Monday, November 30, 2009

Hill Times article: How to (try) to run a cover-up

How to (try) to run a cover-up: the case of the Harper government and the prisoners in Afghanistan

Has no one told the Tories that almost all cover-up tactics are supposed to be conducted in secret? A cover-up conducted in public is a farce—produced at taxpayer expense.

Published November 30, 2009
The Hill Times

"Distant events spiral out of control, secrecy silences truth and the messenger is humiliated, then shot." (James Travers, The Toronto Star, Nov. 21, 2009).
The purpose of this piece is to outline the set of tactics used by the Harper government to try to cover up serious errors (and possibly worse) relating to the turnover of prisoners captured by Canadian troops in Afghanistan to local authorities who are believed to have routinely tortured prisoners. The cover-up has come to light largely as the result of testimony in October and November 2009 by diplomat Richard Colvin who spent 17 months in Afghanistan and sent many messages up the line to many senior persons starting in 2006.

The tactics are listed in roughly chronological order:

Bury Bad News

"In Jan. 2007, the government also tried to bury a human rights report on Afghanistan—an annual requirement of all Canadian embassies—that included a section on the abuse of Afghan detainees. It was later released, but still with all references to prisoner abuse blacked out," (Greg Weston, Ottawa Sun, Nov. 22, 2009).

Write Your Own Truth

A "former [NATO] official, speaking on condition his name not be used, told The Toronto Star that Harper's office in Ottawa 'scripted and fed' the precise wording NATO officials in Kabul [ in 2007] used to repudiate allegations of abuse 'at a time when it was privately and generally acknowledged in our office that the chances of good treatment at the hands of Afghan security forces were almost zero,' " (Mitch Potter, The Toronto Star, Nov. 22, 2009).

Use the Courts to Try to Derail/Contain Public Hearings

The Harper government went to court to try to quash or severely limit an inquiry by a quasi- independent body, the Military Police Complaints Commission [MPCC]. "A judge [ of the Federal Court] ruled early last week that the probe can examine the conduct of military police but that it cannot delve into broader issues of public policy....The inquiry has been delayed by a series of court challenges, including a government bid to block the probe [launched after a complaint was filed by Amnesty International and the British Columbia Civil Liberties Association] on grounds that it could unfairly damage the reputations of Canadian Forces members, inadvertently divulge military secrets, and turn out to be a waste of money during tight economic times," (Janice Tibbetts, Canwest News Service, Oct. 1, 2009).

Refuse to Hand Over Documents and Stonewall

Military Police Complaints Commission chairman "Peter Tinsley shut down the hearings indefinitely [on Oct. 9, 2009], saying he had no choice because the government has refused to hand over any documents to help implicated military police mount their defence....The commission, the political opposition and human rights advocates have persistently accused the government of trying to stonewall the commission, after losing a court challenge to stop the public proceedings. Tinsley said the government has not produced a single new document since the commission decided last year that its probe would be public.... Alain Prefontaine, a Justice Department lawyer, blamed the commission for casting its net too wide in its quest for documents, given the relatively narrow mandate of the probe to investigate the actions of military police," (Janice Tibbetts, Canwest News Service, Oct.14, 2009)

Invoke National Security

"The Justice Department's argument is [that] the testimony of the 22 public servants [to the MPCC] is not relevant and, even if it was, they wouldn't be able to publicly testify because it could breach national security. In their motion to quash the subpoenas, Justice lawyers have invoked a section of the Canada Evidence Act that protects national security," (Janice Tibbetts, Canwest News Service, Oct.1, 2009)

Deny Getting Any of the Many Warning Messages

Gen. Walter Natynczyk, chief of defence staff, said "he's working to get to the bottom of what happened to reports from a senior Canadian diplomat in Afghanistan[ Richard Colvin]. [He said] he did not yet know where the [many] reports landed back in Ottawa, who read them, and what was done with the information."

In mid-October 2009, Prime Minister Stephen Harper "told reporters in Toronto he didn't see the reports from diplomat Richard Colvin 'at the time,' which said, among other things, he had seen first-hand evidence of abuse and torture while visiting Afghan detainees in jail in June 2007. Earlier this week, Defence Minister Peter MacKay and his predecessor, Gordon O'Connor, said they'd never heard a word about Colvin's reports," (Norma Greenaway, Canwest News Service, Oct. 16, 2009).
Note that in his affidavit unsealed on Oct.9, 2009, Colvin said he "wrote and widely distributed his formal and informal reports to top bureaucrats at the departments of foreign affairs and national defence, as well as to the senior military chain of command."(Ibid)

Retired defence chief Rick Hillier said Thursday "he cannot recall reading a 2006 Foreign Affairs report that first warned of 'serious, imminent and alarming' risks associated with transferring battlefield combatants to Afghan custody.... Hillier said his main focus in 2006 was on Canada's rising military death rate as the Taliban insurgency reared its head in earnest and began inflicting the first major casualties on the Canadian Forces,"(Mike Blanchfield, Canwest News, Oct. 22, 2009)

"In all 76 reports e-mailed to the most powerful people in the Canadian government. Today none of them can remember seeing or reading any of the e-mails. Memory loss is such a sad thing," (Richard Cleroux, The Westmount Examiner, Nov. 22, 2009).
The position of various persons to whom Colvin communicated his memos is summarized a CBC News report, Nov. 20, 2009.

Threaten Witnesses

Public servant Richard Colvin "has been told to shut up on this file or risk being charged under the Canada Evidence Act," (Don Martin, National Post, Nov. 20, 2009).
"On July 28[2009], the federal Justice Department wrote to 28 high-ranking government and military officials with knowledge of the Afghan detainee file, warning that their testimony could damage their reputations and potentially put their colleagues' careers at risk. The letter 'strongly' recommended they all retain the Justice Department as their legal counsel," (Greg Weston, Ottawa Sun, Nov. 24, 2009).

Stop the Emails; Block the Paper Record

Richard Colvin, whose emails are at the centre of the cover-up, was ordered to stop putting certain kinds of information into writing. "While serving in Kandahar, [Colvin] was told his insights were too sensitive to be put in writing, he says. His emails have been declared off limits on national security grounds," (Don Martin, National Post, Nov. 20, 2009).

Columnist Chantal Hébert (The Toronto Star, Nov. 20, 2009) notes that "according to Colvin, the clampdown order came from the very top, from officials who reported directly to Prime Minister Stephen Harper or his ministers, often on a daily basis."
"There was a phone message from the DFAIT assistant deputy minister suggesting that we should not put things on paper but instead, use the telephone," (quoted in The Ottawa Citizen, editorial, Nov. 21, 2009).

There is No Proof

The Minister of Defence, Lawrence Cannon, said " 'There were a lot of allegations, but there is no proof to what Mr. Colvin had to say,' in testimony to a parliamentary committee ...during a telephone interview," (Matthew Fisher, Canwest News Service, November 19, 2009).

Smear the Messenger

The Conservatives' tactic of choice has been to "smear" Richard Colvin. "The attack script written this week for Conservative MPs by the Prime Minister's Office and party research office impugn Mr. Colvin for (a) wanting to assist the Taliban, (b) undermining the morale of the Armed Forces, and (c) making recruitment difficult," (Jeffrey Simpson, The Globe and Mail, Nov. 21, 2009.)

The Harper government devoted the day [of Colvin's testimony] to a public-relations counteroffensive against Mr. Colvin through phone calls and e-mails to reporters, as well as Mr. MacKay's attacks. It painted the career diplomat's testimony as groundless and "ridiculous" and suggested his reports of torture ultimately stem from Taliban propaganda," (Steve Chase et. al., The Globe and Mail, Nov. 20, 2009).

"Defence Minister Peter MacKay called [Colvin's ] testimony [before a Commons Committee] 'not credible.' 'What we're talking about here is not only hearsay, we're talking about basing much of his evidence on what the Taliban have been specifically instructed to lie about if captured," (Jennifer Ditchburn, The Canadian Press, Nov.19, 2009). "MacKay claimed that his comment were "not attacking the individual."
Chantal Hebert (The Toronto Star, Nov. 20, 2009) noted that MacKay "did not say the government had not been apprised of Colvin's reports."

"The awkward fact for the Conservatives, however, is that Mr. Colvin is trusted by the Canadian government on sensitive matters. He is currently working for Ottawa as a senior intelligence officer at Canada's embassy in Washington," (Steve Chase et. al., The Globe and Mail, Nov. 20, 2009). (For more detail, see, Tonda MacCharles, The Toronto Star, Nov 21 2009; note that the title wrongly implies that Colvin is a whistleblower. See The Ottawa Citizen editorial, Nov. 24, 2009)

"Conservative MPs at a special House of Commons committee called [Colvin] a Taliban 'dupe' after he provided an account this week of how government officials ignored or played down his reports of the torture of Afghan detainees," (Ditchburn, The Canadian Press, Nov. 19, 2009).

