Saturday, September 19, 2009

HST reveals the two faces of TD Bank. Neither is pretty. Both are self serving.

Today we observe in full technicolour, the two faced hypocrisy of the TD bank.

Back in May of this year we learned that TD Bank was the major backroom player in convincing the McGuinty government to impose this rapacious and absurd HST tax onto consumers in order to hand windfall tax benefits to corporations. This revelation was contained in a Globe article (below) entitled TD's Power of Persuasion.

Now we learn in the very same paper that TD Bank is saying and finally acknowledging what this tax is REALLY about in an article entitled: "TD Bank says Harmonized tax to hit consumers hard:"

Why was this reality about HST withheld from the public by TD Bank until the day AFTER the ST Paul's byelection that was a referendum of sorts on the HST tax.....conceived by TD Bank in the first instance?

This stinks on so many levels......however none more so than the tax itself which is really bad piece of tax policy solely aimed at shifting tax burden from corporations to consumers to make "Ontario the last place to live and raise a family":

TD Bank says Harmonized tax to hit consumers hard:

Karen Howlett and Ian Bailey
Globe and Mail
September 19, 2009

Consumers will bear the brunt of proposed tax changes in Ontario and British Columbia while businesses reap windfall savings of $6.9-billion, a new report says.

For the first time, economists have put a price tag on the value-added taxes the two provinces plan to introduce July 1, showing that the tax rate on consumption will jump 1.5 percentage points for consumers.

The report prepared by economists at Toronto-Dominion Bank could have caused a political headache in Ontario for Premier Dalton McGuinty. But the impact of its release Friday was somewhat blunted, having come one day after the Liberals sailed to victory in a by-election in the Toronto riding of St. Paul's, despite attempts by opposition candidates to turn the race into a referendum on the harmonized sales tax.

Ontario New Democrat Leader Andrea Horwath called the timing “awfully fishy.” A spokesman for Revenue Minister John Wilkinson said he was pleased with the report, regardless of the timing.

TD Bank chief economist Don Drummond, who played a key role in advising the McGuinty government on the proposal to harmonize the provincial sales tax with the federal goods and services tax, said he shared his findings with government officials a week ago but did not finish the report until the day of the by-election.

“I guess in a perfect world I would have preferred to have it out there before that,” Mr. Drummond said. “It could have been a basis for debate.”

The report said the tax burden will shift from businesses to consumers, who will pay higher prices on goods and services ranging from haircuts to new home purchases. Businesses will pass on most of their cost savings to consumers, but the lower prices will not fully offset the higher taxes, the report said.

Mr. McGuinty is facing political turbulence over tax harmonization, but nothing compared with the maelstrom that is battering B.C. Premier Gordon Campbell and his Liberals, who are facing a pointed anti-HST campaign by former Social Credit premier Bill Vander Zalm, and plunging poll results over their decision to embrace the HST after ruling it out during the recent provincial election campaign.

The TD report adds fresh fuel to accusations by opposition members in both provinces that harmonization is little more than a tax grab aimed at benefiting businesses at the expense of consumers.

“TD Economics shows the ‘Dalton Sales Tax' is just that – a permanent tax grab that will result in higher prices on the things we buy with no immediate benefit to consumers,” Ontario PC Leader Tim Hudak said Friday.

David Docherty, a political science professor at Wilfrid Laurier University, said the by-election results will resonate beyond the riding of St. Paul's because they will force the Tories to rethink their strategy. The Liberals emerged unscathed even though the midpoint of their second term has been dominated by spending scandals at two agencies.

“Voter turnout was so abysmal, McGuinty may well ride an apathetic public to a third term,” Prof. Docherty said.

It's a different story in B.C., where the HST has been just one of a series of economic woes for the Liberals that also includes a soaring deficit and resulting cuts to government programs and services. Opposition to the HST has driven down the Liberals' ratings in the polls and has prompted Mr. Vander Zalm to participate in an anti-HST rally in Vancouver today with NDP Leader Carole James. Both Mr. Vander Zalm, who left politics in 1991, and Ms. James have acknowledged the unusual nature of their alliance, but said their political differences matter less than hammering the Liberals over the HST.

“It's probably the first time that people from the left, the right, the middle – people from all political persuasions have come together, as well as labour and business and seniors and students,” Mr. Vander Zalm said in an interview Friday.

Once the provinces combine their PST with the GST, the new tax will be 13 per cent in Ontario and 12 per cent in B.C.

Businesses will reap huge savings because they will be able to claim rebates. But consumers will end up paying the new tax on goods and services that are currently exempt from any tax. Both provinces have attempted to take the sting out of harmonization by exempting goods such as diapers.

