Flaherty's trick still no treat
William Hanley, Financial Post Published: Saturday, October 31, 2009
The timing was impeccable. Three years ago today, on the spookiest Halloween ever for investors, Jim Flaherty, the Finance Minister, knocked on our collective door and yelled: "Trick or trick." The Harper government's stunning about-face on the taxing of income trusts, a staple investment for 2.5 million Canadians, many of them retirees, was like finding a razor blade in the apple.
Three years on, the announcement still rankles deeply with all those investors who saw the value of their portfolios sink by double digits within a few days, future income flows choked off. And while many executives and other observers supported the move, it is still viewed by many as a complete betrayal by a party that had vowed to protect income trusts, especially now when pricing yield out of low-risk investments is a near-impossible trick and absolutely no treat.
An income trust holds income-producing assets, with the income passed on to investors through monthly or quarterly distributions, which typically are higher than stock dividends and give cash yields of up to 10% a year -- higher for riskier trusts.
Before that fateful Halloween of 2006, investors had enjoyed these hefty payouts from the income trusts, which came into being in 1985, but really caught the public's fancy in the new millennium. Top money managers such as Ira Gluskin of Gluskin Sheff had championed the trusts, which provided clients with great income streams and good underlying capital gains --a magical win-win story.
The beginning of the end for income trusts actually started on Sept. 5, 2005, when the Department of Finance under the Liberals said the trusts had cost Canadian governments hundreds of millions of dollars in lost taxes the preceding year. Too many companies were contemplating the trust route.
On Sept. 19, the department suspended advance tax rulings on future trusts, thereby hurting investor confidence and wiping $9-billion off the trusts' market capitalization. The Liberals later recanted and said the advance rulings would continue. But the trust issue was on the table and under the microscope.
Flaherty's stunning Halloween announcement the following year was basically the nail in the coffin. By 2011, even those trusts formed before the announcement will be subject to the new tax rules.
The Finance Minister did increase the tax credit for those over 65 by $1,000 and introduced new rules to allow senior couples to split pension income to reduce the income tax they pay.
That, though, was seen as a mere sop compared with the income and capital gains provided by the trusts.
Meanwhile, the three years since that infamous Halloween have turned out to be difficult for investors, with the past 18 months especially tough for retirees and those Baby Boomers hoping to retire in the next few years as the stock market crashed and fixed-income returns withered away.
Their current plight is put into stark focus by the Canada Savings Bond campaign that offers investors all of 0.4% interest for the one-year bond. To save all the trouble, the saver may as well park the money in the proverbial mattress.
Along the same line, this week I got a call from my bank informing me that I was such a good customer that I was being offered a special deal on a new kind of account available to only us special clients. I could get an annual quarter per cent on a balance up to $5,000 and -- sharp intake of breath--half a point on anything over that.
I asked if this was some kind of pre-Halloween trick-or-treat prank. The caller replied no, obviously not seeing the irony in this "special" offer.
For history buffs, there is a certain ironic arc between Jim Flaherty's Halloween massacre and today's square-root-of-squat interest rates courtesy of the Bank of Canada (Mark Carney, the Bank's Governor, was widely credited with being the architect of the income-trust strategy when he was at Finance in 2006, the man who designed the policy that led to that infamous about-face.)
Of course, Carney was doing the bidding of his political masters in the Harper government. And today, though he is ostensibly independent of politics, he is charged with steering the right path to economic recovery.
Part of that recovery depends on persuading consumers to spend on SUVs and flat-screen TVs with ultra-low credit rates, and to get buyers into homes with mortgage rates so low they will only be repeated in another financial crisis.
Unfortunately, there are winners and losers in all matters financial. We, the aging savers, are the losers in this equation, just as income-trust investors were in Flaherty's Halloween flip-flop. The winners -- for now -- are the borrowers being treated to the low, low rates provided by us lenders, who will either grimace and bear it or find better returns in riskier investments just as the stock market takes on a spooky tone.
Saturday, October 31, 2009
Posted by Fillibluster at 11:31 AM
This new comprehensive academic study (email CAITIinfo@rogers.com for a copy) comes to the same conclusion that Bank of Canada Governor David Dodge had reached, albeit in a more comprehensive way, when David Dodge stated at a press conference on October 19 , 2006 (i.e. before he was muzzled by Flaherty) that: "The work we have done in terms of capital markets per se is that probably, on balance, income trusts make capital markets somewhat more complete and somewhat more efficient.”
So why would the Minister of Finance want to make Canada’s capital markets less efficient by destroying income trusts, unless of course the purpose of doing so was to allow those who were exploiting the market’s inefficiency to continue to reap these unjust rewards inherent in an inefficient market?