Rick Hillier [former head of Canadian Forces] "derisively compared the political uproar that surrounded Mr. Colvin's Parliamentary testimony to people 'howling at the moon' and said nobody ever raised torture concerns with him during the 2006-2007 period in question," (Steve Chase et. al., The Globe and Mail, Nov. 20, 2009).
Pollster Nik Nanos said that going on the offensive from the start—as the Tories have done—can be remarkably effective. "It muddies the narrative of anyone trying to criticize the government, [the] Tories know the power of first impressions. [A sort of negative framing ]. It sends a signal to anyone else who's thinking of doing that, that if you're thinking of taking this government on, be prepared for a full-on offensive. It's a clear media strategy and an effective deterrent for future problems." (Jennifer Ditchburn, The Canadian Press, Nov.19, 2009). "The instinct to attack is part of a larger Conservative Party strategy that is consumed with controlling all messages as tightly as possible," (Jeffrey Simpson, The Globe and Mail, Nov. 24, 2009).

No Public Inquiry

"The Tories have already dismissed calls for a far more thorough public inquiry into detainees" (Steve Chase and Campbell Clark, The Globe and Mail, Nov. 24, 2009). "So far, the deny, delay, disparage strategy has worked. There seems little chance of any inquiry until after the government pulls Canadian combat troops out of the fight about 18 months from now," (Paul Koring, The Globe and Mail, Nov. 24, 2009).


The newspapers of late have been filled with overwhelming evidence of the Harper government trying to conduct a cover-up with great energy and no scruples. Has no one told the Tories that almost all cover-up tactics are supposed to be conducted in secret. A cover-up conducted in public is a farce—produced at taxpayer expense.

Canada's Defense(less) Minister assumes fetal position

UPDATE: Scott Taylor, a veteran and experienced investigative reporter on military matters with strong ties to the rank and file, rips into Peter MacKay:

Initially, MacKay charged that by retelling "Taliban lies" Colvin has essentially been fuelling enemies’ propaganda machine. When that tactic failed to score a hit, MacKay wrapped himself in the flag, curled up in the fetal position and pleaded for everyone to "stop attacking his soldiers." This is an emotionally charged issue for many of those who are justly proud of the service of our Canadian Forces, and MacKay claiming that Colvin is somehow attacking our military will immediately invoke their ire.

Although the manoeuvre was dramatically played out by MacKay, the fact is that no one engaged in this debate has alleged wrongdoing on the part of any of our troops.

Stephen Harper: REMF

The title of this article below is actually bang-on when it states PM says he stands behind troops.

Indeed Harper DOES stand behind the troops. Operative word “behind”. Harper is cowering behind the troops and using them as his convenient shield and fabricated excuse to displace the furor that is being directed against him and not the military men and women at large.

Harper is exploiting the military men and women and the high regard that Canadians have for THEIR service as HIS flak jacket. This is the military equivalent of throwing your fellow soldier on the incoming grenade in order to save one's own sorry ass.

As with all things in the military, the front line US Military in Vietnam had a term for this kind of cowering conduct being displayed by Stephen in, Rear Echelon M.....F.......

That term captures Harper perfectly for the sniveling cowardly REMF that we have all learned him to be....starting with his income trust promise made to seniors that was followed up by his tax leakage lie that destroyed $35 billion of their hard earned life savings and left Canada vulnerable to wave of foreign takeovers that caused billions in real tax leakage, where none existed previously

Stephen Harper: Lie. Conceal. Fabricate. REMF extraordinaire.

PM says he stands behind troops

30th November 2009

PORT-OF-SPAIN — Prime Minister Stephen Harper assured Canada’s military Sunday that he and most Canadians stand behind them, even if his political opposition does not.

Before leaving the Commonwealth summit in Trinidad and Tobago, Harper took another backhanded swipe at MPs and others who have questioned the handling of prisoners captured during the war in Afghanistan.

“Let me just say this,” Harper said during a photo opportunity, “living as we do, in a time when some in the political arena do not hesitate before throwing the most serious of allegations at our men and women in uniform based on the most flimsy of evidence, remember that Canadians from coast to coast to coast are proud of you and stand behind you, and I am proud of you, and I stand beside you.”

That sparked another broadside from Liberal Leader Michael Ignatieff who said: “Stephen Harper’s comments are beneath the office of Canada’s prime minister.”

“To use an audience of active Canadian service men and women serving abroad as a prop for political attacks is bad enough. To try to hide behind the brave men and women in uniform for his own government’s handling of the Afghan detainee scandal is even worse.”

The war of words erupted over questions about Canada’s prisoner-exchange practices in Afghanistan and committee testimony from intelligence specialist Richard Colvin.

Colvin told the Commons special committee on Afghanistan on Nov. 18 that as Canada’s No. 2 diplomat in Kandahar he repeatedly warned that prisoners turned over to Afghan authorities by Canadian troops were probably being tortured.

Harper and his Conservative caucus have continually cast Colvin and others who have questioned prisoner protocols and the practices in Afghan prisons as Taliban dupes and unpatriotic critics of Canada’s military.

The Tories have pointed fingers at their political opponents and played the patriotism card ever since opposition MPs and others began questioning prisoner transfer policies two years ago.

“I can understand the passion that the Leader of the Opposition and members of his party feel for the Taliban prisoners,” Harper told the Commons on March 21, 2007.

“I just wish occasionally they would show the same passion for Canadian soldiers.”

Yet Defence Minister Peter MacKay acknowledged Friday that his government knew of the problems and began to act shortly after taking office in January 2006.

A 2005 prisoner transfer agreement with the Afghan government was eventually renegotiated in May 2007 under intense public scrutiny after explosive media revelations about torture in Afghan prisons.

The international community has also acknowledged that torture is widely used in Afghan prisons.

An Afghan agency that was once entrusted to monitor Canadian-captured insurgents in Kandahar said last week it has documented nearly 400 cases of torture across the war-ravaged country.

The Afghanistan Independent Human Rights Commission said in its latest report it uncovered 47 cases of abuse in Kandahar, where Canadian troops have been based since 2005.

“Torture and other cruel, inhuman or degrading treatment are common in the majority of law enforcement institutions, and at least 98.5 per cent of interviewed victims have been tortured,” said the commission’s April 2009 study.

The independent study, which tracked abuse claims between 2001 and early 2008, shows the vast majority of them — 243 — were levelled in 2006 and 2007, when Colvin was in Afghanistan and warning the federal government about torture.

Sunday, November 29, 2009

Prime Minister of Conflation, Stephen Harper

Breaking news:

Harper takes shot at opposition over torture allegations

Joanna Smith Ottawa Bureau
Toronto Star
Published 28 minutes ago

PORT OF SPAIN–Prime Minister Stephen Harper took a partisan shot at his opposition critics while touring the HMCS Quebec in Trinidad-Tobago Sunday.

"Let me just say this: living as we do, in a time when some in the political arena do not hesitate before throwing the most serious of allegations at our men and women in uniform, based on the most flimsy of evidence, remember that Canadians from coast to coast to coast are proud of you and stand behind you, and I am proud of you, and I stand beside you."

Hey Stephen, no one is accusing Canadian men and women serving in the Military (at this point) of committing any wrongdoing in the matter of potential torture of Afghan detainees. It is you and your government that is being held to account for possible wrong doing.

Stop exploiting these Canadian men and women who serve in Canada's military in a desperate attempt to shield yourself from public scrutiny, as you are deviously conflating issues to buy absolution for your obvious wrongdoing. Made obvious by the lengths to which you are going to cover this issue up, including hiding behind these very men and women who serve it the military, whose goodwill in the minds of Canadians, you are attempting to engender and exploit.

Conflation: Conflation occurs when concepts, sharing some characteristics of one another, become confused until there seems to be only a single identity — the differences appear to become lost. [1] In logic, the practice of treating two distinct concepts as if they were one does often produce error or misunderstanding — but not always — as a fusion of distinct subjects tends to obscure analysis of relationships which are emphasized by contrasts.[2]

HST and Harper's billion dollar Bay Street subsidy

This is a follow-up to my earlier posting entitled Why are underwriting fees exempt from GST, hence HST?

Not taxing the service known as underwriting fees is costing both levels of government approximately $308 million a year, or billions over the course of a given budget cycle.

Below are the facts that support that claim.

Why does this inequity exist and how can it be justified in policy terms?

As a former Investment Banker myself, I have always maintained that Investment Bankers are merely glorified real estate agents. Why are real estate agents’ fees paid by home vendors subject to GST and now HST, while investment banking fees paid by stock issuers are not?

What is the logic? Where is the fairness? Why are mutual fund fees paid by investors subject to GST and now HST and yet investment banking fees get off scott- free?

For the year ended October 31, 2009, Canadian Bank owned dealers ( including RBC Capital and TD Bank) underwrote US$47.3-billion in new equity issues. At an average underwriting commission of 4.5%, this translates into CDN$ 2.4 billion in underwriting fees on which ZERO GST was collected. Why is this highly lucrative “service” going untaxed? Why is the government foregoing $118 million in GST taxes?

Is it because the Harper and McGuinty governments think that every investment banker should have a Porsche in his or her garage?

Why is this highly lucrative and remunerative “service” not going to be subject to HST? Why is the government foregoing $308 million in HST taxes? Why is that? Meanwhile investors are being taxed 13% GST on their mutual fund fees.

Why are the corporations as USERS of capital along with their middle-men, the investment bankers, not being taxed, whereas the investors as the PROVIDERS of capital ARE being taxed?

Maybe the Globe could get Christie Blatchford to write a piece about tax leakage?