TD's power of persuasion

May 14, 2009
Globe and Mail

NEW YORK, TORONTO — One evening last December, Ontario Premier Dalton McGuinty strolled into Grano, a popular Italian restaurant in midtown Toronto, clutching a document that would provide the blueprint for his upcoming provincial budget.

He handed copies to two of his dinner companions: Mike Lazaridis, co-founder of BlackBerry maker Research In Motion; and Carol Stephenson, dean of the Richard Ivey School of Business at the University of Western Ontario.

The third guest, Toronto-Dominion Bank chief economist Don Drummond, didn't need to see the report. He wrote it.

Mr. Drummond's policy paper, “Time for a vision of Ontario's economy,” may have been dryly titled, but it was blunt: Ontario's days as an economic powerhouse were over. It called for bold action from the government, including spending on transit and environmental measures and – most crucially – the harmonization of the provincial sales tax with the federal GST.

A few months later, after those very recommendations were enshrined in an ambitious budget, TD sent an e-mail to select media quoting chief executive officer Ed Clark.

“The Ontario government has listened and acted on what needs to be done to create jobs and growth in the Ontario economy,” Mr. Clark said.

What he didn't say, at least not explicitly, was that Queen's Park had accepted TD's advice.

This kind of political canniness has come to characterize the ascendance of the bank, under Mr. Clark, as a lobbying juggernaut.

The Ontario budget was just the latest lobbying victory for TD – and perhaps more remarkably, the latest victory in which there appears to be no obvious prize for the bank. At least not in the immediate term.

From taxation rules in British Columbia to sales tax harmonization in Ontario to monetary policy in Ottawa, TD has become what many see as Corporate Canada's most influential player on public policy – and its most resonant voice amid the financial crisis.

Indeed, on some days, the bank can be mistaken for a shadow finance ministry.

“People used to say, ‘What's good for GM is good for America,'” concedes Scott Mullin, TD's vice-president of government and community relations. “I guess we turn that on its head and say, ‘What's good for Canada is good for TD.' So, if we're convinced that something like tax harmonization is good for Ontario, then we see that as having a positive impact ... for us.”

The clout is baked into the bank's corporate DNA, most notably in the formidable triumvirate of Mr. Clark, Mr. Drummond and Frank McKenna, three senior executives who were shaped by years of high-level government service. They remain among the most politically connected operators in Corporate Canada – particularly with the Liberal Party.

And their signature can be found on public policy files across the country.

When Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney suggested in December that the big banks weren't lending enough to consumers, it was Mr. Drummond who quickly crafted a rebuttal and sent the presentation to other banks for their feedback. Mr. Clark took the document to a meeting with Mr. Flaherty, Mr. Carney and the other bank CEOs in early January.

TD was also among the first to lobby the government to expand its CMHC mortgage purchase program, to provide banks with more flexibility to lend to consumers – an effort that was unveiled last October and has been twice expanded since then (although other banks insist they were equally involved).

At the end of April, on the eve of the Liberal Party convention in Vancouver, TD released an in-depth study on employment insurance, calling for an overhaul of the program. Two days later, Liberal Leader Michael Ignatieff (who has sought counsel from Mr. Drummond and Mr. McKenna on his economic stimulus plan) pitched a very similar proposal to the country.

And sources say Mr. McKenna, in particular, was instrumental in helping to persuade British Columbia to replace its financial institutions capital tax with a minimum tax in its budget last year.

To understand TD's pursuit of policy influence, one has to understand the career trajectory of these three men, and their transition from the public sphere to the private.

Mr. Clark, who has a PhD in economics from Harvard, was once an ideologically driven bureaucrat who helped craft the national energy program in the Trudeau years, and was vilified in the oil patch as Red Ed. In 1985, one of Brian Mulroney's first surgical moves as prime minister – to great applause in the business community – was to have Mr. Clark fired. The career bureaucrat responded by embracing the business community, and embarking on a career as an investment banker at Merrill Lynch.

Yet his policy roots haven't withered. After taking the helm of TD in 2002, and spending a couple of years fixing some of the bank's lingering issues, Mr. Clark has since carved out a singular niche among bank CEOs, proffering advice to governments not merely on mundane financial issues such as credit card fees, but on issues ranging from social housing to equalization. The more powerful TD became – as Canada's second-largest bank, and one of the largest by market value in North America, it has clout – the more powerful became Mr. Clark's ideas.

