.....the song remains the same, except worse since nothing is being done by these "opposition(?) leaders:
Finance refuses to divulge key trust data
STEVEN CHASE
Globe and Mail Update
January 23, 2007 at 10:28 PM EST
Federal Finance Minister Jim Flaherty's department has refused to release details of how it calculated that income trusts are costing Ottawa hundreds of millions of dollars in annual tax revenue, a key claim used to justify the new trust levy.
A Calgary trust analyst who filed a request under Canada's Access to Information Act for this information received 13 pages from the Finance Department that appear to detail the calculations it used, but these are all heavily blacked out so that only row and column labels remain visible.
BMO Nesbitt Burns analyst Gordon Tait describes another 12 less heavily censored pages that Finance sent him — details of trust distributions — as information that's already readily available to the public.
Finance justified its censorship using a section of the Access to Information Act that allows it to withhold data dangerous to Canada's economic interests.
The law allows it to keep secret information “which could reasonably be expected to be materially injurious to the financial interests” of the federal government, or could hinder Ottawa's ability “to manage the economy of Canada” or could provide “undue benefit” to anyone.
The law, however, also makes clear this is a discretionary rule rather than a mandatory protection — such as private health history — and thus is up to Finance to decide.
A second excuse Finance gave was that it's allowed to keep secret advice provided to ministers.
Mr. Tait, a critic of the controversial trust tax the Harper government announced last Oct. 31, said he doesn't understand why the Finance Department is hiding calculations from public scrutiny.
“Do they feel they can't substantiate the tax loss claims that have been made? I can't find another reason why you wouldn't make it available,” Mr. Tait said.
Income trusts pay little or no corporate tax, instead shovelling out the bulk of earnings to investors, who are taxed individually. Ottawa says it never recoups all the tax these businesses would have paid had they been structured as corporations instead of trusts.
Tax revenue losses were central to Mr. Flaherty's rationale for breaking a Conservative election promise and slapping a levy on trusts.
He justified the new levy last Halloween by saying that annual tax leakage was already $500-million and would have risen to $800-million had BCE Inc. and Telus Corp. converted to trusts.
Trusts have produced experts to repudiate Ottawa's tax leakage estimates, but the Finance Department has so far rebuffed media requests to demonstrate how it derived those figures.
The Finance Minister had also warned that tax revenue hemorrhaging would only grow if left unchecked until it threatened the federal government's ability to fund priorities such as health care, education and infrastructure.
Income trust lobbyists decried the government's decision to shelter the bulk of its calculations from public scrutiny.
“It's a joke,” said Brent Fullard, president of the Canadian Association of Income Trust Investors. “They're treating it like it's somebody's private health records or bank account details.”
Liberal finance critic John McCallum said the censorship demonstrates the need for key parliamentary hearings that begin next week on the trust tax, a probe driven by opposition parties that he said will grill Finance on its tax leakage estimates.
Mr. Tait said he doesn't believe that releasing the information Finance is withholding would reveal some wildly unexpected figures. But it would show the blow-by-blow calculations Finance made so Canadians can judge whether the leakage estimate is sound reasoning, he said.
“What we want to know is how they took information and processed it to come up with these losses so we know if it's valid or not,” Mr. Tait said.
“If you want your data to be accepted, it has to be scrutinized. It's got to be subject to peer review. You can't just come up with your own little theory and not show anybody how you came to it.”
The Finance Department's Access to Information co-ordinator did not immediately respond to requests for an interview to explain why the department refused to release 13 pages of calculations.
Mr Fijne from Calgary, Canada writes: Democratic accountability Flaherty style... Shame on Harper, Flaherty and the civil servant bureaucrats who are sucking the blood of Canadians, SHAME ON CRA!
* Posted 23/01/07 at 10:36 PM EST |
ah sails from whistler, Canada writes: what a shock ! harpo doesn't want to have to justify policy to the rabble
* Posted 23/01/07 at 10:53 PM EST | Alert an Editor | Link to Commen
Ross sako from lloydminster, Canada writes: what could Flaherty want to hide but the truth?
* Posted 23/01/07 at 11:09 PM EST | Alert an Editor | Link to Comment
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mogens bay from Canada writes: Sure we do not know what we are doing. But it is the right thing to do.
* Posted 23/01/07 at 11:13 PM EST | Alert an Editor | Link to Comment
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Philo Beddoe from USA, United States writes: Gee,
doesn't this give you Canadians a warm and fuzzy feeling about your government? Next you will have to click your heels and salute with a Heil Harper and a Heil Flaherty.
* Posted 23/01/07 at 11:22 PM EST | Alert an Editor | Link to Comment
marcelin tremblant from montreal, Canada writes: the issue will not go away and will eventually bring about the demise of the Government.It is almost incomprehensible how this is being mismanaged by Flaherty and his department,almost as if they were closing their eyes and wish it away.
If the department had conducted a comprehensive study leading to cogent evidence that tax leakage was damaging the government's ability to finance its programs(as has been advanced by Flaherty),surely the request to make these calculations public would serve the minister well.If the department is unrelenting,could it be because the calculation is merely a series of questionable assumptions and in the end ,a flawed political gamble?
* Posted 23/01/07 at 11:22 PM EST | Alert an Editor | Link to Comment
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Ian Sutherland from Brentwood Bay, BC, Canada writes: Flaherty is going to far trying to hide the fact he did not do his homework. This is not a dictatorship. In the words of the Office of the Auditor General: "parliamentarians need objective and fact based information on how well the government raises funds (i.e. taxes)". Major Tax policy changes must stand up to scrutiny. I hope the Finance Committee exposes this "Clear and Present Danger" for the sham he is.
* Posted 24/01/07 at 12:12 AM EST | Alert an Editor | Link to Comment
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M. Perry from Quebec, Canada writes: What is the Finance Department hiding?
* Posted 24/01/07 at 12:13 AM EST | Alert an Editor | Link to Comment
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Michael H from Edmonton, Canada writes: I agreed with the decision based upon the explanation that Flaherty gave. A refusal to release information on this, however, is bizarre and makes me wonder if we were getting the truth. If we can't review the numbers, we can't evaluate the decision. This is accountability?
* Posted 24/01/07 at 12:17 AM EST | Alert an Editor | Link to Comment
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Jian Min from Windsor, Canada writes: It seems we have a George Bush junior of the North at work here. I believe one of the Bush supporters in Congress gave the same reason for not telling the American people what their strategy in Iraq is. Guess what happened to him? He is unemployed now.
* Posted 24/01/07 at 12:23 AM EST | Alert an Editor | Link to Comment
Ian Sutherland from Brentwood Bay, BC, Canada writes: These figures should be presented to the Finance Committee, after all they are representatives of Canadian voters. The committe must be allowed to scrutinize the governments numbers. This is what our system is all about. If this information cannot be challenged then the Governor General or the Auditor General should demand to see the facts. This is an outrage. Anyone who was tempted to take Flaherty at face value should be asking themselves why he needs to hide his facts.
* Posted 24/01/07 at 12:32 AM EST | Alert an Editor | Link to Comment
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CONAR RANOC from Cape Breton, Canada writes: Now this Governement is toast or it is true - the people gets the Governement it deserves - like in the US!!!!!!!!
These leaders do not know the damage they impose on the
Canadian financel market and to there reputation all over the world.
Stop it or we are not better than any other BANANA REPUBLIC = STOP IT NOW, PLEASE!!!!!!
* Posted 24/01/07 at 12:38 AM EST | Alert an Editor | Link to Comment
an Sutherland from Brentwood Bay, BC, Canada writes: M. Perry...The Finance Department is the department Flaherty heads up as Minister of Finance. They work out policy ideas and present them to the Minister. Often, the Minister gets lobied by industry and asks the department to prepare reports and recommendations based on his/her ideas. Not sure exactly what went wrong here but they are afraid to show their calculations to the Canadian people. They expect us to accept major tax policy change without scrutiny. This is unacceptable.
* Posted 24/01/07 at 12:50 AM EST | Alert an Editor | Link to Comment
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M. Perry from Quebec, Canada writes: Ian - what country do we live in ? The former Soviet Union ?
* Posted 24/01/07 at 12:54 AM EST | Alert an Editor | Link to Comment
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Jian Min from Windsor, Canada writes: Sarcasm aside. Seriously, I will bet serious money that they were just scared into making this rash policy decision. Now they are just in coverup mode. You ask who scared them? Big businesses, CEOs of big companies (for example: former CEO of Encana and current CEO of BCE). They don't want the discipline of the trust structure. They control most of the media in Canada, and it shows!