All Canadians owe a debt of gratitude to Christie Blatchford, of the Globe and Mail as she took the time from her busy schedule to read all of Richard Colvin’s emails (that have been forbidden to our paid elected Members of Parliament) and was able to conclude (despite the selective natiue of the emails that she received and the heavily redacted nature of these emails, that, low and behold, the Harper government is right and Richard Colvin is wrong? Evidently there is no need for a public inquiry according to Christie Blatchford and the Globe and Mail. To which I posted the following comment. This SO REMINDS me of the Globe’s grossly biased and nonsensical repetition of the Harper government’s lies about tax leakage and confirms the Globe and Mail as being Canada’s answer to Pravda:

Brent Fullard wrote:
Posted 2009/11/28
at 12:37 PM ET

This article by Christie Baltchford is spurious nonsense in the extreme and a blatant attempt to manipulate the public record.

Whatever Christie Blatchford has in her possession is what her source wanted her to have...namely a subset of all of the available facts.

What nonsense! How can Christie Blatchford and the Globe be so easily manipulated and be so naive as to "run" with this story?

This Afghan detainee issue can only be properly dealt with if ALL THE FACTS are on the table, and not that subset of facts that had gone through somebody's "filter".

I have the same concern about the "filter" that Harper and MacKay keep citing when they say they will release the documents, and refer to the "legally permissible" documents.

Just what does that even mean and just who exactly will be making that determination?

Enough is enough. Let's start with all the facts and begin at the beginning and not begin at the end, namely an end that is being forced upon us through manipulation and which is being defined by certain people's preferred political scenario, rather than by the facts.

89 Agree
33 Disagree

Why are underwriting fees exempt from GST, hence HST?

Barrick Gold recently issued $4 billion of stock by way of a bought deal that saw Bay Street earn underwriting fees in excess of $140 million. How much GST do you suppose these underwriters/Barrick paid on that commission? Correct, Zero. Is that because underwriting fees are considered neither a good nor a service? Hardly. Why is it that I as an investor have to pay GST on the fees that I pay to Bay Street when it comes to managing my mutual fund investments and yet Bay Street itself pays not a cent on what is the largest and most lucrative side of its business, namely underwriting fees that are measured in billions of dollars a year? Why are investors taxed and issuers (corporations) are not, when it comes to the services of Bay Street?

Why the big tax holiday for these high rollers like Barrick Gold? Being exempt from GST also means that these underwriting fees are exempt from HST. I wished I could say the same about my mutual fund investments being exempt from HST, but I can not.

Why the enormous asymmetry between the “services” provided by Bay Street? Why do investors get hit with 5% GST and now the whopping 13% HST, when corporations like Barrick Gold get away paying ZERO for the services that are rendered to them by Bay Street?

There is nothing fair or equitable about this. What is good for the goose, should be good for the gander. Except in this case, the gander was actually employed as Canada’s Minster of Finance at the time that GST was introduced. That’s right. Michael Wilson was Canada’s Minister of Finance at the time that GST was ushered in. Michael Wilson came to that job with the qualifications that he worked in investment banking at Dominion Securities (now RBC Capital Markets) and was easily swayed by his former industry colleagues and corporate clientele that investment banking underwriting fees should be exempt from GST. How fortunate for them, and highly lucrative as well, especially now that the GST is being “harmonized” with Ontario and BC’s provincial tax rates and this 5% dodge of GST is now turning into a 13% dodge of HST.

This makes no sense and probably explains why Canada’s banks are being so meek and placid about the 13% HST tax being imposed on the savings of their investing clients, because they are too concerned about their issuing clients and losing their unfair tax treatment that sees billions in underwriting fees going FULLY UNTAXED?

Which leads to my conclusion...... Why are underwriting fees exempt from GST, hence HST? After all, we have Bay Street people like Ed Clark. CEO of TD Bank to thank for the introduction of HST. So why does he not want to pay HST, if it is such a good thing, on the hundreds of millions of dollars that TD Bank earns annually from underwriting fees? Seems hypocritical to me, that he wouldn’t want to pay the very tax that he so intensely lobbied for, namely HST?

What is the answer? What is the rationale? Why are mutual fund fees taxes at 13% HST and underwriting fees are taxed at zero, Why are investors being taxed, whereas corporations who draw upon those very investors are not?

Who wants to take a crack at answering that question? Harper? Flaherty” McGuinty? Duncan?.....maybe Ed Clark?

For the year ended October 31, 2009, Canadian Bank owned dealers ( including RBC Capital and TD Bank) underwrote US$47.3-billion in new equity issues. At an average underwriting commission of 4.5%, this translates into CDN$ 2.4 billion in underwriting fees on which ZERO GST was collected. Why is this highly lucrative “service” going untaxed? Why is the government foregoing $118 million in GST taxes?

Is it because the Harper and McGuinty governments think that every investment banker should have a Porsche in his or her garage?

Why is this highly lucrative and remunerative “service” not going to be subject to HST? Why is the government foregoing $417 million in HST taxes? Why is that? Meanwhile investors are being taxed 13% GST on their mutual fund fees.

Why are the corporations as USERS of capital along with their middle-men, the investment bankers, not being taxed, whereas the investors as the PROVIDERS of capital ARE being taxed?

HST: Yet another Harper tax that shatters Canadians' retirement nest eggs

Kow-towing to the whims of larger corporations:

Harper has a gold plated government pension. 75% of Canadians have no pension. Maybe that explains why Harper is so oblivious to the issue of saving for retirement and the enormous damage so willfully and brazenly inflicted by him via his income trust tax ($35 billion loss in Canadians' retirement savings) and now Harper's HST.

Both Harper's income trust tax and his HST have one sole purpose.....kowtow to the whims of large corporations (read: CCCE) and let Canadian taxpayers and those saving for retirement be damned.

HST will hurt investors and their nest eggs

Tom Bradley explains how Ontario and B.C.'s new HST isn't helpful for investors

Tom Bradley
Globe and Mail
Nov. 27, 2009

Note to reader: I have an axe to grind. I own and operate a low-cost mutual fund company – and I'm hopping mad about the HST.

The impact of Ontario and British Columbia's harmonized sales tax will be negative for investors. No matter who you want to blame – the government or the investment industry – there is no getting around the fact that resulting higher all-in fees, compounded over a long investment horizon, add up to real dollars. For a long-term investor, it will be the difference between an Audi and a Taurus, or golfing in Florida versus watching the Battle of the Blades on CBC.

There are compelling arguments and precedent for not further taxing Canadian's retirement capital, but unfortunately they've fallen on deaf ears because of bad timing and the wrong messenger.

The timing relates to budget deficits. From what the insiders have told me, bureaucrats have been sympathetic to the investment issues around HST, but the response from a higher authority has been clear and consistent: “This is going to happen because we need the money. Focus on implementation and we'll talk about the inequities later.” Recessions are a bad time for rational arguments and good policy.

As for the messenger, Joanne De Laurentiis and her team at the Investment Funds Institute of Canada (IFIC) have done a good job of laying out the arguments why the HST is bad for Canadian investors. But IFIC is an organization whose membership is made up of too many firms that charge world-leading fees, and have been reluctant to share the benefits of their scale with clients. IFIC's association with Bay Street's fat cats has hurt its credibility when arguing against HST.

The banks, which represent tens of millions of investors, have been surprisingly mute on the issue. They have huge mutual fund operations that attract HST, but most of their other investment and savings products are tax exempt. Their silence may be the result of their conflicted position, but it may also be because the impact of the HST is hard to figure out. As is often the case with tax policy, the legislation will significantly change the wealth management landscape, and not for the better.

Canada's regulatory patchwork, cut up by geography, product type and ancient history, has already inadvertently shaped how investment products are designed and sold. Structured products, for example, fall between the regulatory cracks and have been given freer rein to make marketing claims and obscure their fees and risks. A whole industry has been built around this regulatory arbitrage (playing one off against the other).

The HST will distort the industry more broadly, however, because some financial services are HST-able, while others are not (Note: The tax experts I consulted with are cringing at the simplification). The relative competitiveness of every product on the shelf will be affected, some good, some bad. The inequity lies in situations where there are products that are indistinguishable as to their objectives, risks and underlying investments that sit on opposite sides of the HST line.

Let me give you the early betting line on how it will play out, for both providers and clients.

Short-term vehicles like GICs and high-interest savings accounts will continue to be tax exempt. Money market and short-term bond funds on the other hand are taxable. Their attractiveness relative to banking products has always ebbed and flowed, depending on interest rates and the banks' funding requirements. But the tax will tilt the balance toward the deposit-taking institutions. Because investors have options when it comes to their savings needs, they will not be hurt in this case.

Facilitating a transaction is exempt from tax, so any form of service that charges a commission, as opposed to a management fee, will fare better. Hiring an adviser to select and buy individual securities won't incur tax, but getting professional help in another form – by buying a mutual fund – will.

The unfortunate consequence of different tax treatment for commissions versus fees is the likely reversal of a trend that has seen clients shifting to fee-based accounts. These accounts, which charge fees based on assets as opposed to transaction activity, better align the interests of advisers and clients. To be clear, the adviser is being paid for advice in both cases, whether it be a taxable fee or tax-exempt commission.

