decided to announce that he was going to reduce corporate tax rates at the federal level by 24%......and yet no corresponding equivalent reduction to the 31.5% income trust tax? That doesn’t sound like the exercise was ever about leveling the playing field, does it to you?

(5) Fifth, As his final act of hypocrisy and in order to eliminate any doubt in your mind about whether level the playing field actually meant leveling income trusts by removing them from the field, Flaherty was finally successful in brow beating Dalton McGuinty into lowering the corporate tax rate in Ontario from the statutory rate of 12% to 10%, and shift that tax burden onto consumers by way of Flaherty’s HST at a cost to consumers of $2 billion a year and a tax on everything. Again no corresponding decrease in the 31.5% tax paid by income trusts, 40% of which reside in Ontario, and where 40% of income trust investors pay their enormous taxes to both levels of Government at the average rate of 38%. With a new 13% tax on everything in the province of Ontario, these people need the income stream from their investments more that ever. Unfortunately their retirement assets have been taxed at 31.5% in order to kill this preferred investment vehicle and their significantly reduced income has now been rendered even less productive in light of Flaherty’s 13% tax on everything?

When will people learn that Plumb Bob Jim Flaherty is nothing more than a pawn for the corporations who are intent on reducing their competition by killing income trusts and shifting their entire tax load on to consumers, including every consumer who resides in Whitby-Oshawa, the scene of this crime as they are the ones who have empowered Plumb Bob Jim to, in effect, give them the “green shaft”, to quote Stephen Harper

1 comment:

Dr Mike said...

Jim`s idea of leveling the playing field just means the corporations will be on a level up here while the rest of us will be down there.

Two different levels & two different realities.

I say we go with Jim`s wife`s suggestion of a flat tax on income of between 8-10%.

If we did this there would be no need for all of this silly crap as then the best business model would win on it`s ability to raise capital based solely on their profitability.

At that point the corporations can bitch & bellyache all they want as it will be up to them to produce the returns demanded by their owners.

Dr Mike Popovich