* Posted 24/01/07 at 1:01 AM EST | Alert an Editor | Link to Comment
W M from Canada writes: The trust issue is one of the few things that I have been inclined to think the Conservatives have been right about (even if I think Harper's initial promise that only he could be trusted to leave them as they were was a bit of political sleaziness on his part). However, I simply don't understand how the calculations used to determine the economic impacts of the status quo vs. the implemented changes can possibly be considered a state secret. The measure has already been announced, so it's not as though providing the assumptions would be akin to a budget leak.
It is beyond mindboggling to think that the government would have taken such an unpopular measure without some pretty good reasons (and I'm inclined to think that there were) some; but surely we have a right to know what those reasons are / were. Otherwise, the government is EITHER saying that Canadians have no right to know the bases on which it sets economic policy (or any other policies for that matter) OR that we can't be trusted with the information. The former is stunningly unaccountable / secretive and the latter is incredibly arrogant. Niether reassure me that this government can be trusted in any way.
* Posted 24/01/07 at 1:26 AM EST | Alert an Editor | Link to Comment
Peter Cromerovich from Calgary, Canada writes: More decisive, open and accountable censorship to protect the treachery and antics of Jim "Chavez" Flaherty. The only thing this administration can possibly be suppressing is the truth and that can only be because it is damaging. It's time to think about a quiet regime change.
* Posted 24/01/07 at 2:03 AM EST | Alert an Editor | Link to Comment
FLUVIAL SEDIMENT from Port Alberni, BC, Canada writes: Obviously the Harper government has a very good reason for keeping these calculations secret - that reason being that they are covering up a major policy blunder that has caused significant damage. Just reinforces for me that they are deliberately misleading the Canadian public on this and other issues. So will the opposition parties PLEASE bring down this government before it does any more damage?
* Posted 24/01/07 at 2:12 AM EST | Alert an Editor | Link to Comment
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Claudia W from Canada writes: Harper broke his election promise about income trusts and ignored the recommendations of the Gomery Report, so clearly he defines "accountability" differently than the rest of us.
* Posted 24/01/07 at 3:15 AM EST | Alert an Editor | Link to Comment
Gord Adams from Okanagan, Canada writes: And to think some people criticized the Liberals and Bloc for seeking the truth. To the Liberals and Bloc: keep digging in the muck. You'll eventually find the source of the stench surrounding income trusts.
* Posted 24/01/07 at 3:52 AM EST | Alert an Editor | Link to Comment
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William Mayne from Markdale, Canada writes: Obviously Flaherty and Harper made their original decision in haste and did not have supporting evidence at that time. They have asked Finance to prepare it, but what they have will not stand up to scrutiny, given the number of excellent reports that have already been released. Now the plan is for Flaherty to release it, as late as possible, then rush the legislation through, not giving opponents a reasonable chance to review it. It is possible that Flaherty will use "National Security" to avoid releasing some of the supporting data. i.e. If the Taliban gets the info, it could affect our role in Afghanistan! The problem is that most Canadians have caught onto this scam! Just look at the results of yesterday's Globe poll, 55% of respondents give the Conservatives a failing grade!
* Posted 24/01/07 at 4:20 AM EST | Alert an Editor | Link to Comment
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Harry Weltman from Ottawa, Canada writes: Take 50 Billion dollars out of the economy is great stuff. Then you can finance windmill and other programs , for a cost of 1.5 billion dollars. Then you have 48.5 billion dollars for many more questionable projects. Then you have lots of money for more PORK.
* Posted 24/01/07 at 4:43 AM EST | Alert an Editor | Link to Comment
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Thor S from Canada writes: So Flaherty, Harper & Co. just want all of us to have faith that all their income trust pronouncement about tax leakage, "fairness", and economic efficiency are true???
Mr. Flahery, if I wanted to live under a faith-based goverrnment I'd have moved to the US and become a Dubya supporter.
Mr. Flaherty, your sledghammer approach to trusts wiped out over $30-billion of people's savings (likely more than $40-billion if BCE, Telus, and O&G juniors are included), which translates into >$8-billion of foregone future income tax collections on capital gains and RRSP withdrawals.
And now you claim that "Canada's New Government" can't release the data behind your decision because it would be dangerous to Canada's economic interest? Is releasing the data really dangerous to Canada's economic interest? Or would that be dangerous to your and the Conservative Party's self-interest?
Lies, deceptions, and bluster are all we've seen and heard from you on the trust tax issue, Mr. Flaherty.
I shudder to think what may be in store for lower- and middle-income Canadians if you and your Party win your cherished majority in the next election.
* Posted 24/01/07 at 4:50 AM EST | Alert an Editor | Link to Comment
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A Canadian from Dartmouth, Canada writes: someone wrote "They expect us to accept major tax policy change without scrutiny. This is unacceptable"
The above statement is only if we have a conservative government, under the liberal watch people/media would not care.
* Posted 24/01/07 at 4:53 AM EST | Alert an Editor | Link to Comment
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Paul who is from Vancouver, Canada writes: BMO Nesbitt Burns analyst Gordon Tait:
"Do they feel they can't substantiate the tax loss claims that have been made? I can't find another reason why you wouldn't make it available."
BINGO
"It's a joke"
"They're treating it like it's somebody's private health records or bank account details."
It WOULD show the blow-by-blow calculations Finance made so Canadians can judge whether the leakage estimate is sound reasoning.
Jim (Canadians for Bush) Flaherty obviously doesn't want Canadians to judge for themselves. That's why these 13 pages from the Finance Department were heavily blacked out.
I'm beginning to understand why Stephen Harper choose an ambulance chasing lawyer to be the Finance Minister.
I'm glad that the Conservatives enjoyed their first and last anniversery party.
* Posted 24/01/07 at 5:28 AM EST | Alert an Editor | Link to Comment
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The Emperor's Paparazzi from Renfrew County, Canada writes: The legislation won't pass without support of another party. What does Jack Layton have to say about this?
* Posted 24/01/07 at 5:44 AM EST | Alert an Editor | Link to Comment
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gaetan diotte from Ottawa, Canada writes: Welcome Canada, to the guy who gave Ontario a deficit.
* Posted 24/01/07 at 6:22 AM EST | Alert an Editor | Link to Comment
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Dave T from midwest, Canada writes: This is good. Keep the pressure on. Flaherty has a responsibility to show the numbers. And the opposition critics need to step it up, and demand to see data.
* Posted 24/01/07 at 6:26 AM EST | Alert an Editor | Link to Comment
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walter clare from Merrickville, Ontario, Canada writes: I believe that this is the first time a G&M thread on the income trust subject has had this much posting without one of the conservative apologists showing up here trying to spin the information in a positive light for the government.
I think even their most ardent supporters, which would have included me not that long ago, have become disgusted by their cavalier attitude and indifference toward everyday Canadians. I am kind of proud of the way Canadians have stood tough against the calculated arrogance of this failed government. It is time for them to go.
* Posted 24/01/07 at 6:30 AM EST | Alert an Editor | Link to Comment
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Stanley Aleong from Montreal, writes: What has to question the political sanity of Flaherty and the Conservative strategists. This was not meant to be. I think that most Canadians, including income trust investors like myself, could live with a painful decision if it were properly explained. We all know that electoral campaign promises are just that and politicians can't really be bound to them. But to wreak such havoc on the savings and investments of 2.5 million Canadians, and especially seniors, without a decent explanation has to be one of the biggest political miscalulations in recent history. And the gall of calling it the Tax Fairness Act, This thing is starting to make the sponsorship scandal look like small potatoes. Where is the Tax Leakage of Mass Destruction? Maybe there isn't any after all.
* Posted 24/01/07 at 6:58 AM EST | Alert an Editor | Link to Comment
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al woodward from Canada writes: I have long since given up trusting ANY government. Give Canadians the facts. After all, it is OUR money!!!
lex
* Posted 24/01/07 at 7:17 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: William Mayne, 55% of Canadians may have given the Cons a failing grade, but that also means 45% gave them a passing grade. Considering the divergence of opinion in Canada, and that all any political party needs is 40% to get a mandate, I'd say the Cons were doing quite well. Greens, Bloc, Dippers and up to 50% of Liberals would be bound to say the Cons are doing badly, no matter what they did. Those numbers should add up to more than 55% giving the Cons a failing grade, but don't. Having said that, I am definitely NOT happy that they won't provide numbers. I do agree conversions to trusts had to be stopped, but Flaherty went about it the wrong way. He should have just frozen trusts at their current level, not allowed any new ones. By not releasing the numbers, he's compounding his mistake. It's a matter of trust, and I will admit my trust has been shaken by these actions. Not, however, to the point I'd vote for someone else. The good the Cons have accomplished in only one year still way outweighs the bad.