Structured products are not subject to HST. Compared to mutual and pooled funds, they will become more competitive. Again, for the client, any shift in this direction will be a step backwards. Structured “anything” is more expensive, complex and poorly understood. Firms selling exchange-traded funds (ETFs) have argued against HST on behalf of their clients, but from a competitive standpoint, they are huge winners in the HST realignment. Taxes on ETFs will go up, but due to their low fees, it won't be much. The fee gap between ETFs and conventional funds will widen.

I'm mad because this additional tax on Canadians' retirement goes against one of our country's, and dare I say our government's, highest priorities – getting Canadians to invest more for retirement. It hammers individuals who are investing on their own, and puts them at a bigger disadvantage compared with members of company pension plans. And its urgent and sloppy implementation negates years of efforts by the industry and regulators to improve how financial services are delivered.

Saturday, November 28, 2009

HST: The zenith of Flaherty’s hypocrisy

(Reprint from May 1, 2009)

As the mastermind behind Ontario’s 13% HST consumer Tax on Everything, Jim Flaherty has achieved the zenith of his intellectually dishonesty and laid bare who his real constituency is, namely corporations and not the people of Whitby-Oshawa. The HST tax that all Ontario consumers will face, is the ultimate manifestation of Flaherty’s bizarre campaign of year ago in which he railed Dalton McGuinty that Ontario was the last place in Canada to invest. This destructive childish rampage was designed to force the Ontario Liberal Premier to lower the tax rate for Ontario corporations and find those revenues elsewhere or to imperil essential services such as Ontario’s social security system.

Flaherty’s first attempt at brow beating Ontario to march to his drummer failed. Having delivered major cuts to corporate taxes at the federal level, amount to some 24% reduction, Flaherty wanted to do likewise for them at the Ontario Provincial level. This ultimately took the form of the HST in which some $4 billion in annual taxes will now be borne by Ontario consumers in order to create a like amount of windfall profits for Ontario corporations. The “incremental” economics of this policy are not pretty, as every purchase of a good or service will be met with the psychological hurdle of being faced with a 13% surcharge. This will only serve to magnify dramatically. Ontario’s already enormous underground economy, causing not only GST and PST to be evaded, but income taxes as well.

The hypocrisy of it all, becomes abundantly obvious when you take a moment to remind yourself how it was that Flaherty “sold” his highly destructive income trust tax. This entire policy was premised on the notion that income trusts cause tax leakage. Tax leakage is a completely false argument and is a contrived concept that attempts to argue that a given business formed as an income trust will result in less tax collection by Ottawa and the provinces than if that same business were formed as a corporation.

This is simply not true. Perhaps next time you are speaking with Jim, you should ask him for his in numbers and methodology since his argument has been disproved by HLB, BMO, RBC and PwC. Meanwhile Deloitte confirms that the takeovers of trusts now causing tax leakage, where none existed previously and these tax losses will continue to escalate as more takeovers of trusts occur, such as the takeover of Eveready by US based Clean Harbors Inc.

Flaherty’s hypocrisy on HST vis-à-vis his income trust tax occurs when you realize how it was “sold”. This canard known as tax leakage was presented to Canadians as being a situation in which tax revenues were being lost to the overall system, from the business side of the equation with the result that more tax revenues would have to be collected from taxpayers at large. This is simply not the case, unless of course Flaherty would like to PROVE it. Meanwhile this shifting of tax burden from corporations to the average taxpayer at large is EXACTLY what’s happening with the HST. That fact is self evident and can not be denied. The HST tax and the income trust tax were both designed to conger HUGE financial advantage to corporations in the way of windfall gains. The HST rewards corporations with $4 billion in additional profits in exchange for doing nothing and the income trust tax is simply designed to kill the corporations’ competition.

Anyone who buys into Flaherty’s inherently false rhetoric about income trusts, since tax leakage is a fraud, will have to, BY DEFINITION, hate the HST. This would include Dalton McGuinty, whose Finance Minister at the time, Greg Sorbara, wrote a letter in support of Flaherty’s income trust tax, that cojurred up the false notion of tax leakage when he wrote saying: “We believe that these changes will protect federal and provincial revenue from significant tax leakage.” Meanwhile tax leakage is only a supposition and not an empirically proven concept.

Nevertheless, that is how the income trust tax was sold. Therefore if you bought the bogus argument about tax leakage (as the McGuinty government did) and you don’t like income trusts, then you have to not like the HST, by definition, since the HST will also do the very thing that was alleged by Jim Flaherty in his Ways and Means motion to double tax investments made by RRSPs and kill income trusts, namely:

* ensuring that taxes are not unfairly shifted onto the shoulders of Canadian taxpayers, especially Canadian families.. (whereas the HST WILL unfairly shift a huge new tax burden from corporations on to the shoulders of Ontarians and especially Ontarian families!)

* strengthening Canada's social security system for pensioners and seniors....(whereas pensioners and seniors under the HST are now faced with a big new tax burden and/or the social security system is weakened since all this tax money is going into the corporations' pockets!)

And to the extent that the tax rate for corporations was lowered by 24% at the federal level and will be reduced to 10% at the Ontario provincial level, where 40% of trusts and 40% of trust investors reside, and given that there has not been a commensurate decrease in the 31.5% income trust tax, then this measure will also not have been met:

* levelling the playing field between trusts and partnerships and corporations,

One thing is however fro certain. Any constituent of Whitby-Oshawa who thinks that either Jim Flaherty has been empowered by their vote to act in the best interests of the residents of Whitby-Oshawa needs to do a reality check, as their vote has merely gone to Jim Flaherty in order to empowered him to do the right thing by his REAL constituency, namely corporations big and small, and all wannabe Jim’s friends on Bay Street. Jim Flaherty: corporate pawn and Whitby-Oshawa sell out.

Could it be any clearer or more hypocritical? Perhaps the name by which HST should now be known is the Hypocritical Sales Tax.

Anyone who said they like the income trust tax and who says they like the HST is a hypocrite or a complete argument in terms. At least Christine Elliott is being consistent, since she presumably supports husband Jim's income trust tax, but is decidedly against his hypocritical tax on everything, the HST. Hypocritical Sales Tax. Let's hope they are able to live harmoniously ever after.

Thursday, November 26, 2009

HST will create 1,250 new "no good bastards" in Ontario

The Harper/McGuinty HST will save CORPORATIONS in BC and Ontario $8 billion a year in taxes, at the expense of CONSUMERS and will drive a huge underground economy, along with transforming 1,250 Ontario government workers into “no good bastards” (the term recently coined by the Harper government to describe those who are out of work).

I’d like to see a list of which companies are the beneficiaries of this scandalous tax policy. No doubt, the Banks are at the top of that list along with a lot of other businesses that simply act as “toll road” collectors on the residents of Ontario and BC, and for whom leaving these two provinces would mean leaving the VERY source of their business revenues behind.

So why are they getting a corporate tax break? They have no choice but to invest in Ontario and BC, as that is where their “toll road” equivalent businesses are based. Speaking of toll roads, are the foreign owners of the 407 getting this tax break? Does Dalton McGuinty think there is some risk that the owners of the 407 might pick up the road and mover it to some other jurisdiction?

It is for this reason, that all the professed benefits of the HST are illusory, as reducing corporate taxes will do nothing to effect the investment that these businesses that are captive to Ontario and BC will make. However they WILL get their unfair share of this $8 billion windfall that is being totally “underwritten” by consumers in these two provinces.

The effectiveness of the HST in promoting business investment in Ontario and BC be about as effective as the Hone Renovation Tax Credit would have been if the program gave $1,350 to every homeowner IRRESPECTIVE of whether the homeowner spent $11,000 on qualified renovations or not. As such, the HST is like saying to Corporations in BC and Ontario: “Here’s $8 billion. Do whatever the hell you want with it”. Is that smart government? Is that an efficient allocation of lost tax revenue? Not a chance. The HST is a holus bolus and mindless approach to tax policy and economic incentives.

What does Dalton McGuinty have to say about that?. Better yet, what does Ed Clark, the CEO of TD Bank have to say about that, as Dalton was merely Ed Clark’s front man for hoisting this tax on to Ontario residents and reducing the purchasing power of their hard earned money and burdening their investment savings with a new tax at a time when retirement savings are supposed to be a matter of grave public concern?

Premier dares Tories to say whether they'd repeal HST

Embrace it or erase it: That's the ultimatum Dalton McGuinty gave to rival Tim Hudak after the Progressive Conservative leader called the premier "increasingly slippery" in answering questions on the 13 per cent harmonized sales tax.

"I think Ontarians would be interested in knowing why it is that the leader of the Official Opposition is not prepared to repeal the HST," McGuinty said on Tuesday.
He challenged Hudak to write his former colleague, federal Finance Minister Jim Flaherty, asking him to "put a stop" to the HST, which the federal government is advocating.

Flaherty, a former Ontario finance minister and the husband of Hudak's deputy leader Christine Elliott (Whitby-Oshawa), calls the tax "good economy policy."

But Hudak would not take aim at Ottawa. "Our fight is here," he told reporters, repeatedly evading questions as to what a provincial Conservative government would do about the tax if elected in the provincial election in 23 months.

On Monday, Hudak led his MPPs out of the Legislature to protest McGuinty's refusal to hold public hearings on the tax, which will blend the 8 per cent provincial sales tax with the 5 per cent federal GST.

