Tuesday, October 13, 2009

Does Euromoney even understand the term “tax arbitrage”?

These people at Euromoney are demonstrating that they know as little about Finance as the lay people who populate Ottawa who call themselves “Politicians” and/or “Finance Minister”.

Either Euromoney has no clue about high finance or they delight in seeing investors lose $35 billion by being on the wrong side of a government created tax arbitrage. The most recent example being the Canada Pension Plan’s (CPP) purchase of Livingston Income Fund.....tax leakage I presume?

Euromoney’s Finance Minister of the Year, the arrogant and deceitful Jim Flaherty, with the help of the underhanded Mark Carney, put forward the false and manufactured argument that income trusts cause tax leakage by conveniently and with no justification leaving out the taxes paid by deferred savings accounts (ie RRSPs and pension funds) from their analysis. This slight of hand falsely created tax leakage, and formed the false justification for taxing these deferred savings accounts twice, including Flaherty’s new 31.5% rapacious income trust tax.

However there was a twist to all of this, that was deliberately designed to screw the public investors and the average Canadians’ RRSP and favour the pension funds who manage the pensions of only 25% of Canadians so privileged, including the very buraeucratts like Carney who concocted this tax arbitrage scheme in the first place, That is called self dealing.

Flaherty and Carney created a tax arbitrage that favours pensions funds at the expense of RRSPs and average Canadians by allowing Pension Funds to completely AVOID and EVADE his 31.5% income trust tax by SIMPLY taking these public trusts private.

That is exactly what CPP and the other pension funds are doing in spades, the most recent example announced Friday with CPP taking the public income trust Livingston, private. CPP is exploiting this tax arbitrage that was artificially created by Euomoney’s Man of the Year to buy these undervalued trusts from their public owners and reap the rewards for themselves. For the benefit of Euromoney this is called Tax Arbitarge. It is also called Fraudulent Conveyance and exploitation of the marketplace.

This explains why the highly politicized CPP applauded Flaherty’s income trust tax at the outset, even though it cost them over $100 million in lost asset value, since they knew they would make it up at the other end, plus they were instructed to praise the move by Flaherty, demonstrating that the CPP and their managers, the CPPIB are not independent of government control and influence.

Therefore for anyone to say that the loss of $35 billion by public income trust investors at the hand of Jim Flaherty was simply money that evaporated into thin air is wrong, as this mother lode of $35 billion is ACTUALLY being transferred deliberately and Flaherty’s express knowledge and intent into other hands, namely Pension Funds and foreign private equity in the very kind of highway robbery deal that was announced on Friday involving Livingston CPP and a US private equity vulture/locust.

Apart from deliberately “juicing” certain buyers at the expense of others what possible public policy benefit does Flaherty’s inane policy serve? It does nothing to address Flaherty’s much ballyhooed tax leakage, a condition that never existed in the first place. However if you adopt Flaherty’s absurd logic about the non collection of taxes from deferred savings accounts, it only makes things worse, since instead of income trusts being held 38% by deferred savings accounts and and the balance by taxables, the ultimate manifestation of Flaherty’s absurd policy will see these income trust owned 100% by deffered savings accounts (exclusively the pension funds” and non-taxables.

Can it get any dumber than that?

And on that point I have some earth shattering news for the troglodytes at Euromoney. Turning 38% of a bad thing into 100% of a bad thing is not deserving of praise, since the number 100 is larger than 38% assuming that has any meaning to the Editorial Board at Euromoney?

1 comment:

Dr Mike said...

Flaherty yapped on about tax leakage & how this was going to rip the food right out of the mouths of everyone in Canada (makes you wonder why he promised not to tax them if that was the case---as an award winner he would have known that either there was or there wasn`t leakage sometime during the time frame of the promise)

We have had experts tell us that the gov`t figures do not add up & that there is no tax leakage whatsoever.

What we need to clear the air on this whole thing is to have the gov`ts figures checked by someone both parties would agree to , like say The Auditor General , or the budget officer Kevin Page .

Unfortunately for us , neither will comment on Gov`t policy.

Once again , it appears that our loss is his gain.

Dr Mike Popovich