* Posted 24/01/07 at 7:18 AM EST | Alert an Editor | Link to Comment
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Clive Gingell from Canada writes: Quote: "But it gets worse. Instead of immediately moving to assure markets that income trusts are here to stay, the xxxx are justifying their actions in the coldest political terms. As one government member was quoted in the media as saying about income trust investors, "They have no constituency. They don't count politically." That kind of arrogance cannot go unanswered. There is just no justification for what amounts to a xxx government attack on investors, and especially on seniors". Quote: "The government continues to overtax Canadians and run multi-billion dollar surpluses, yet their first instinct is to attack an investment vehicle that can make the difference between bare survival and a dignified retirement for millions of Canadians". Quote: "The government claims that income trusts enjoy an unfair tax advantage over corporate dividends. If they believe this, then the answer is not to shut down a valuable investment vehicle, but to cut the double taxation of dividends. In short,level the playing field and let the market decided between income trusts and dividend-paying companies". Stephen Harper, in a letter to the National Post. October 26, 2005 Broken promises? Lies? Incompetence? All of the above, (but certainly not NONE of the above)?
* Posted 24/01/07 at 7:18 AM EST | Alert an Editor | Link to Comment
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Frankie @^_^@ from Canada writes: IF THE NDP ( NEAR DEAD PARTY) will support Conervatives over this trust issue without changes then they will have to change their name to the TDP (TOTALLY DEAD PARTY)
YUP if you dont want to show how dumb you are just hide it under the secrecy act. Harper and Flaherty are just adding more insult to injury to the poor seniors who lost thousands of retirement money.My god , is this not a democratic country or are we going the dictatorship route.
* Posted 24/01/07 at 7:19 AM EST | Alert an Editor | Link to Comment
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s b from calgary, Canada writes: Wow, sure a lot of economic policy experts posting here...
Just becasue you personally lost money doest not make the trust decision a bad one, I hate to tell you.
I agree that Finance should be more open and release the information. However, am pretty certain that very few people (likely none of the above posters) would understand this information. More likely they would pick out a few unrelated data pieces and wave them around to support their position.
Just like every economic policy issue that Finance weighs in on, this one is complex and will be truly understood by few. What do you think - there are two columns of numbers, A and B, and Finance simply adds each one to get the net trust impact? (The analyst from Nesbitt probably would understand it, but then again you won't see them spouting off the kind of hysterical nonsense posted on this forum.)
* Posted 24/01/07 at 7:28 AM EST | Alert an Editor | Link to Comment
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The Emperor's Paparazzi from Renfrew County, Canada writes: s b from Calgary, so you're saying we can't handle the truth.
Don't just us, using yourself as the standard.
Don Adams from Perth, if you "do agree conversions to trusts had to be stopped", perhaps you could share your numbers with us.
* Posted 24/01/07 at 7:34 AM EST | Alert an Editor | Link to Comment
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Clive Gingell from Canada writes: s b: Since one of 'the above posters' used, (except for a brief closing comment), words that came directly from Mr Harper himself, (an economist, we are led to believe), are you presuming that he too "would pick out a few unrelated data pieces and wave them around to support their (his) position"?
Because that's what many of us are starting to believe.
* Posted 24/01/07 at 7:39 AM EST | Alert an Editor | Link to Comment
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Paul who is from Vancouver, Canada writes: The first problem was the promise.
People actually thought that they could trust this government to not "say one thing before an election and do another thing after an election."
Refusing to divulge key trust data is political suicide.
Who is going to believe anything from them in the next election?
Stephen Harper wrote an editorial on Wednesday, October 26, 2005 for the National Post while Opposition Leader.
Here's what he said BEFORE the election.
[Stephen Harper: "Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine. They also provide tax relief from a government that is addicted to taking too much money from their pockets and spending it without care, and very often without meaningful results."]
Seniors made the mistake of taking this editorial seriously. They won't make that mistake again.
Read Stephen Harper's entire editorial here.
http://politicsblog.ctv.ca/blog/Contributors/_archives/2006/11/1/2465438.html
* Posted 24/01/07 at 7:40 AM EST | Alert an Editor | Link to Comment
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M. R. from Toronto, Canada writes: At least the Libs did everything out in the open in 2005 and this info is still available for those who want to review. I have to assume that the Libs back off, in part, because the numbers just didn't add up and back their tax leakage claims. Nothing has changed.
http://www.fin.gc.ca/toce/2005/toirplf_e.html
We became collateral damage as Harper and Flaherty chose to support Michael Sabia, Gwynn Morgan and other corporate ceo whiners over 4 million canadians (ipsos reid poll).
Yes we know politicans LIE but this LIE sucked in millions of votes and this is what got Harper the PM job. Hopefully we will soon have the opportunity to remove him and Flaherty.
* Posted 24/01/07 at 7:58 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: Emperor's Paparazzi. It doesn't take a rocket scientist to figure it out, but I'll try to explain it in simple terms you'll understand. I hold trusts, in my RRSP account. Trusts distribute their profits to unitholders and don't pay Corporate tax on the distributions. The income I get from them grows tax free. When I eventually take them out of my RRSP, I'll be taxed at the lowest tax rate. Comparing an individual's lowest tax rate with a Corporation's tax rate, there's a huge difference, and this difference is a tax loss to the Government which pays for social programs etc. One doesn't need numbers, one just needs a little common sense. If huge Companies like BCE, Telus, The Banks, GM, etc were all allowed to convert to trusts, there'd be a huge tax loss to the Government, which would have to make it up somewhere. Where? From individual taxpayers, of course. Is that the road you want to go down? Mind you, the Liberal way of handling the loss would probably be to just print more money. Nope, don't want to go down that road either.
* Posted 24/01/07 at 8:02 AM EST | Alert an Editor | Link to Comment
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Don Wilson from Debert, NS, Canada writes: I can only echo the long long list of people that now know that Harper lied to the public - what kind of head of state is that. But to the issue of Trust distributions - they went to some seniors , some pension plans ( perhaps to yours - it did to my plan ) , some ordinary tax paying Canadians and some to out of country individuals and plans. All individuals paid some tax depending upon the tax rules in effect in that year. The amounts paid in pension plans is taxed when paid to the individuals in a future day. I don't know of any plan or type of income that gets taxed heavier than RRSP payouts to seniors. Pension plans were set up with government rules - where the money comes from is not an issue - except to the Harperites it seems. As to BCE and taxes paid - they were using tax loss carried forward and didn't pay corporate tax anyway. They will continue that way again now . Many corporations do that - it's a legal government rule that any responsible company will use. The bottom line is the Harper government doesn't understand finance, and now refuses to divulge it's calculations as by now they know they were wrong. I wonder what it feels like to go to bed each night knowing that you lied to a nation and are very poor at your job ? If his actions weren't so damaging , I'd feel sorry and vote for them next time , but I would be irresponsible to my family if I did that now.
* Posted 24/01/07 at 8:07 AM EST | Alert an Editor | Link to Comment
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Paul who is from Vancouver, Canada writes: QUESTION:
Why would Stephen Harper choose a personal injury lawyer to be the Minister of Finance?
* Posted 24/01/07 at 8:11 AM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: The trusters have proven their ability to manipulate numbers. The Fortin study has holes you can drive a truck through, comparing $150 of trust income to $28 of dividend income and concluding that, yes indeedy, trust income generates more taxes, BUT ONLY when paid to a taxable investor. No reason to think Mr. Tait would be any different.
Access to information requests are getting out of hand anyway. More like fishing expeditions.
Far better to put together a comprehensive presentation for the Finance committee.
That's it people. No story here. Please move on.
Far bettr
* Posted 24/01/07 at 8:21 AM EST | Alert an Editor | Link to Comment
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Catherine Wilkie from Canada writes: This 'knew' gov't surely can't say the words, 'open, transparent and accountable', anymore.
* Posted 24/01/07 at 8:22 AM EST | Alert an Editor | Link to Comment
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The Emperor's Paparazzi from Renfrew County, Canada writes: Don Adams from Perth, thanks for your simple explanation, but simple explanations lead to simple understandings.
Federal personal tax rate over income of $36,379 is a minimum of 22%, rising to 29% on income over $118,286.
Federal corporate tax rate is 22.1%.
Can you see now that there is actually a tax leakage when individuals are taxed, and not corporations? This is the opposite to the "conventional wisdom". There is, however, a tax deferral.
You wrote that "When I eventually take them out of my RRSP, I'll be taxed at the lowest tax rate." I believe you do not complete your own tax returns, otherwise, you would recognize the folly of your statement.
Since you own income trusts in your RRSP, I want you to realize that in the future, the income from these trusts will be doubly taxed -- once when the government eventually taxes income trusts, and then again when you withdraw from your RRSP. Are you still in favour of taxing income trusts?
* Posted 24/01/07 at 8:25 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: Hey, Catherine finally got out of bed.