Wednesday, November 25, 2009

2009 Darwin Awards. Flaherty is a runner up!

Yes, it's that magical time of year again when the Darwin Awards are bestowed, honoring the LEAST EVOLVED among us.

Here is the glorious winner:

1. A man walked into a Louisiana Circle-K, put a $20 bill on the counter, and asked for change. When the clerk opened the cash drawer, the man pulled a gun and asked for all the cash in the register, which the clerk promptly provided. The man took the cash from the clerk and fled, leaving the $20 bill on the counter. The total amount of cash he got from the drawer... $15. [If someone points a gun at you and gives you money, is a crime committed?]

And now, the honorable mentions:

2. The Finance Minister of Canada campaigned on a promise that he would never tax income trusts. Nine months later after intense lobbying by the insurance industry who wanted to eliminate their competition, he taxed income trusts, claiming that income trusts result in lost taxes to the government of $500 million a year. Not only did he leave out 38% of the taxes in his analysis, which would mean that there was no lost taxes, all of these trusts began to be taken over by foreigners and by non-taxable investors. Within a year, the Canadian government was losing over $1 billion a year, to solve an alleged $500 million problem, a problem that never existed in the first place? For that he was awarded Euromoney’s Finance Minister of the year award for 2009? Makes you wonder what the other Finance Minister must have done to be losers?

3. A man who shoveled snow for an hour to clear a space for his car during a blizzard in Chicago returned with his vehicle to find a woman had taken the space. Understandably, he shot her.

4. After stopping for drinks at an illegal bar, a Zimbabwean bus driver found that the 20 mental patients he was supposed to be transporting from Harare to Bulawayo had escaped. Not wanting to admit his incompetence, the driver went to a nearby bus stop and offered everyone waiting there a free ride. He then delivered the passengers to the mental hospital, telling the staff that the patients were very excitable and prone to bizarre fantasies.. The deception wasn't discovered for 3 days.

5. When his 38 caliber revolver failed to fire at his intended victim during a hold-up in  Long Beach  , California  would-be robber James Elliot did something that can only inspire wonder. He peered down the barrel and tried the trigger again. This time it worked.

6. An American teenager was in the hospital recovering from serious head wounds received from an oncoming train. When asked how he received the injuries, the lad told police that he was simply trying to see how close he could get his head to a moving train before he was hit.

7. Seems an Arkansas guy wanted some beer pretty badly.. He decided that he'd just throw a cinder block through a liquor store window, grab some booze, and run. So he lifted the cinder block and heaved it over his head at the window. The cinder block bounced back and hit the would-be thief on the head, knocking him unconscious. The liquor store window was made of Plexiglas. The whole event was caught on videotape.

8. As a female shopper exited a New York convenience store, a man grabbed her purse and ran. The clerk called 911 immediately, and the woman was able to give them a detailed description of the snatcher. Within minutes, the police apprehended the snatcher. They put him in the car and drove back to the store. The thief was then taken out of the car and told to stand there for a positive ID. To which he replied, "Yes, officer, that's her. That's the lady I stole the purse from."

9. The Ann Arbor News crime column reported that a man walked into a Burger King in Ypsilanti , Michigan at 5 A.M., flashed a gun, and demanded cash. The clerk turned him down because he said he couldn't open the cash register without a food order. When the man ordered onion rings, the clerk said they weren't available for breakfast... The man, frustrated, walked away. [*A 5-STAR STUPIDITY AWARD WINNER]

10. When a man attempted to siphon gasoline from a motor home parked on a Seattle street, he got much more than he bargained for.. Police arrived at the scene to find a very sick man curled up next to a motor home near spilled sewage. A police spokesman said that the man admitted to trying to steal gasoline, but he plugged his siphon hose into the motor home's sewage tank by mistake. The owner of the vehicle declined to press charges saying that it was the best laugh he'd ever had.

In the interest of bettering mankind, please share these with friends and family....unless of course one of these individuals by chance is a distant relative or long lost friend. In that case, be glad they are distant and hope they remain lost.

*** Remember.... They walk among us!!!***

Flaherty, McGuinty team up just as furor erupts over HST

Globe and Mail

TORONTO — From Tuesday's Globe and Mail Published on Tuesday, Nov. 24, 2009 12:00AM EST Last updated on Tuesday, Nov. 24, 2009 3:30AM EST

Federal Finance Minister Jim Flaherty has gone from denouncing Premier Dalton McGuinty's stewardship of the economy to supporting the Ontario government's ambition to transform the province into one of the world's top-10 financial centres over the past year.

Their friendlier relations were on display yesterday when Mr. Flaherty and Mr. McGuinty attended a blue-chip meeting of CEOs from Canada's biggest financial services companies in Toronto. But the meeting came on the same day debate in the provincial legislature almost ground to a halt over a pet policy of Mr. Flaherty's, highlighting differences between the federal Conservatives and their provincial cousins.

The McGuinty government is under attack by opposition members at Queen's Park over its plans to blend Ontario's 8-per-cent retail sales tax with the 5-per-cent federal goods and services tax - an initiative made possible with $4.3-billion in federal funding.

Ontario Progressive Conservative caucus members staged a protest over the proposed retail tax changes by walking out of Question Period en masse, just minutes into the one-hour debate, after Mr. McGuinty refused to hold public hearings. Progressive Conservative Leader Tim Hudak yesterday accused the Premier of avoiding full public hearings across the province because he does not want to face consumers, who would end up paying the new tax on goods and services that are now exempt from the provincial levy.

"Sadly, we see a Premier ... who hangs out with the elite and won't listen to hard-working taxpayers," Mr. Hudak said in Question Period. "If he has that kind of contempt for taxpayers, I see no point in continuing with Question Period today," he said, and left.

It was Mr. Flaherty who began pushing the Premier to adopt harmonization when the Conservatives came to power in 2006. He also called on the Ontario government to lower its corporate tax rates, at one point ridiculing the province as the last place anyone would want to invest.

The Ontario government announced in the budget last March that it had reached an accord with Ottawa to reform the province's retail sales taxes, effective next July 1. The provincial Tories stepped up their attack last week after the government introduced legislation on the harmonized tax, which is now in second reading.

Everyone who works in the Ontario Legislature (including reporters) has endured the incessant ringing of bells meant to call MPPs into the chamber. But the Tories latest tactic was criticized by both the government and New Democratic Party Leader Andrea Horwath, who is also fighting the harmonized tax and who said MPPs need to be in the legislature to "hold the government's feet to the fire."

Mr. Flaherty has not gone out of his way recently to help Mr. McGuinty sell the harmonized tax in public. But an Ontario government source said the fact that Ottawa is providing financial aid attests to its support. He also said Liberals are comfortable with the way the public debate is unfolding, because it calls attention to the fact that the federal and provincial Tories are divided on the tax changes.

Mr. Flaherty was not available for comment following yesterday's first meeting of a new financial council that will look at creating more jobs in the banking and insurance sectors.

But Mr. McGuinty said it was a mistake for Mr. Hudak and his caucus to walk out. "Their responsibility in Question Period is to provoke, cajole, and highlight shortcomings in government policy and they should be there to do that."

Tuesday, November 24, 2009

Gerald Keddy: That "no good bastard" handing out Conservative logo cheques

I guess if you live in the fantasy world of self-importance occupied by CON MP Gerald Keddy, you are denigrated as being a ”no good bastard” if you are unwilling to work on his Christmas tree farm cutting down trees for seasonal employment at minimum wage.

Meanwhile this self righteous Gerald Keddy, is engaged in far more meaningful "work", as you may recall that he is same "no good bastard", who was gleefully handing out Canadian taxpayers' money, on the pretense that is actually money coming from the Conservative Party of Canada?

Speaking of work, this guy's a real piece of work himself. Surely there is someone better suited for his job than him? Perhaps ”Leona Helmsley?”

Tory MP derides jobless as 'no-good bastards'
MPs' comments on unemployed, abortion show party's 'meanness,' opposition critics say

Toronto Star
November 25, 2009

OTTAWA–Comments by Conservative MPs deriding homeless people and describing abortion as a procedure that makes women more available to men demonstrate the party's true colours, opposition critics say.

Nova Scotia Conservative MP Gerald Keddy has apologized for describing unemployed Nova Scotians as "those no-good bastards sitting on the sidewalk in Halifax that can't get work."

There has been no such apology from Saskatchewan MP Maurice Vellacott for his unflattering depiction of women seeking abortions, which also applauded Saskatoon doctors for restricting access to abortion services.

"Pro-life feminists have ... come to see abortion as part of a male agenda to have women more sexually available," said the controversial MP in an anti-abortion news release sent out Nov. 20.

Vellacott just this week had to apologize for a flyer wrongly accusing Nova Scotia NDP MP Peter Stoffer of supporting the long-gun registry.

Nova Scotia Liberal MP Scott Brison said Keddy's remarks reflect the kind of mean-spirited attitude that Canadians have come to expect from the Conservative government.

"This is from a Conservative party under Stephen Harper that has referred to Atlantic Canadians as being defeatist," he told reporters.

"This Conservative party has a deep vein of meanness to it. It's a party that kicks people when they are down," he said.

Winnipeg Liberal MP Anita Neville said Vellacott has proven time and again that he has a "very right-wing, somewhat Neanderthal agenda."