Within the bank, he has attempted to engrain the importance of participating in the political process. Three years ago, just before the federal election, he held a meeting with top senior executives to discuss making donations to both the Liberals and the Conservatives. The 10 officials agreed to contribute a combined $93,000, split equally between the parties. The move raised eyebrows, not least because only two of these people had made contributions before the meeting. But Mr. Clark insisted at the time it was important for individuals to pick up the financing slack after new rules barred companies from making direct contributions.

He declined to be interviewed for this story, but in an e-mailed statement he attempted to play down his bank's lobbying as unexceptional.

“I know my peers at the other Canadian banks do the same and I believe TD does not have any extra or special influence in this regard,” Mr. Clark wrote. “Frankly, I would be surprised if responsible businesses large and small were not reaching out to offer ideas on Canada's future success.”

Even if they are, they would have a hard time matching TD's influence, much less its connections.

Consider Mr. Drummond, a career bureaucrat in the Finance Department who some thought should have been named to the deputy minister's job, but never was. Frustrated by career limitations in Ottawa, Mr. Drummond jumped to TD in 2000, as chief economist and, in the only job pairing of its kind in Canada, head of government relations.

Less visible, but no less influential, is Mr. McKenna, the former Liberal premier of New Brunswick, who was recruited by Mr. Clark in 2006 to help win accounts for TD's investment bank. Perhaps the most skilled political networker in the country since Mr. Mulroney was at his peak, Mr. McKenna was the sort of door-opener TD needed to win top assignments during the financial boom years. He also has been put to work winning government allies during the bust.

He consulted with Ontario Finance Minister Dwight Duncan on the tax-harmonization file, sharing his first-hand experience with blending the taxes in New Brunswick in 1997.

“His advice was to do it,” Mr. Duncan recently told a Globe and Mail editorial board meeting. “His advice was that there would be political backlash to it but if you manage it properly ... you will be able to withstand the political backlash.”

Since the financial crisis began, TD's top officials have held roughly four times as many meetings with federal officials as those at RBC, the country's largest bank, according to the federal lobbyist registry.

Mr. Clark is very hands-on, and will request the name of individual bureaucrats who are writing memos to ministers so he can speak to them personally. While he and Mr. Drummond are intimately familiar with how the bureaucracy works, Mr. McKenna brought an added dimension: knowing how a first minister thinks.

TD does not have a Bay Street monopoly on national issues. Ontario's Premier has a close relationship with Gordon Nixon, CEO of Royal Bank of Canada, who formerly chaired the Toronto Region Research Alliance and has been an active promoter of technology and environmental programs in the province. And Ontario routinely consults with other top bank economists, such as Bank of Nova Scotia's Warren Jestin.

Ontario Liberal MP John McCallum, a former RBC chief economist, cautions against attributing too much clout to any single company. But he acknowledges that, among the banks, TD is now the most prominent lobbyist – and likely the most skilled, especially in the persons of Mr. Clark and Mr. Drummond.

“Between the two of them, they have huge knowledge of how the public sector works, and which are the most effective buttons to push. ... They're masters at that.”


Anonymous said...

This makes me sick, and I feel sorry for my MPP, who has to go around and sell this..he said it has not been easy. I know it is not his fault.
TD Canada Trust is my bank nd shame on those.....!!!!!

Dr Mike said...

Big Business & Government.

Government & Big Business.

Kiss kiss kiss.

Hug hug hug.

Flaherty & Duncan , Harper & McGuinty.

Conservative , Liberal -- hug hug hug , kiss kiss kiss.

Makes me want to barf.

Toss in a few bank economists & a few Manulife & Power Corp CEOs & my breakfast goes south.

I thought we hired & pay these guys to look after us , so why is it that my gasoline bill , my water bill , my electricity bill , & my natural gas bill will all be going up 8%.

Sure I will gladly take my $1000 bribe & go to my nearest contractor for some reno---of course that is going to cost me 8% more as well.

I am sick & tired of the gov`t imposed shaft that always comes in the form of some half baked tax scheme---HST , GST , Income Trust Tax.

I think it is time to return the power to the people & get it out of greedy corporate & incompetent gov`t hands.

Dr Mike Popovich

Anonymous said...

Isn't it very funny how the Ontario PCs do not like it either....who does?

Anonymous said...

TD economists usually spout the Liberal talking points, some one missed the memo on this one.

Vancouver BC real estate said...

Hello, thank you for the post. I must admit that I'm quite disappointed with the situation, too. Life in Canada isn't cheap at all, and now, it seems, will be even tougher. Next time, we should really be careful who and why we vote.

Take care,