* Posted 24/01/07 at 8:29 AM EST | Alert an Editor | Link to Comment
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Clive Gingell from Canada writes: Catherine got out of bed....and so did Diane Francis:
http://www.canada.com/nationalpost/financialpost/story.html?id=e381987f-81d8-4af8-b550-2fa2b6d77684
Quote:"But Mr. Flaherty did not do his research. He could not have because he said publicly that the Americans and Australians had shut down all their trusts except for real-estate ones. That's totally wrong.
The U.S. energy/infrastructure trust sector is now equivalent in size to 20% of the entire Toronto Stock Exchange, or more than US$480-billion. Whoops.
Then there's the tax leakage myth.
Department of Finance officials convinced, and gave Mr. Flaherty, the false information that registered retirement savings plans (RRSPs) and pension payments were tax-exempt. Too bad they aren't".
There is, of course, more.
* Posted 24/01/07 at 8:35 AM EST | Alert an Editor | Link to Comment
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Derek Holtom from Swan River (Only cowards don't use their real name on here), writes: Can some of the experts on here tell me what would have happened if more of the bigger companies in Canada converted into income trusts? serious question
* Posted 24/01/07 at 8:42 AM EST | Alert an Editor | Link to Comment
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Peter Paul from barrie, Canada writes: Can't divulge what you don't have. Flaherty outrage is just a cover for the embarrassment this going to cost the conservatives. Truth is this policy was driven by special interests and not by facts.
* Posted 24/01/07 at 8:43 AM EST | Alert an Editor | Link to Comment
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Stude Ham from Outremont, Canada writes: This article is a lie!!! Flaherty had nothing to do with this report. It was prepared by Wajid Khan... who for those good services was promoted to conservative party hack. Khan's commercial acumen was critical to the welfare of Canada in these calculations.
* Posted 24/01/07 at 8:47 AM EST | Alert an Editor | Link to Comment
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Clive Gingell from Canada writes: Derek Holtom: From the previously linked column by Diane Francis, (referring to quotes by BOC Governor David Dodge): "Here is what Dodge said in 2006:
"The work we have done in terms of capital markets, per se, is that probably, on balance, income trusts make capital markets somewhat more complete and somewhat more efficient," Dodge told a news conference held as part of the bank's quarterly economic outlook. The bank studied trusts.
"Limited evidence suggests that income trusts may enhance market completeness by providing diversification benefits
to investors and a source of financing to firms that might not otherwise have had access to markets," the bank's study said".
* Posted 24/01/07 at 8:49 AM EST | Alert an Editor | Link to Comment
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Catherine Wilkie from Canada writes: Good morning, to ya, Don Adams; Just talk amongst yourselves...Pragmatic Pundit, the usual suspects and yourself. Differing opinions, from you own, are viewed as inferior, wrong and worthy of insults. Whatever, sir.
* Posted 24/01/07 at 8:49 AM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: The JIG is up Fatherty...... sit down, the Finance Committee has some questions for you: Under Oath.
"I'm sorry, the dog ate my homework"
Is this part of the CONS Accountability Act??? LOL
The sooner these FACISTS are gone, the better.
We The People Will Decide When The Debate Is Finished.
We The People Will Decide When The Debate Has STARTED!
The Truth Will Hurt, but it will set us free from the insolent.
* Posted 24/01/07 at 8:51 AM EST | Alert an Editor | Link to Comment
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J Tittle from Canada writes: You don't need to be an economist to put some numbers around this... without the Finance depts help. They claim a "slippage" of around $800million if they don't act. Well, the net capital loss from $30Billion will show up in tax revenues as a decline of around $2.25Billion! And the net loss to all of Canada from the US$0.08 decline in the loony directly attributed to that decision is US$80BILLION!!! Oh, and the ( acceptable to the CPC ) loss in tax revenue from a 1% cut in the GST is around $2Billion.
These direct losses to tax revenue of around $4Billion this year, are acceptable? But a minor slip of $800Million is NOT???
There is no way that a $30 Billion loss to Canadians won't have any fallout.
And a continued loss in tax revenue without some cuts in gov't programs is going to look even worse...
* Posted 24/01/07 at 8:54 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: Emperor, I believe the corporate tax rate you quoted is for small business corporations, not large ones. I'll double check to verify. My accountant is my wife.... keeps us on the straight and narrow, uses all the rules re deductions (really good at it) so I don't have to do my own returns. The income from my/our trusts will NOT be double taxed, I'll/we'll have disposed of them by then. I'll actually be clearing out all my RRSP's over the next 10 years at the lowest possible tax rate, so we certainly haven't defferred taxes, actually cut taxes as we'd currently be paying a higher tax rate than we are without putting money into RRSP's. I can get a far better rate of return outside the RRSP than any RRIF will offer. By then, yes, our tax rate will jump, but I don't really mind.... we'll still have an excellent income, and the taxes I pay go into decent programs and helps other Canadians. Please remember one thing. It's not how much money you make, but how you manage the money you make. :-)
* Posted 24/01/07 at 8:55 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: Catherine, opinions differing from ours are only wrong when they're idealistic, as opposed to realistic opinions. Then, of course they're wrong.... you can't run a world through rose coloured glasses. As for the insults, well, yes, all part of the fun of this post. Insults really wind up the idealistic left, and they come out with real funny posts...always good for a laugh. Yours usually are too :-)
* Posted 24/01/07 at 9:01 AM EST | Alert an Editor | Link to Comment
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Catherine Wilkie from Canada writes: To Don Adams;
Maybe peruse the decima results. The "knew " party is losing ground with the female gender. There is maybe a lesson there for you and your co-horts. Insults are not welcomed as 'fun': rather as personal and simplistic. I choose not to comment on your asides. I can judge for myself, the message and the messenger. You do your party no favours with your comments.
* Posted 24/01/07 at 9:07 AM EST | Alert an Editor | Link to Comment
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Clive Gingell from Canada writes: Don Adams: How do you ensure that "the taxes I (you) pay go into decent programs"?
A fair portion of my taxes always seem to end up in wasteful pork-barrel projects and I'd dearly love to change that.
* Posted 24/01/07 at 9:08 AM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: Remember this name:
M. Sabia/CEO of BCE
* Posted 24/01/07 at 9:13 AM EST | Alert an Editor | Link to Comment
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ross sako from lloydminster, Canada writes: s b from calgary;
You must not have much hope for Canada when you want the truth to be hidden from the voters?
* Posted 24/01/07 at 9:13 AM EST | Alert an Editor | Link to Comment
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bruce weaver from Toronto, writes: No other country allows income trusts except Canada. Foreigners pay 10% witholding tax less than what is paid in Canada. There is some of the leakage
* Posted 24/01/07 at 9:14 AM EST | Alert an Editor | Link to Comment
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walter clare from Merrickville, Ontario, Canada writes: Jim Cruickshank suggests there is no story here, we should move on. Boy is he out of touch with political reality. He suggests that the entire matter can be dismissed because "access to information requests are getting out of hand anyway." Excuse me, but I really am curious, Mr Cruickshank is that your best effort or are you just having an off day? Denying information under the access laws is a near panic reaction, a last gasp response. Denial of an access to information request is an unleashing of the hounds that can become parliamentary blood sport. It suggests that the government may be about to fold. It appears that Mr Cruickshank may even be ahead of the government in deciding not to play these cards. But, I really am curious. Mr Cruickshank do you really advocate the suppression of the data?
* Posted 24/01/07 at 9:17 AM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: bruce weaver from Toronto, writes:
The USA STILL has ITs... now known as MLPs/Master Limited Partnerships.
The Market Cap for these MLPs are in the Hundred's of Billions.
The withholding tax is 15%.
The government supplied KoolAid is still evident... but weakening.
Why are some Canadians not supportive of finding the TRUTH on this matter???????
* Posted 24/01/07 at 9:19 AM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: Emperor, it is you who misunderstand, not Don Adams.
The personal vs. corporate tax rate is a red herring. Rather, it's the fact that the corporate taxes which aren't paid are instead flowed through to the investor as an enhanced trust distribution, who THEN pays tax on it. The loss is therefore the corporate taxes (38% - 42%, depending on the jurisdiction) X (1-personal tax rate). That personal tax rate ranges from 46% to 0% for a taxable investor, 10-15% for a foreigner, and 0% for an RPP/RRSP. But the leakage is always positive.
RRSPs/RPPS are incented to invest in trusts at anytime when the corporate tax rate is above ZERO:
1. The Goodale DTC initiative doesn't apply to them.
2. The Flaherty reduced corporate tax rate helps but it's still a positive number.
3. The ONLY way is to tax trusts on a level playing field, OR to make the corporate rate NEGATIVE.
So simple, but you won't get that from the CAIF website.