"It's an insult to women in this country," Neville said. "It gives me great fear should they ever have a majority government," she told reporters.

If only Bob Rae were this passionate about Harper's income trust scandal

Liberal Foreign Affairs Critic Bob Rae is quoted in a Liberal Press Release of today, as saying:

“Just as the Prime Minister hides behind photo-ops instead of taking questions in Parliament, his government is hiding behind the veil of national security to save itself from scrutiny,”. “If they have nothing to hide, then release the evidence and the public can decide.”

Harper withheld his “proof” of tax leakage from public view citing the same lame argument about National Security. I have yet to hear Bob Rae say a single word about that? Would that have anything to do with the fact that his brother, John Rae, works for Power Corporation and Power Corporation lobbied extensively to kill income trusts?

Why the double standard on disclosure, Mr. Rae? Is losing $35 billion of Canadians life savings based on a patent falsehood (ie tax leakage) acceptable in the way that Afghan detainee torture is not? How about defending the rights of Canadians here at home as well as foreigners abroad, Mr. Rae? Or are you more beholding to the Desmarais’s than you are the average Joe Blow on the street.?

Why is this concept of yours applied selectively? Concepts that are only applied selectively aren’t principles, they are excuses. What is your excuse?

“If they have nothing to hide, then release the evidence and the public can decide.”

Why are the Liberals allowing Harper to get away with his income trust fraud?

Who do the Liberals actually represent? Canadians-at-large or closely-held commercial interests?

The Globe’s Eric Reguly fell for Flaherty's same trick

In my previous posting entitled Flaherty pulled the same trick, I describe how Flaherty arranged to testify before Parliament on the matter of income trusts ahead of all the other witnesses and before all the facts were on the table. This is a deliberate tactic now being used by David Mulroney in the matter of the Afghan detainee torture investigation: Provide pre-emptive testimony to gain the higher ground and seize the public record.

Guess what? It often works with the gullible and malleable Canadian media.

Just look at the story that Eric Reguly of the Globe published in the immediate aftermath of Flaherty’s testimony on January 1, 2007 entitled: “Trust lobby had no hope against Flaherty”.

For heaven’s sake, this piece was printed in the Globe's February 1, 2007 paper and held itself out as being the definitive account of the Public Hearings on Income Trusts.

One problem with that however is the fact that there were 2 days of hearings, January 30 AND February 1. Eric Reguly was off writing stories and reaching premature conclusions before all the testimony had been provided. What kind of yellow journalism is that? Or is it merely the journalism of someone easily manipulated? Probably both. The most damning testimony was about to be delivered by the person who knows as much if not more about tax leakage than Flaherty himself or any person in the Department of Finance, namely Dennis Bruce of HLB Decision Economics . Think of Dennis Bruce as the Richard Colvin of tax leakage. And yet, here we have Eric Reguly filing his premature account of the two day public hearings as if they had ended, when they clearly had not, and before the star witness had even testified

Talk about a rush to judgment. Trust lobby had no hope against Flaherty? Yes, especially with people like Eric Reguly and the Globe so compliantly in Flaherty’s control.

And how do you suppose Eric Reguly’s premature piece ended? His piece ended with the following advice concerning the opponents to Flaherty’s trust policy: “They should be ignored”.

Well isn’t that nice? Advice from the Globe and Mail that the other side of a “debated” should be ignored, published the very day before they were about to testify before Parliament? You’d almost think the Globe had an agenda on this policy, which clearly they do. What’s the next piece of advice we can expect from Eric Reguly and the Globe? That books should be burned? Or just people’s life savings?

Eric Reguly would soon experience his fall from grace.....or should I say fall from pomposity and presumptuousness?

The real world (the one not occupied by Eric Reguly) soon outted the false conclusions reached by Eric Reguly and Flaherty’s so far successful efforts to manipulate the media, because it wasn’t a short two months later when the deluge of takeovers of trusts began to occur ( as predicted by many, but dismissed by Reguly) that Eric Reguly had the temerity to conclude that “these takeovers are a disaster for Canada’s Finance Minister, Jim Flaherty”.

Gee, what an epiphany.

It’s too bad that Eric Reguly didn’t have the balls to actually write about that “disaster” in the Globe rather than merely musing about it on the seldom watched BNN. But to do so would refute all of Eric’s previous vapid musings on income trusts. Refuting one’s own vapid musings of the past would take a degree of professional integrity that evidently is completely lacking in Eric Reguly and the Globe’s grossly biased news coverage of the Income Trust tax.

Had Eric Reguly not rushed to judgment on the Public Hearings on Income Trusts and IF he had stuck around to hear all the testimony, he could have avoided himself a lot of embarrassment and have actually performed his professional duties as a journalist. Instead he chose to be a mouth piece for the government and make conclusions that were favorable to the government before all the testimony had been delivered. Eric Reguly sought to be pre-emptive of people’s testimony before Parliament. What a thug of democracy. Why did Eric Reguly not write about this testimony that was presented in day 2 of the hearings by Dennis Brice and others, as it would have avoided him the professional embarrassment of a few months later, to wit damning testimony like this. Or would that be balanced and objective reporting, something not tolerated in the Globe and Mail?

Independent economists discredit govt tax leakage claims

OTTAWA, Feb. 1, 2007 /CNW Telbec/ - In remarks delivered to the House of Commons Finance Committee Thursday, Dennis Bruce, Vice President of HLB Decision Economics Inc., provided data and supporting documentation to discredit the Department of Finance's tax leakage claims.

"The department is sharply overstating tax leakage," said Mr. Bruce, who added that there would be minimal costs associated with a 10 year phase-in of the new tax on income trust distribution payments.

HLB Decision Economics, an Ottawa-based independent consulting firm that provides analytical consulting services to industry and governments worldwide, has been working on behalf of the income trust sector to develop a comparative analysis of taxes generated under the income trust structure versus the corporate structure.

Mr. Bruce told committee members that his firm worked with the Department of Finance as it prepared the federal government's 2005 consultation paper on the tax effects of income trusts. Specifically, HLB was asked by the department to develop a common methodology and assumptions for deriving tax leakage estimates.

Mr. Bruce said that HLB and the Finance Department achieved consensus on the methodology with one exception - they disagreed on whether to include deferred taxes. Deferred taxes are derived from distributions, capital gains, and dividends received in tax exempt accounts. While they are not immediately taxable, they are taxable upon withdrawal from such accounts.

"The discussions that you are hearing about deferred taxes reflect confusion about budgeting convention versus policy analysis," said Mr. Bruce. "While federal budgeting is done on a current basis, federal policy analysis is done on a life-cycle basis. Accounting for the life-cycle effects of tax changes, namely deferred taxes, is appropriate in the consideration of tax policy."

Mr. Bruce went on to outline the factors that resulted in the differences between HLB's tax leakage estimates and the tax leakage figures put forward by Finance Minister Jim Flaherty. These factors include:

1) The Department's assumed effective corporate tax rate for energy
trusts fails to reflect the reductions in the tax rates for resource
corporations from 2004 through 2006, from 27.12% to 24.12%. This
results in an overstatement of tax leakage of $84 million;

2) The Department's figure for income trust units held in tax exempt
accounts is overstated. Derived from data from surveys, Statistics
Canada, interviews and Scotia Capital Markets data, the percentage of
units held in tax exempt accounts is 31 percent, less than the
Department's 38 percent estimate. This results in an overstatement of
tax leakage of $125 million;

3) The value of deferred taxes is excluded from the Department of Finance
analysis. This results in an overstatement of tax leakage of
$80 million; and,

4) The Finance Department's atypical inclusion of the impact of limited
partnerships, which reduces the tax leakage to $45 million.

5) The impact of future legislated tax changes post 2010 has not been
accounted for. Doing so reduces the ongoing federal tax leakage after
2010 by $232 million.

Mr. Bruce stressed that the discrepancies between HLB and the Finance Department led his firm to conclude that the Finance Department is "sharply overstating tax leakage."

Specifically, HLB concluded that:

- Federal tax leakage for 2006 was $164 million, not the
half billion dollars stated by the Department; and,

- Ongoing tax leakage, post 2010, after taking into account legislated
tax changes, is $32 million per year, about five percent of the
Department's figures.

For further information: Dennis Bruce, Vice President, HDR - HLB Decision Economics Inc. (613) 234-0080; Cell: (709) 632-1708

Flaherty pulled the same trick

Flaherty was successful at pulling the same trick that Canada’s former Diplomat in Afghanistan. David Mulroney is now trying to pull, namely providing testimony to Parliament before all the facts are known.

It is a much simpler task to defend your self against an incomplete record than it is a complete record. In Flaherty’s case. he arranged for himself to be the first to testify before Parliament on the matter of income trusts and was therefore completely free to conjure up all sorts of fanciful numbers on alleged tax leakage.....with ZERO supporting evidence to support those claims. Flaherty got 45 minutes to speak. All the other witnesses got 5 minutes.

Being the first to testify meant that Flaherty was long gone before groups like HLB Decision Economics, BMO Capital Markets. RBC Capital Markets. The Coalition of Energy Trusts, CAIF and CAITI testified that Flaherty’s tax leakage numbers were completely wrong and are premised on a totally erroneous methodology that was inconsistent with how the Government’s own books are supposed to be kept, according to the Auditor General.

