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 proof....as 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.