* Posted 24/01/07 at 9:23 AM EST | Alert an Editor | Link to Comment
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Brian Dell from Edmonton, Canada writes: At any given time the Department is processing heaps of ATI requests, and a circumscribed release of information is routine. What should be released and what should not is determined by an interpretation of the Access to Information Act, and rarely does this involve senior management in the Department, never mind the Minister, which is unheard of. The unhappy people here should be calling for an amending of the ATI Act instead of asking a Minister to interfere for political reasons in a standard procedure for handling ATIs that has been around for years. Would it be fair if the institutional investors at BMO or elsewhere had access to market relevant information that small investors do not? Unless an ATI request can be answered in just a couple man hours, the Department needs to recover its costs for the time it takes to search for and review the documents relevant to the request, and that means it has to charge the party requesting the information. If an ATI could get you pure gold in terms of information, an institution would pay up all the time for ATIs, effectively creating a insider trading market. Imagine if a corporation was subject to ATIs and an ATI could get obtain any and all corporate plans. The whole idea of quarterly reporting and trading halts for corporate announcements, etc. would be undermined by the fact certain well-heeled persons, expert in framing these ATI requests, would be trading on information not generally available. Also, management would not be able to get much work done, because they would be spending so much time answering ATI inquiries. As it was, when I was working in Finance I had to spend hours and hours on these ATI things instead of doing my real job.. As an aside, concerns about the improper disclosure of potentially market moving information may have been a factor if consultations with Bay Street prior to the October 31 announcement were limited.
* Posted 24/01/07 at 9:24 AM EST | Alert an Editor | Link to Comment
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Jean Michel from Toronto, Canada writes: Sounds much like the Bush administration !!! Finance refuses to divulge key trust data ... the Khan's report on the Middle East will not be made public ... The Harper's governement is taking its cues from south of the border!
* Posted 24/01/07 at 9:27 AM EST | Alert an Editor | Link to Comment
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The One and Only True PRAGMATIC PUNDIT Not those Phony LEFTY HACKS who pretend to be me from Canada writes: Flaherty is a smart politician who knows a minefield when he sees one. Anyone with a finance background knows that the funny thing about projections is that if you give 10 different people the same numbers to start with, they'll come up with 10 different versions, each (surprisingly) will support their own case. Flaherty is in no mood for a "peeing" contest with a bunch of libby pencil necks with partisan objectives.
* Posted 24/01/07 at 9:28 AM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: corporate taxes (38% - 42%,????
The average corporate tax paid in Canada, is about 18%. And of course some pay ZERO tax.... like BCE and Telus! And just these 2 will pay NO tax for years to come.
Gee... doesn't BCE and Telus ring a bell?
* Posted 24/01/07 at 9:31 AM EST | Alert an Editor | Link to Comment
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Reality Check from Ottawa, Canada writes: What does Flaherty have to hide? When you wipe out $30B in market cap of Canadians savings and business you have a lot to answer for. I still contend the analysis will show the government would always get its corporate taxes. It just wants them right now instead of later when the aging population will start to close out its RRSP's. The reasons for this drastic action had better be compelling to justify the damage. Show the analysis.
* Posted 24/01/07 at 9:36 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: To answer your question re taxes Clive, yes, tax money is still going to pork barrel programs. I don't like it either. However, we have to remember these programs were put in place by Liberals, no sunset clauses, no reviews.... the Lib thinking is that once in place, programs become sacrosanct. I believe the Cons government is looking into lots and lots of these programs, and that we're going to see many changes that will free up dollars for better, more worthy programs. Yes, we'll be hearing from the special interest crowd, but that's OK. They're always good for a laugh, like a certain female who posts here :-)
* Posted 24/01/07 at 9:37 AM EST | Alert an Editor | Link to Comment
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William Mayne from Markdale, Canada writes: Don Adams: Be careful about using "posted rates" for the tax rates that corporations pay. Keep in mind that corps spend a lot of money for many accountants so that they can pay as little tax as possible. It is an accepted fact that the average tax paid by corporations is 18% and for oil and gas corps it is 16%. Flaherty, conveniently "forgets" to tell us this. It is also a well know fact that Telus has not paid any federal tax for the past five years, if they had been a trust during that period the feds would have pulled in millions more in tax revenue. BCE boasted in their release that they would not be paying tax until about 2010! Same situation re trusting, feds would have gained. If Flaherty wants to stop large corporations from trusting, why not simply put a maximum market cap on the size of a company that can trust and not allow a large corp, to spin off a smaller one and then trust!
Incidentally, if you are paying the lowest tax rate when you de-register from your RSP, you may want to get a new financial planner. I know many people who de-register and have to pay at the highest marginal rate!
* Posted 24/01/07 at 9:38 AM EST | Alert an Editor | Link to Comment
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Give Your Head A Shake from Southern Ontario, Canada writes: Brian Dell, you get it! One only has to reflect on Scott Brison's blunder to really understand the truest nature of this beast. Could it be that larger investors once had access to this sort of thing, and now they are pissed off that they have to satisfy themselves with their own market research. I really wonder. So to all who chastise the governments' handling of the affair, I say this. If IT's had been dumped October 30 or 31 during the day by the major players, but prior to the announcement, could I have been proven correct here? Get over it, and move on. You will have your chance at the polls, but you probably won't see any government revive the trusts in their previous form. They all knew it was the correct move, Flaherty just had the courage to do something about it.
* Posted 24/01/07 at 9:41 AM EST | Alert an Editor | Link to Comment
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Andrew MacGillivray from writes: The democratic process is working. The hearings will be held and the facts will be presented. If the evidence is that Flaherty and Finance did not use reasonable due diligence considering the impact on capital markets and investors, there should be a price to pay (resignation). The fact that the Americans have MLP's which are the same as Trusts for their Energy/Resource sector WILL come out and finance will have to justify proposing to impair the ability of Canada's energy sector to compete with our major trading partner at a time when energy security is of great importance. The issue of the threat of Private Equity buyouts will be examined and it WILL be clear that no taxes will be paid by these entities if they are taken out by the PE vultures leaving a net result that canadian investor/owners will lose not only a source of retirement income, but more of our industrial base to foreign interests.
The information will be made available because this is Canada not North Korea and the government will be held accountable to it's employer - the Canadian people. Let the hearings begin ! The likely end result will be a sensibly modified tax proposal with exemptions for Energy and Real Estate and a ten year adjustment period for existing Trusts to soften the blow of the BIG LIE.
* Posted 24/01/07 at 9:48 AM EST | Alert an Editor | Link to Comment
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Richard Zientara from London, Canada writes: Diane Francis in today's column nailed Flaherty as an incompetent. What she probably could not say, because it would be so difficult to prove, is that this was probably a plot to let Public Sector Funds buy up the Trusts assets cheaply, not pay the proposed new tax and, further, Flaherty's "Advantage Canada" proposal would have probably legislated a leveraged advantage to the Piblic Sector in order to finance those purchases. Not that the Public Sector could not simply tax us un-elite more, but the costs of keeping the Public Sector rich,only that way, would perhaps wake up and outrage the average Private Sector Canadian . Also, they might pull the same stunt as the Ontario Teachers' Pension Plan, ostensibly taking the funds into their own hands and responsibility, subsequently declaring themselves more than solvent as an excuse to siphon off more benefits and when things were not as rosy running back to the taxpayer for more.
* Posted 24/01/07 at 9:49 AM EST | Alert an Editor | Link to Comment
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Don Adams from Canada writes: William Mayne. Yes, I can partially go along with your reasoning. I haven't seen anything about 16% and 18% rates, so can't comment much on that, except to ask is the 16 or 18% based on gross or net income? As for caps for trusts, never thought of that...could be a good idea. Re de-registering, maybe those people should get new financial planners. How can one pay the highest marginal rate when one can legally show their only income is what they're taking out, jointly, from their RRSP's (unless, of course, they have HUGE RRSP's... in that case, let them pay taxes.) It's simply been a question of money management, all within the tax rules. I will admit, we're not multi millionnaires, like many people, but are comfortable. We'll never have to just live on CPP.
* Posted 24/01/07 at 9:53 AM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: G H, I'm looking at my corporate tax return now. Federal rate for large corporations is 38% of taxable income less 10% for the provincial abatement PLUS 14% for Ontario corporate tax = 42%. Note that the corporate rate was as low as 10.5% under Harris, but that's a different debate.
The small business tax rate is 18.62% in Ontario, which is what you may be referring to. This wouldn't apply in this case.
* Posted 24/01/07 at 9:54 AM EST | Alert an Editor | Link to Comment
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The Emperor's Paparazzi from Renfrew County, Canada writes: Jim Cruikshank, you are assuming that income trusts only distribute to unitholders that amount of money which would have been paid in taxes if the legal entity had been a corporation.