By that point the coward, known as Jim Flaherty had long since vanished from the scene and all the reporters had run off with their latest Jim Flaherty sound bites and catastrophic predictions of tax leakage with which to mislead the Canadian public and foster Flaherty’s conspiracy known as tax leakage, as justification for a policy with sinister ulterior motives at play.

Now we have David Mulroney anxious to get before Parliament to “correct the record” before the record is even known? Sounds like a page taken from the books on How to BS Parliament by Jim Flaherty

There must be something about Irish men who think they can bluff their way through matters of import and contrive circumstances that favour their testimony......Jimmy Flaherty......and now David Mulroney?

Opposition aims to block diplomat's testimony on detainee case

Steven Chase and Campbell Clark
Globe and Mail
November 24, 2009

Ottawa — From Tuesday's Globe and Mail Published on Monday, Nov. 23, 2009 10:15PM EST Last updated on Tuesday, Nov. 24, 2009 4:34AM EST

A high-ranking Canadian diplomat is jetting back from a Beijing posting to defend his record against allegations that Canada transferred prisoners to certain torture in Afghanistan – but opposition parties may not let him testify.

David Mulroney, currently Canada's ambassador to China, served as the government's point man and chief fixer on Afghanistan until May. He was singled out by Canadian diplomat Richard Colvin during explosive testimony last week as one of the senior officials who tried to contain and suppress his warnings about the torture of Afghan detainees in 2006 and early 2007.

But opposition parties are leery of giving Mr. Mulroney a public platform to beat back Mr. Colvin's charges before they have all the facts in hand.

The NDP, the Liberals and the Bloc Québécois are demanding the Tories release a long list of documents linked to Mr. Colvin's testimony before they allow Mr. Mulroney a public rejoinder. In a minority government, the opposition parties together have a majority of seats on a committee and can control its agenda if they work in concert.

Mr. Colvin reignited the long-simmering debate over Canada's handling of detainees when he told a parliamentary committee Nov. 18 that all prisoners captured by Canadian soldiers and handed over to Afghan authorities in 2006 and early 2007 were tortured – and that many were innocent.

Mr. Mulroney has sent a letter to the Commons committee on Afghanistan saying that he wants to “set the record straight” regarding “very serious allegations” made by Mr. Colvin. A career public servant, Mr. Mulroney served until May 2009 as deputy minister of Ottawa's task force on Afghanistan.

The Tories have been trying to arrange for Mr. Mulroney to testify this Thursday, hoping to get it out of the way before Prime Minister Stephen Harper flies to China next week for a groundbreaking official visit. Word that Canada's ambassador to China has been fingered in a cover-up of Afghan detainees has already made headlines there.

In an apparent indication of how he would challenge Mr. Colvin's testimony, Mr. Mulroney added that he “encouraged officials to report freely and honestly, while expecting them to meet the highest standards of accuracy, objectivity and professionalism.”

Mr. Mulroney also insisted in the letter to committee chair Rick Casson that Ottawa has been mindful of the possibility for abuse in Afghanistan.

“We have always recognized that that human rights situation in Afghanistan was cause for concern,” he wrote.

Mr. Mulroney will be arriving back in Ottawa late Tuesday night, officials said. As Canada's ambassador to China he's supposed to be devoting his time right now to laying the groundwork for Mr. Harper's official visit, which begins in Beijing Dec. 2.

Prime Minister's Office spokesman Dimitri Soudas accused opposition parties of playing games on detainees by blocking Mr. Mulroney.

“If the opposition were serious about finding answers, they would allow him to appear before the committee,” Mr. Soudas said.

Opposition MPs however say they can't properly question Mr. Mulroney without access to the uncensored versions of e-mails, briefing notes and memos that make up the background story behind Mr. Colvin's testimony. The Tories have already dismissed calls for a far more thorough public inquiry into detainees.

“We don't want to give Mr. Mulroney a microphone so he can say, ‘Here's the government's position.' We've heard the cassette,” Bloc defence critic Claude Bachand said.

Liberal MP Bryon Wilfert said each party only gets seven minutes per round of questions and answers at committee and that means they can't afford to be ill prepared in quizzing Mr. Mulroney.

The opposition request for uncensored documents is a very tall order. The Tory government has already fought several times against requests by groups such as Amnesty International to get unredacted versions of internal documents on the treatment of detainees. Ottawa has argued this would pose a security threat.

New Democrat foreign affairs critic Paul Dewar said the Conservatives have forced opposition parties into the position of delaying Mr. Mulroney's testimony in order to get documents because the government has rejected holding a public probe that might have produced them.

In the Commons, Defence Minister Peter MacKay offered a vague pledge to release information but suggested his motive would be to shed light on detainee transfers in Afghanistan under the former Liberal government.

“We will look at the documents that are going to be placed before the parliamentary committee, going back beyond the time that we took office. We will see what [the Liberal] government's record was and how it stacks up against the efforts that we have made to improve the conditions in prison,” Mr. MacKay said.

It was not clear just what documents Mr. MacKay was promising, but Liberal Leader Michael Ignatieff immediately seized on it as a pledge.

Separately, the Canadian government said Monday it halted detainee transfers twice in 2009 because of concerns over the treatment of prisoners.

Mr. MacKay said the suspensions came after Afghan authorities failed to honour an agreement with Ottawa that gives Canada guaranteed access to prisons where detainees are being held.

“Most recently the reason that the transfers stopped was that the Afghan officials were not living up to ... expectations,” Mr. MacKay told the Commons.

Mr. Harper, briefly in Ottawa between trips to India and Trinidad, skipped yesterday's raucous Question Period – which was dominated by detainee questions – to instead pose for a photo with Canada's men's lacrosse team.

“It's significant that the prime minister was at a photo op a kind of a hop, skip and a jump from Parliament Hill instead of being in the House responding to questions that Canadians want answered because they're questions about his leadership,” Mr. Ignatieff said.

Monday, November 23, 2009

Letters to the Editor

Re: “Harper-Layton Income Trust Tax: Time to ditch it ” (The Hill Times, Nov. 16th).

I hope Canadians will take seriously this column by Brent Fullard in The Hill Times.

It is a shame that our government has made a decision that negatively affects so many people in this country regarding their investments (many for their retirement purposes) without telling us why they did it.

Isn’t government elected to serve the needs of the people? Why do approximately 2.5 million Canadians have to be punished for investing in their country?

When I served in the Canadian Army I was willing to give my life for my country. Is this is how we get rewarded—by taking away our right to a decent return on our investments?

Canadian investors took a big hit in their incomes with those transactions. I would like to know how such a move will benefit Canada. If there are tax benefits for Canada, would someone please explain them in layman’s terms so that the average Canadian taxpayer can understand them.

I would very much like to have a government in power that I can honour and respect for doing what is right.

Robert Bertuzzi
Castlegar, B.

The kids were out trick or treating. The adults kept a watchful eye. In some areas the wind blew, in others, the snow flew. It was just another typical Halloween for many Canadians. Unfortunately, those left behind in the wake of the 2006 income trust massacre have never been able to celebrate.

These are the small investors who lost a major part of their savings after relying on the promise of our Prime Minister Stephen Harper and Finance Minister Jim Flaherty to preserve these investments at all costs.

It was bad enough to be the victim of such a cruel move, but to be forgotten in the shuffle like yesterday’s news and abandoned by the Prime Minister in whom
we had placed our trust, has left us financially terrorized and has left us very discouraged with our democratic system.

Michael Popovich
Rodney, Ont.

Hill Times: Stephen Harper’s communications strategy and some principles of propaganda

Double-Click on the above article to read this brutally insightful piece by Professor William Stanbury in today's Hill Times about Harper's penchant for propaganda.

Propaganda? Harper would never lie about tax leakage, would he?

Why is Harper being allowed to get away with such a blatant lie, especially given the harm done and the incompetence and deceit this action represents? What commercial interests are pulling these politicians strings. along with the media?

Harper's communications strategy and some principles of propaganda

Prime Minister Stephen Harper is a 'control freak,' who prides himself on being a top-flight political strategist, and central to his strategy is tight control over his government's messages. But let the pundits wail, thrash about, and pontificate.

The Hill Times, p.31
Published November 23, 2009

On Nov. 16, The Hill Times published a feature column on the effectiveness of Prime Minister Stephen Harper's "iron message control." The column noted that the PM "has become legend for the iron control he exerts not only over the messages his government sends out over the heads of the Parliamentary Press Gallery, but also the messages his staff and MPs project." Harper has sought "to manage the government's information flow to the media as well as the public appearances and statements of his own MPs and Cabinet ministers." Critics have said that "the wall of selective silence and control that shrouds the entire government undermines the free flow of information citizens could normally expect in a western democracy."

With respect, there was not much new here. Since he came to power early in 2006, there have been many articles calling the PM a "control freak," who prides himself on being a top-flight political strategist, and that central to his strategy is tight control over his government's messages. (Generally, see Bruce Campion-Smith, "How to control the spin," The Toronto Star, May 26, 2008.)

Still, I thought it time to do two things to put the Harper government's communications strategy into perspective. The first is to provide a brief, but comprehensive summary of the many elements of that strategy. That has not been done before. The second is to provide a wider perspective on Harper's communications strategy by comparing it to some important principles of propaganda.

