The cowardly testimony of Euromoney Man

By selecting Jim Flaherty as their Finance Minister of the Year, Euromoney, through its cursory and incomplete evaluation of Jim Flaherty’s record, is simply encouraging and rewarding bad behaviour in the global financial community. Jim Flaherty epitomizes and embodies the very ethical make-up of the people who caused the global financial meltdown,. For which accolades are in order? In Canada he caused innocent Canadians who were paying taxes at the rate of 38% on their income trust distributions to lose $35 billion of their life savings by arguing that these people were not paying taxes, and yet was unwilling to provide any proof for this outrageous claim. The man is a complete charlatan and a fraud.

In the following testimony you will read what it means to be a “man” in Europe. Evidently becoming Euromoney Man of the Year involves being deceitful, dishonest, evasive and completely unwilling to own up to one’s actions.

Can you even conceive of the Chancellor of the Exchequer giving testimony to the British House of Parliament that is as completely evasive and cowardly as this, or the Treasury Secretary of the US being so disdainful of the elected members of Congress and the people they represent as this? They would be ridiculed and disdained, rather than feted by Euromoney, who clearly did not do their homework into the thug known as Jim Flaherty.

Apparently this is the direction that Euromoney would like to see all Finance Ministers in the world head down. This is the type of evasive and cowardly conduct that Euromoney is asking other Finance Minister to emulate. If not, why the award?

Finance Commitee Chair: Mr. McCallum, you'll begin, six minutes.

Hon. John McCallum (Markham—Unionville, Lib.): Thank you, Mr. Chair.

I think we have good news and bad news today. The good news is that at least these hearings have demonstrated their value by forcing the Department of Finance to produce numbers instead of these blacked-out highly censored documents that we have had to date. So congratulations on that.

The bad news is that these numbers from finance have been all over the map. There have been four sets of numbers. These are hugely complex issues. We can't respond immediately when we're presented with numbers on the spur of the moment. So it'll be my proposition that after we have heard from the witnesses, and some of these experts will question finance. Finance says now “900 million”. Some of our witnesses say “zero”. This is an important subject. We will hear the witnesses and then we will propose to invite the minister back in the light of expert testimony to revisit his estimates after we have heard from the experts.

But I might just say, off the top of my head, looking at two charts, I can think of two good reasons why right away I'm skeptical. He puts a lot of emphasis on BCE and TELUS, and at the time he said that if BCE and TELUS had converted there would be $300 million of lost revenue. But since that time, BCE and TELUS have both revealed they will be paying essentially no corporate income tax. So as one of our experts will testify, in fact by not converting to income trust, BCE and TELUS will be paying less tax because they will be paying essentially no corporate tax over the coming years.

The second example, his other chart here, about the foreign energy trusts and the 15% withholding tax, if those companies were corporations they'd presumably be paying the average effective corporate tax rate in the energy sector, which is approximately 7%, and 7% is less than 15%.

So those are just two examples, which I won't elaborate on further, as to potential flaws. We have to hear the witnesses at this point. At that point, we will seek to call the minister back after we have had time to digest all of these numbers.

My question for the minister: Before your announcement, did you receive studies on the impact of your announcement on investors? If so, what did those studies tell you?

Hon. Jim Flaherty: As you know, your government put out a consultation paper in 2005 and there were a large number of responses to that.

I'm pleased, Mr. McCallum, that you have said, and I quote, “What we did was absolutely the right thing and we had started on this track to protect the tax base--”

Hon. John McCallum: Mr. Minister, my time is limited.

Hon. Jim Flaherty: “--to ensure tax fairness and to work for the productivity of the nation.” I am glad that you approve of the policy decision that I made.

Hon. John McCallum: Mr. Minister, as a humble member of Parliament, I only have five minutes, but it is my five minutes, so I would ask you to answer the question--

Hon. Jim Flaherty: I was going to answer your question.

Hon. John McCallum: --and my question has nothing to do with that out-of-context statement of mine. My question is a very simple one. Before you made your announcement--

Hon. Jim Flaherty: Was it the right policy or not? You said it was.

Hon. John McCallum: Mr. Minister, I am asking a very straightforward question. Before you made your announcement, did you receive studies on the impact on investors? For example, did you have any estimates or information or studies from your department as to the likely impact on the stock market in terms of the market value of income trusts? Did you have any studies or reports on that subject?

Hon. Jim Flaherty: Obviously, Mr. McCallum, as I said in my opening remarks, the reason why the income trust sector, particularly the energy trust sector, argues so vociferously for the maintenance of the status quo--

Hon. John McCallum: Mr. Minister, did you, or did you not have any such reports?

Hon. Jim Flaherty: The reason why the income--

An hon. member: Come on.

Mr. Mike Wallace: On a point of order--

Hon. Jim Flaherty: Are you going to let me answer, or do you just want to keep going? If you want to keep going, it's okay. I've made the important points I wanted to make, and if you don't want me to reply, I won't.

A Voice: You've had 30 minutes.

Hon. John McCallum: You have had 30 minutes. I simply want to know: Did you receive any reports from your department as to the likely impact on the market value of income trusts before your announcement?

A Voice: Did you know?

Hon. Jim Flaherty: Do you want me to answer?

Hon. John McCallum: Yes.

A Voice: Yes, sir.

Hon. Jim Flaherty: I'll answer the question if you give me a moment. I'd be happy to.

Hon. John McCallum: If it is an answer to the question--

Hon. Jim Flaherty: I should mention, Mr. McCallum, the little speech you gave. The $500 million figure I used today is the same figure I used on--

Hon. John McCallum: I know, but that is not the question. I take it the answer is no or else you would have said yes. Did you have any reports? Did you have any sense as to the loss to those hardworking Canadians who had invested in income trusts, taking the Prime Minister at his word? Did you have any sense whether the loss they would experience the day after your announcement would be $30 billion or $30 million or $30,000? Did you have any advance estimate or information from your department as to the likely impact on Canadians of that announcement of yours?

That is my question.

Hon. Jim Flaherty: Do you want me to answer?

Hon. John McCallum: I do.

Hon. Jim Flaherty: Will you let me answer?

Hon. John McCallum: If you answer that question--

Hon. Jim Flaherty: No, you want me to answer what you want me to say.

An hon. member: Exactly. That's why the question is--

Hon. Jim Flaherty: How about if I say what I want to say in response to your question? Will you let me answer or not?

Hon. John McCallum: I'd like you to answer my question. Please proceed.

Hon. Jim Flaherty: Good. Thank you.

The estimate of the tax loss was $500 million on October 31--

Hon. John McCallum: That's not the question.

Hon. Jim Flaherty: --and it is today the same--

The Chair: Mr. McCallum, your time is up, but I'll give a little bit of time for the minister to respond if he'd like to just have 20 seconds.

Hon. Jim Flaherty: The answer, of course, Mr. McCallum, just as your government knew if it had acted that there would have been a negative impact on the market, as you knew in 2005 and you didn't have the courage to act--you had courage to leak but not to act--we knew that there would be an impact on the markets, to which I did not look forward. That was a sad effect on people in Canada, on a significant number of investors. I met with one yesterday. It gives me no happiness to see that kind of impact on people, but we have to act in the interests of the whole country, of all Canadians, and do the right thing, which we did and your government didn't.

Editor's Note: So where's the proof of tax leakage Mr. Flaherty? Are you too much of a coward to share the most basic facts of the situation with the persons you claim to be so sympathetic towards? Your actions are only deserving of the EuroCoward award.