Furthermore, the income not distributed to unitholders is re-invested (in oil producing properties, for example), and is eventually distributed to unitholders where it will be taxed.
Consider 2 cases, using only Federal tax rates (to avoid the mulitiplicity of provincial rates) and no funds are retained for re-investment:
Case (1) corporation earns $100, pays tax of $22.10, and distributes $87.80 to shareholder as a dividend (who gets tax credit which supposedly offsets the corporate tax already paid)
Case (2): income trust earns $100 and distributes $100 to unitholder who pays tax of $22.00 (if his taxable income is in range $36,378 - $72,756.
Where is the leakage?
references:
http://www.kpmg.ca/en/services/tax/documents/2006%202007%20non-CCPC%20June06.pdf
http://www.kpmg.ca/en/services/tax/documents/PersTable2006.pdf
(have to go out for a few hours)
* Posted 24/01/07 at 9:56 AM EST | Alert an Editor | Link to Comment
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BoB Leier from n vancouver, writes: This government needs to go!!!! Someone needs to inform these monkeys that Canada is still a democracy and transparancy is the name of the game. In fact, Canadians demand it. Responsible leadership is a rquirement. It appears that truth is not part of this governments mandate. Sad day in Canadaville. An election will cure this travesty, to be sure.
* Posted 24/01/07 at 9:57 AM EST | Alert an Editor | Link to Comment
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Rob Smith from king,s Point, Canada writes: It is politics as usual, it doesn't seem to matter who is in power they all behave the same, the arrogance is disgusting
* Posted 24/01/07 at 9:59 AM EST | Alert an Editor | Link to Comment
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Brian Dell from Edmonton, Canada writes: re the numbers the "Emperor's Paparazzi" cites, he is ignoring the fact that dividends are taxed in the hands of the individuals receiving them. See Table 1 at http://www.fin.gc.ca/news06/06-061e.html#Backgrounder Re Harper writing in 2005 that "the answer is not to shut down a valuable investment vehicle, but to cut the double taxation of dividends. In short, level the playing field and let the market decide between income trusts and dividend-paying companies," the answer is that this was done in November 2005 by reducing the rate of federal tax on dividends from large Canadian corporations. That Table 1 I refer to reflects this leveling of the field for taxable Canadian residents. While it may have been reasonable to believe at the end of 2005 that this would take some of the steam out of the rush to convert, as it turned out by Oct 31 2006 almost $70 billion of additional conversions were announced or completed. Clearly, the demand of non-resident and tax exempt investors must have been significant and the only way to create tax neutrality with respect to form of business organization would be to 1) reduce the taxes of tax-exempts and non-residents below zero 2) reduce all corporate taxes to zero or 3) tax trusts like corporations Option (3) was the only viable option. With respect to those who claim that Harper should have anticipated that leveling the field for taxable residents would not have been sufficient to restrain the explosive growth of trusts, I think people are asking a lot because I and others worked full time at Finance on this file and it was not very easy even for us to determine how much influence non-resident and tax exempt investors had on decisions to convert.
* Posted 24/01/07 at 10:00 AM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: Jim Cruickshank from Farmington Hills MI, Canada writes: G H, I'm looking at my corporate tax return now. Federal rate for large corporations is 38%.....
Give it a rest. The vast, vast majority of corporations have ample ways and means to apply tax write-offs to these 'paper' rates. Why do you think God invented Tax Lawyers?
So let's take just 1 example shall we... Does BCE or Telus pay 38% Corporate Tax?? No, they pay ZERO tax, and will pay ZERO Tax for many years to come. Does that sound like 38%??
I said "The AVERAGE CORPORATE TAX PAID IS 18%".
* Posted 24/01/07 at 10:03 AM EST | Alert an Editor | Link to Comment
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Carey Turner from Lethbridge, Canada writes: Someone said "call the Auditor General in" I think the RCMP should be called in. All this from the "Accountability Government" What a horrible joke the Finance Dept. is, My retirement has been devastated. I think I will send my income tax form in with all the numbers blacked out. Signed A disgusted senior.
* Posted 24/01/07 at 10:05 AM EST | Alert an Editor | Link to Comment
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F. Wm. Woodward from Calgary, Canada writes: Just imagine what we would be faced with if these "Bozos" had a majority. This kind of behavior is unacceptable and hopefully will come with a price to pay...........
* Posted 24/01/07 at 10:15 AM EST | Alert an Editor | Link to Comment
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Ian Sutherland from Brentwood Bay, BC, Canada writes: The issue here is not to debate the merits of the tax or any political party. The issue is about open and accountable government. Major tax policy changes must stand up to scrutiny and it's obvious that Mr. Flaherty does not have any credible information to produce. We must demand that full disclosure be provided, at a minimum to the Finance Committee. We cannot allow this government to avoid the checks and balances in our system through such obvious abuse of secrecy guidlines. If Mr. Harper does not openly challenge his Finance Minister on this then the RCMP must be called in to investigate. And has Jack Layton seen this? Does he still support Harper on this? I never thought I'd see the NDP backing a totalitarian government.
* Posted 24/01/07 at 10:19 AM EST | Alert an Editor | Link to Comment
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Graham M. from Kingston, Canada writes: So - No answers to question of how leakage and other numbers were arrived at.
Ok, let's move on and try a few more questions:
What was the basis for exempting REITs yet including O&G & Resource trusts?
Why are Private Trusts exempt from tax? (Like those formed by wealthy Canadians to hold business interests and financial assets and other income generating investments.)
Why are Private Income Trusts exempt from tax. (Like those held in large private and public pension funds, the benefits of which only accrue to those select Canadians that belong to these plans, including the members of Canada's civil service.)
Enquiring minds want to know!
* Posted 24/01/07 at 10:27 AM EST | Alert an Editor | Link to Comment
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Norm Neil from in the wild, wild West, Canada writes: I'm glad to see Brian Dell from Edmonton posting his experiences on this issue. FINALLY we have someone posting from an objective point of view, based on experience and knowledge, and not rhetoric! However, I'll challenge your statement: "...Would it be fair if the institutional investors at BMO or elsewhere had access to market relevant information that small investors do not?...". Generally, I certainly agree with this. But I don't believe that this should apply to policy decisions like on the Income Trust file. Publicly posting their numbers to justify such a major policy shift as this is certainly warranted (and expected), especially in light of their campaign promise to "not touch" ITs. If everyone has access to their numbers, how can any one person have a unfair advantage. Granted, knowing what to do with the numbers is another matter entirely. But the point I'm trying to argue is we expect openness and transparency in government policy decisions (unless there are national security concerns). The issue is not "would the average tax payer understand these numbers", but would the market industry (economists, institutional banks, etc.) perceive the policy as financially sound and fair? If only one or two players (e.g. BCE and/or Telus) were the ones crying foul, then their bias would be pretty obvious. But when the entire market goes "Huh? Show us your numbers.", then something in the state of Denmark stinks (sorry, the capital of Canada) and we should demand a public reckoning. Not being an economist, I cannot intelligently debate the numbers. I can only observe the bewilderment of those who DO understand the numbers. All the Finance Minister needs to do is release his justifications (rationale) to public scrutiny. Is this too much to ask (or am I being hopelessly naive)?
* Posted 24/01/07 at 10:32 AM EST | Alert an Editor | Link to Comment
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Romi Sejo from Canada writes: Flim Flam,
Show us the numbers. Also, everyone should read Diane Francis in the Financial post today, she really swings for the fence and she connected real hard.
* Posted 24/01/07 at 10:34 AM EST | Alert an Editor | Link to Comment
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Brian Dell from Edmonton, Canada writes: The vast majority of the Finance Department's internal work would not be of much use to ordinary Canadians. The people who would be most interested in it would be various external experts whose primary concern is not necessarily the Canadian public (such as foreign finance ministries and financial market speculators, many of whom are also foreign). Be careful what you wish for. If the Department were completely transparent you might well not seen a market move on October 31 because selling might well have started well before then in tandem with the extent to which internal memos at Finance took a tone of increasing concern about the number, and more importantly, the type of business assets falling under the control of trusts. And who would have doing the early selling? You or well-connected foreign hedge funds taking speculative short positions? Were you leading the selling after the Department revealed some of its interest in income trusts in September 2005 or were you left holding the bag a month and a half later (before the govt backed off in November 2005)? While a multi-week or even multi-month decline may SEEM less painful for the retail investor than an abrupt market move, note that a frog in a bowl of milk that suddenly turns hot will jump out, but if you very slowly turn up the heat the frog will end up cooked.