•Centralize communications for the entire government in the PMO. Threaten Cabinet ministers and others with pain of dismissal if they fail to keep their mouth shut, or when told to open it to speak from the centrally prepared talking points. This only works because Harper also centralized all important government decision-making in the PMO backed up by PCO. This is perhaps the most extreme example of court government in Canada's history.

• Create a simple message (series of simple messages over time) aimed at keeping support among the base and adding supporters and repeat it endlessly—with only the slightest variations. Link the message to previous campaign promises and try out theme/issues for the prospective campaign which might come at any time as there is a minority government.

•Manage both images (still and video) along the same lines as words. Steven Chase of The Globe and Mail (Nov. 14, 2009) reported that "Since the spring, the PMO has effectively set up its own picture service, e-mailing photos to Canadian media almost daily in an effort to find a market for publicity shots of Mr. Harper's activities. It's a service that ultimately competes with the work of photojournalists, but one, they argue, that should not be relied upon as a record of events." Further, Chase documents manipulation of photos and photo ops in much the same fashion as the text messages have long been "managed."

• Use the vast government communications machine (and to a lesser extent Conservative Party media team) to bypass the filter of the mainstream/major media. The government communications/advertising budget has been used to promote the Conservative Party and its peerless leader. There is no propaganda tool too low not to be used—think of those super-sized cheques (made for six second clips on the nightly news) with the CPC logo and/or the Tory MP's signature.

• Keep the PM front and centre on behalf of the entire government. There can never be too many flattering photos of the PM in every conceivable government website, ad campaign, etc.

• "Message Control Includes Appearance Control...Personal stylist makes sure PM's polished." This headline during the last election says it all. Note that taxpayers paid for the PM's stylist, (Sue Bailey, The Canadian Press, Sept. 22, 2008).

• Demonstrate aggravated contempt for the press gallery, most notably the reps of the biggest dailies and the TV networks. (Former U.S. president George W. Bush also followed this approach.) This plays well with the Conservative Party base—and it tells reporters that they are not going to be the effective opposition as they are wont to do. Part of this tactic is to deny reporters the kind of facilities they want. The debate over such facilities can facilitate long delays—helpful to the government. Let the pundits wail, thrash about, and pontificate. They are irrelevant to the PM's strategy. Stay focused, sir. They need the PM far more than he needs them—despite the usual comment that it is a symbiotic relationship.

• Never let the PM face a "scrum" of journalists; never let him be "ambushed" in moving from his office to the Commons, for example. There is too great a chance of saying something unscripted, hence getting him "off message." Just ignore the criticism from journalists—the base certainly doesn't like them either.

• Ration interviews with the PM and press conferences carefully. Economists advise that creating artificial scarcity raises the price. In this context it means that reporters will be less hostile and a little grateful for even a limited interview.

• Invite reporters from small-town outlets for interviews. Feed them the line of the day—near their deadline and watch them convert the press release into a major story with few changes. Have the press secretary call them later and tell them what a great job they are doing. Subtle, right?

• Let reporters eat "Gaines burgers"—specially prepared versions of the message du jour. If they want more they will have to dig. (What a concept!) Besides, thy can ask Ken Rubin to help them with an Access to Information Act request (see Ken Rubin, The Hill Times, Nov.16, 2009).

• Frame the opposition leaders negatively with party-sponsored ads. Reinforce with party speakers' jibes in Question Period—all for TV news. They lap up this stuff.

• Use surrogates of the PM or ministers to spread dirt on "enemies" (but do not keep an "enemies list" as did former U.S. president Richard Nixon). If the "dirt" does not check out—stonewall—just like RN. If absolutely necessary, do a "modified limited hang out"—another move from the RN playbook.

• Use the social networking media—on a limited basis to target the young. In general, make more use of the new media—like feeding the Tory bloggers who are happy to disseminate the PM's message without questioning it. Ignore the websites listing the PM's lies and factually questionable statements—and which provide evidence to support their claims.

• Spend big bucks creating a high-tech "war room" for what amounts to the "permanent campaign." This is the era of minority governments in Canada. Use the new technologies to ensure message control by all 308 Tory candidates.

• Combine party fundraising appeals with the PM's statements in the news media.

• Clamp down and ensure delays for what flows out via Access to Information Act (see Stanbury on the secrecy game in Ottawa, The Hill Times, June 15, 2009).

• Use the legal system to block the release of news. Sue the Liberals for big damages and create "libel chill" regarding the accusation of attempted bribery of the now late MP Chuck Cadman to get his vote on a non-confidence motion. Then negotiate a settlement under which no details can be released.

• Let the opposition self-destruct from a distance. Never interfere with a political opponent who is hurting himself in an effective fashion.

• Encourage Conservative MPs to spend as much as possible on the "ten percenters" mailed at taxpayers' expense to persons outside the MP's constituency. "Le Devoir found that MPs with the minority Conservatives spent $6.3-million on the mailers, while opposition MPs spent $3.8-million," (The Globe and Mail, Nov. 16, 2009).
According to one authority, "Propaganda is neutrally defined as a systematic form of purposeful persuasion that attempts to influence the emotions, attitudes, opinions, and actions of specified target audiences for ideological, political or commercial purposes through the controlled transmission of one-sided messages (which may or may not be factual) via mass and direct media channels," (Richard Alan Nelson, A Chronology and Glossary of Propaganda in the United States, 1996).

Although the term propaganda is not pejorative in its origin, the negative connotations arose during the First World War when both sides engaged in extensive propaganda—much of it crude by later standards—as part of the war effort.

1. The propagandist must have access to intelligence concerning events and public opinion.
This role is played with great energy by the PMO, backed by the PCO, as noted above. While spending by the federal government on public opinion polls has declined somewhat under Harper, it still permits frequent polls, and allows the PM to delay the release of the results—thereby gaining an advantage in designing communications efforts.

2. Propaganda must be planned and executed by only one authority.
This is perhaps the central task of the 85 staffers in the PMO. But the entire government communications apparatus is enlisted in the same task.

3. The propaganda consequences of an action must be considered in planning that action.
This seems apparent from the messages distributed and amplified by the PMO and other government communications efforts (using many tax dollars).

4. Propaganda must affect the [opposition party] policy and action.
Just ask Stéphane Dion and Michael Ignatieff about those attack ads (said to cost some $4-million) paid for by the Conservative Party from donations subsidized by a generous tax credit.

5. To be perceived, propaganda must evoke the interest of an audience and must be transmitted through an attention-getting communications medium.
Harper has made extensive use of the mass media and he has also used the so-called new media including the social networking site on the Web. Recently, he has been emphasizing photos, as noted above. Then there was the crooning at the National Arts Centre—now enshrined on YouTube.

6. Credibility alone must determine whether propaganda output should be true or false.
One of Harper's former advisers, Tom Flanagan, has put it this way: "It (a statement in the news media) does not have to be true. It just has to be plausible," (The Globe and Mail, Sept. 8, 2009). The test for Harper seems to be whether the message "sells" with voters.

7. Black rather than white propaganda may be employed when the latter is less credible or produces undesirable effects. Harper's black propaganda has consisted of (i) millions of dollars of attack ads defaming the current and previous leader of the leader of the opposition; (ii) the use of surrogates to dish dirt on selected targets (just ask former PM Brian Mulroney); (iii) highly questionable (others would use blunter expressions) statements by the PM about quite a variety of issues, notably the validity of asking the Governor General to prorogue Parliament when faced with defeat in the Commons on a scheduled want of confidence motion.

8. Propaganda may be facilitated by leaders with prestige.
The PM—said to hold the most prestigious post in politics—has been his own chief propagandist. He insists on being the only "star" in his government.

9. Propaganda must be carefully timed.
Two successive minority governments have resulted in a much higher level of uncertainty in the federal political arena. However, it is clear that the PMO has always sought to time the release of its messages (No—the PM's messages) for best effect. That includes "burying" bad news.

10. Propaganda must label events and people with distinctive phrases or slogans.
Think of the effort that went into showing a parrot pooping on former Liberal leader Dion (said to be the mistake of an underling)—or the slogan the current Liberal leader Ignatieff is "just visiting." Both got vast coverage in the news media and endless repetition—so from Harper's perspective—they worked (although some pundits decried the crudeness of it all).

11. Propaganda must facilitate the displacement of aggression by specifying the targets for hatred.
Hatred may be too strong when speaking of the "red meat" messages put out by the Harper government to stroke its base. The announcement on Nov. 27, 2008, that the government would end the subsidies for the five major political parties was certainly widely perceived as an effort to kill key rivals—whom Harper himself had called "enemies."

Some readers may be shocked to learn that the principles cited above are based upon Goebbels' Principles of Propaganda by Leonard W. Doob, published in Public Opinion and Propaganda; A Book of Readings edited for The Society for the Psychological Study of Social Issues. I want to emphasize that many other governments have engaged in propaganda as defined above to varying extents, and thus applied some of the principles listed above. The governments include previous Canadian governments and those of Margaret Thatcher, Ronald Reagan, G.W. Bush, and, of course, Winston Churchill during the Second World War. Obviously, Mr. Harper leads a democratically-elected government. However, the level, intensity, and foci of his communications efforts may be of concern to Canadians.

W.T. Stanbury is professor emeritus, University of B.C.