* Posted 24/01/07 at 10:35 AM EST | Alert an Editor | Link to Comment
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Andrew MacGillivray from writes: The most important issue here is the trustworthiness and credibility of the government (or lack thereof). A promise not to tax trusts as a key component of an election platform by a (now) head of state who turns and does exactly the opposite is not acceptable under any rationale. After all, our currency is only as good as the PROMISE TO PAY that underpins it. Trust is everything. Once that trust is broken all bets are off. Harper should have known this to be true as he often proclaimed, and now this will be his and his government's Waterloo. They grossly underestimated the impact of this policy reversal and their lesson will be a hard one. The amateurish way the issue was handled and the dullness of the approach will also be revealed in the hearings. No amount of stonewalling or bluster will prevent a detailed examination of the facts now - the people demand it and the people will be served.
* Posted 24/01/07 at 10:36 AM EST | Alert an Editor | Link to Comment
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S G from Canada writes: I am not quite sure what the goverment is trying to hide, their actions seem to go against statements on the prime ministers website re: accountability. Is the message that we need to be accountable or transparent unless we make a mistake? We need the facts Excerpts from the prime ministers website " No aspect of responsible government is more fundamental than having the trust of citizens. Canadians' faith in the institutions and practices of government has been eroded. This new government trusts in the Canadian people, and its goal is that Canadians will once again trust in their government. It is time for accountability." "This omnibus legislation and the associated Accountability Action Plan will change the current system of oversight and management by strengthening the rules and institutions that ensure transparency and accountability to Canadians..." "The Government will strengthen the capacity and independence of officers of Parliament, including the Auditor General, to hold the Government to account. It will increase the transparency of appointments, contracts and auditing within government departments and Crown corporations." "Effective checks and balances are important, but they are not enough. The trust of citizens must be earned every day. The Government will work to earn that trust." For some strange reasons the actions seem to be speaking louder than words. We like checks and balances unless others try to use them to look at our policies. There are lots of bold statements by the government but none of the promised transparency. Why hide the facts or the analysis?
* Posted 24/01/07 at 10:37 AM EST | Alert an Editor | Link to Comment
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Tim Geoffrey from Canada writes: If you have read recent articles quoting Flaherty, he has not been using the "tax leakage" argument but "tax fairness". What he means is that the tax burden regarding trusts has shifted from corporations to individuals, not necessarily a leakage. But if informed investors know this when they buy the income trust units, what is the problem with the shift? Let Canadians decide.
* Posted 24/01/07 at 10:38 AM EST | Alert an Editor | Link to Comment
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The Skipper from Edmonton, Canada writes: Transparency, Open and accessible government. In light of this decision by Flaherty it is not surprising that politicians rank at the low end of the food chain, right down there with the used car salesmen.
* Posted 24/01/07 at 10:38 AM EST | Alert an Editor | Link to Comment
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Ian Sutherland from Brentwood Bay, BC, Canada writes: Right On Graham M from Kingston. There are definitely more questions than answers. I don't think we'll ever get them because I don't believe Flaherty thought through the entire issue. The best Harper can do is ask for Flahety's resignation and kill the legislation. That way he can blame it all on an inept Finance Minister and not have the embarrassment of a long drawn out inquiry. He may be able to save some of his own credibility and that of the Conservative Party. Everone should read the editorial by Diane Francis in the Financial Post today.
* Posted 24/01/07 at 10:38 AM EST | Alert an Editor | Link to Comment
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Trillian Rand from Canada writes: Only a dishonest person fears the truth.
* Posted 24/01/07 at 10:41 AM EST | Alert an Editor | Link to Comment
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walter clare from Merrickville, Ontario, Canada writes: I was astounded to read Diane Francis and discover that Jack Mintz is denying he supported the decision taken by the government. It would appear that the rats are are beginning to flee the sinking ship.
* Posted 24/01/07 at 10:43 AM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: Brian Dell from Edmonton, Canada writes: and the only way to create tax neutrality with respect to form of business organization would be to 1)....
That may be the only 3 ways that Finance came up with, but many others have since elaborated other roads to take: Take the PriceWaterhouseCooper submission as an example.
With all due respect to you Sir, and you may be the best economist on Earth, but the Finance Department is not noted for hiring the sharpest knives in the drawer. This of course is due to $$: Would the best and brightest go to Finance to make $100,000, or would the sharpest knives be attracted to private industry, and make $250,000 plus Bonus?
And as I well know: Studies and Projects are created in Government with the required answer to said study already known and taken.
* Posted 24/01/07 at 10:46 AM EST | Alert an Editor | Link to Comment
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Neville T from Sidney, Canada writes: The Conservatives came to power offering Canadians more accountability and transparency. After 13 years of Liberal rule, Canadians were tired of corrupt government spending that resulted in millions of dollars of taxpayer money being wasted each year. They demanded a change and hence we have the Conservatives at the helm. As in the public sector you discover that most large private corporations are capable of wasting similar sums of money on failed or personal pet projects. There are plenty of examples of over paid CEOs and middle managers and the like, getting luxury separation packages for a poor job done. Do we expect the Conservatives to be any different? In one year, they have managed the eradicate $30 billion of personal taxpayer wealth. But they did lower the GST, raised income taxes slightly and provided some small tax relief. It is one thing for a public sector organization like the Federal government or a private corporation like to waste millions of dollars. But it is another thing for a large Federal political party to destroy $30 billion dollars of personal wealth. And it is another thing for the same political organization to make a strong stand about accountability and transparency and then do a 100% about turn on these important issues. By throwing out the Liberals Canadians were able to clean house and get rid of some nasty creatures. By voting in the Conservatives Canadians have invited a real monster into our homes.
* Posted 24/01/07 at 10:50 AM EST | Alert an Editor | Link to Comment
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Ian Sutherland from Brentwood Bay, BC, Canada writes: Neville T from Sidney...You forgot about the NDP that is supporting the monster. Layton is so worried about losing his 'balance of power' edge that he is blind to this Conservative injustice. With that said we have little left to chose from. I hope Vancouver Island throws out the Conservatives and NDP at the next election to send a clear message that this is an outrage.
* Posted 24/01/07 at 11:00 AM EST | Alert an Editor | Link to Comment
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R.S. Tse from Canada writes: I, a retiree and a holder of some income trust units in an unregistered investment account, expect little difference in the tax paid to governments before and after Flaherty's Halloween announcement.
Distrubutions under the "other income" category are lumped into my taxable income at the second tier income tax rate, which is not very different from corporation income tax rate. If the unit trust pays corporate income tax, its distrubution would allow me to claim dividend tax credit. So the total tax paid will not be very different.
However, the Halloween bombshell caused a big drop in the market value of my income trust holdings, which came from my lifetime savings before retirement.
There must be plenty of other unit trust holders in the same boat. The Finance Ministry must disclose how it estimates tax "leakage".
* Posted 24/01/07 at 11:18 AM EST | Alert an Editor | Link to Comment
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Michele K from Ottawa, Canada writes: I would suggest that the NDP are purposefully blind to the injustice committed here. I've always been a strong supporter of the social justice platform they traditionally advocate and have certainly voted NDP a few times (we red Tories have nowhere to call home these days), but I recall well the day some 7-8 years ago, as I marched down the street to my $55K/year job, encountering an NDP campaigner who told me that someone like me should be asking to pay MORE taxes (their latest public pronouncement then was that anyone earning $65K at that time was 'rich' and should pay more). When I explained that I was, in fact, firmly situated in the middle class, with a middle-class income, she looked me up and down (new job, new suit) and basically proclaimed me to be a liar. I'm all for social justice, but I am decidedly NOT in favour of stubborn adherence to ideology in the guise of 'principles' - a problem that both the Conservatives and NDP seem to have in spades. I sense in the NDP a disdain for any of us who manage to at least look OK in the dog-eat-dog business world (as if we really have any choice), and boy, if you can find any money to invest at all, there's no way this kind of NDPer is going to go out of their way to support you - even when fairness would say that they should. It's the same kind of sentiment exhibited by those around here who continually post, 'sheesh, you really should have known better!'. How sad that this schadenfreude seems to have become part of the Canadian character, regardless of political stripe.
* Posted 24/01/07 at 11:30 AM EST | Alert an Editor | Link to Comment
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Axl Foley from Calgary, Canada writes: Don Adams: Thanks for the simple explanation that we can all understand. You certainly are very bright and insightful. Of course you're forgetting that RRSP contributions are capped so not all of that money paid out by a trust is going to grow tax-free. And of course the point of the RRSP system is to assist people in providing their own income in their retirement years (a good thing) as the CPP system begins to erode dramatically as baby-boomers retire en masse. You're also forgetting that the real problem has been the tax rate (15%) that US investors pay on the distributions from trusts. Perhaps you could put your formidable intellect to the task of figuring out how much we would recoup from these investors at say 25 to 30% Finally, much like the Finance Department, although your theory seems to make sense on first blush you don't have any numbers to back it up...hey, that's like the Finance Department too! Wow, do you work in the Finance Department? Or are you in the Rocket Science Department. You should be because you're very, very smart.
* Posted 24/01/07 at 11:40 AM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: I give the Emperor credit. At least he's willing to do some research. Unlike Diane Francis today, who's just being a hothead, not a journalist.
It's a shame that Mr. Goodale backed off. He did introduce some DTC enhancements, which, if the provinces follow through, lower dividend taxation towards the trust level. As Mr. Dell points out, this should have slowed the freight train down. But it didn't address the RRSP/foreign ownership issue, and failed.
Mr. Flaherty went one step further and announced reductions in the corporate tax rate, which is directionally better, but still ineffective, as the tax rate is still above zero. The freight train kept coming.
Now the trusters are using all of this "good stuff" against the government, as if tax leakage never existed in the first place.
Sad really, and selfish.
* Posted 24/01/07 at 11:48 AM EST | Alert an Editor | Link to Comment
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Ian Sutherland from Brentwood Bay, BC, Canada writes: Michelle K you are Right On about the NDP. Their support on this is disgusting. They hide behind dated reports. I watched JudyWasylycia-Leis, the NDP Finance Critic on CPAC last night. They were replaying the debate by the Finance committee on public hearings held last week. This lady was constantly asked by the chair (who is Conservative) to stop talking and stick to the point. She was right out of her depth on this issue and entirely out of control as she ranted and raved about Liberal this and Liberal that. She has entirely bought the conservative story on this and if Jack Layton is taking advice from her then I suggest the NDP is doomed in the next election.
* Posted 24/01/07 at 11:48 AM EST | Alert an Editor | Link to Comment
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Andrew MacGillivray from writes: Mr. Dell from Edmonton - your inside experience in Finance is appreciated. Surely as a citizen of a democracy you should understand that factual considerations need to be fully disclosed as part of this process. What on earth should be kept secret from the people about the taxes THEY PAY ? Real people have suffered real losses here - people who unlike yourself who will rely substantially on their RRSP's for their retirement security. Finance is not the CIA and surely the facts of this matter need to be and will be disclosed to the PAYING public as part of this process. I've never cooked a frog in milk or pulled the wings off of flies for that matter - but I have managed money professionally for 30 years and this betrayal of the investing public ranks as the most treacherous act commited by any Canadian government in my lifetime. A full and complete hearing is needed with complete disclosure by Finance of their methodology. If mistakes were made they need to corrected and any law that eventually is passed needs to be based on a very careful examination of the facts. Whether it's hedge funds going short or simply Private Equity vulture funds picking the bones of the decimated Trust sector (and paying no taxes), the consequences both intended and unintended need to be considered very carefully when dealing with an issue of this importance to our capital markets. We can be thankful that the democratic process appears to be working here and that due diligence will be undertaken before we go off half cocked and evaporate $30-$60 billion of the people's savings in the name of "tax fairness" (whatever that is).
* Posted 24/01/07 at 11:49 AM EST | Alert an Editor | Link to Comment
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Brian Dell from Edmonton, Canada writes: Norm Neil, I agree with you that the Minister or his spokesman should provide more information and argument. However, the issue here is not IF but WHEN and HOW. What I am disputing is the wisdom of putting everything of interest into a ATI request addressed to BMO's Gordon Tait. Information should be disseminated on a broad, public channel and that means before a Parliamentary Committee, not by politically interfering in the civil service's processing of a routine ATI. Note that Tait received 12 pages of information but complains that it was largely "public information". So he wanted private, sensitive information and he was not indulged. The G&M article is simply sensational to describe this as "Ottawa censors". Had the author of this article gathered more information about typical practice concerning ATIs he or she would have known that this was most certainly not the Minister's decision to "censor." re Diane Francis' claim of a US$480B American income trust market that is simply false. Add up the market cap of the US securities that are really even remotely analogous; that is, "income participating securities" (IPSs), "income deposit securities" (IDSs) or "enhanced income securities" (EISs) and you will see that it is exceedingly small. G H from Harplerville wrote: "That may be the only 3 ways that Finance came up with, but many others have since elaborated other roads to take: Take the PriceWaterhouseCooper submission as an example" The PWC submission is NOT an alternative solution to the problem of creating a preference against ordinary corporations. They admit on page 39 that the tax treament afforded tax-exempts owning trusts under the Oct 31 plan "mirrors the tax treatment afforded to tax-exempt investors owning publicly traded corporations." See the detailed #s in their Appendix: under their proposal there would be $39 total tax on a distribution to a tax-exempt from a trust and $58.22 total tax from a corp.
* Posted 24/01/07 at 12:05 PM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: G H, you can be sarcastic all you want, but the average corporate tax rate for large corporations is NOT 18%.
I do stand corrected on my earlier 38-42%. There's a 7% federal "reduction" slipped in there for non-Canadian Controlled Private Corporations. Per the KPMG tax (thanks Emperor!) tax tables, the provinces have clawed some of this back, so the more correct range would be 35-39%, depending on the province.
In fact there are very few reductions to accounting income to get it to taxable income. Most are timing, known as Future Income taxes.
Everyone likes quoting Bell and Telus. These are tax loss carry-forwards due to their wireless network and RUN OUT. You can rest assured that if they did convert, they would have INCREASED their taxable income and taxes in the conversion year sufficient to extract the last remaining juice from the carry-forwards.
* Posted 24/01/07 at 12:13 PM EST | Alert an Editor | Link to Comment
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G H from Harplerville, Canada writes: Jim Cruickshank from Farmington Hills MI:be sarcastic all you want, but the average corporate tax rate for large corporations is NOT 18%.
Yes, IT IS.
Where the heck is Farmington Hills MI?
* Posted 24/01/07 at 12:17 PM EST | Alert an Editor | Link to Comment
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Mr Fijne from Calgary, Canada writes: Brian Dell: Tait was not looking for "private sensitive information" he wanted to see what we all want to see, that is the calculation that Finance and Flaherty are basing their policy on. This is really not a state secret is it? And given Mr Cruickshank's ability to defend the Minister's actions against those "trusters" -sorry soon we should have been jailed for investing in trusts and paying conversion taxes to boot-, this demonstration must be readily available -they must have done it before issuing the policy no?-, easy to prove -few lines suffice for Jim Cruickshank- so really there is no when, how and where... or is it that they are frantically crushing numbers only now? If this is the case perhaps they should hire Jim ASAP... LOL
* Posted 24/01/07 at 12:21 PM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: OK, G H, if you're so sure, and have no tax tables to refer to, how did you calculate YOUR 18%?
p.s. Farmington Hills is in Michigan, north of Detroit.
* Posted 24/01/07 at 12:23 PM EST | Alert an Editor | Link to Comment
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David Morgan from Toronto, Canada writes: CRA has a great idea really. I'm going to try it when I submit my tax return - "Hey Jimbo, I don't owe you any tax. All the relevant numbers that lead me to that conclusion and any related thought processes have been blacked out; but you can trust me, really..."
* Posted 24/01/07 at 12:24 PM EST | Alert an Editor | Link to Comment
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Jim Cruickshank from Farmington Hills MI, Canada writes: I want no part of any dispute with the redoubtable Mr. Fijne.
* Posted 24/01/07 at 12:29 PM EST | Alert an Editor | Link to Comment
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Retired One from Calgary, Canada writes: Deny, deny, deny. Just like Nixon. When the 'secret' tapes come out, what country will Steve and the Harpercrites flee to? Not that I care, I'll pay for the tickets anyway. Good riddance.
* Posted 24/01/07 at 12:31 PM EST | Alert an Editor | Link to Comment
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R H from Canada writes: Investors with balanced portfoilios were screwed over by the Harper government. if you don't believe it, watch this video. Watch the passion that your PM delivers in
THE BIG LIE
http://youtube.com/watch?v=U9mibZYpVPY
Since an election seems to be coming, let lme ask you something...
Can you trust ANYTHING Harper says in his bid for re-election?
If you think Harper can be trusted, then P.T. Barnum was right.
* Posted 17/02/07 at 7:58 AM EST | Alert an Editor
Thursday, May 14, 2009
Ignatieff, Layton and Duceppe need to read comments on Globe article " Finance refuses to divulge key trust data"
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1 comment:
Harper`s response to the trust unit holders was "trust Me"--like yikessss.
On one hand he is passing out censored material & on the other hand he is saying "trust me".
Have I missed the fog bound boat here or do these two concepts not mesh.
All I can say is #%%$#%%^^.
Dr Mike
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