Much like the market was inefficient when stocks were traded in eighths and quarters, thereby allowing a few hundred traders to extract huge unearned profits, but was made efficient for all participants when stocks were traded in cents. Was the move to stocks quoted in cents rather than eighths and quarters something that Flaherty would have opposed? So why is Flaherty acting as an agent for narrow interests to kill income trusts using the false premise of tax leakage? The role of the Minister of Finance is not to perpetuate market inefficiencies, so a handful of powerful persons can reap extraordinary gains at the expense of the broad populace. Or maybe it is?
This new study is entitled: “A COMPARATIVE ANALYSIS OF TAX EXEMPT FLOWTHROUGH VEHICLES: THE RISK ADJUSTED PERFORMANCE OF INCOME TRUSTS, MLPs AND REITs”
This study has several important findings that indicate the intent of Flaherty’s income trust tax was to destroy the emergence of a new and distinct asset class (premised on the falsehood of tax leakage) and in so doing reduce the efficiency and effectiveness of the Canadian capital markets, as indicated by the following quotes from the attached study:
On creating more efficient markets, this from page 112:
“As it may be seen by figure 2.24. above, stock of flow-though investment vehicles significantly expand the efficient set when added to the mix over the period of January 1999 to July 2007. The exstimation window is chosen as to minimize the
effects of the global financial crisis of 2007-2008”
On the distinct nature of income trusts as a unique investment “asset class”, this from page 113:
“Overall, our evidence would suggest that flow-through stocks comprise a distinct asset class from bonds and equities. In the meantime, using co-integration analysis, we document varying levels of stock and bond cointegration, which suggest
the risk-return profile of flow-through stocks may in fact be replicated by a combination of bonds and equities. Still, there remains a large enough portion of flow-through stock variability not accounted for by common market risk factors to
justify the diversification benefits of Income trusts, MLPs and REITs”
Why are pension funds like OMERs CPP, PSP. Caisse, Teachers’ etc. exempt from Flaherty’s 31.5% tax, whereas RRSPs are not, given this finding on page 114?
“To the extent that stocks of flow-through investment vehicles are considered as an alternative class, our results would be of interest to investors and portfolio managers alike.”
Posted by Fillibluster at 11:12 AM
Friday, October 30, 2009
Harper must confuse being at the launch of the Olympics with being in the locker room with the boys, although when has Harper ever been in the locker room with the boys, the total non-athlete that he is?
Prime Minister Stephen Harper identifies a key flaw with the Olympic red mittens
By Jonathan Fowlie, Vancouver SunOctober 29, 2009
Prime Minister Stephen Harper (left) and Premier Gordon Campbell show off the Olympic Torch and the red 2010 Olympic mittens in the premier's office at the legislature in Victoria on Thursday.
Prime Minister Stephen Harper (left) and Premier Gordon Campbell show off the Olympic Torch and the red 2010 Olympic mittens in the premier's office at the legislature in Victoria on Thursday.
Photograph by: Debra Brash, Times Colonist
VICTORIA — In a brief photo opportunity, Premier Gordon Campbell and Prime Minister Stephen Harper had an amusing, but curious exchange on Thursday.
Speaking to reporters assembled in his Victoria office, Campbell held his thumbs up while wearing the red Vancouver 2010 Olympic mittens.
"I like the thumbs up," Campbell said, with Harper at his side holding an Olympic torch.
"You can't put anything up but the thumb," replied Harper.
"He can't give you the finger in those things," he added, chuckling at the reporters in the room.
After an awkward pause, a surprised Campbell looked back and responded: "I've never experienced that."
© Copyright (c) The Vancouver Sun
Posted by Fillibluster at 1:58 PM
Jonathan Chevreau of the Financial Post writes today about the “10 billion reasons why Manulife and insurance companies like the status quo” in terms of Canada’s retirement system, 10 billion being the amount of variable rate annuity product, Income Plus, that Manulife has been successful in selling and which was launched simultaneously at the time of the income trust market’s demise, as lobbied for by the very life insurance industry who would benefit (funny that?).
I would argue that Canadians have 10 billion reasons why Manulife and the insurance industry lobby group’s advice should be derided and scorned rather than heeded. The insurance industry lobby group would have us believe that all is well with the ongoing proliferation of this kind of synthetic, derivative based form of retirement savings product, like Income Plus. The President of the insurance industry lobby group writes “"Canada's life insurers already offer guaranteed income products that allow individuals to securely shift from asset accumulation into the retirement payout phase.", as if to infer that is a good thing.
What is good about a product issued by life insurance company’s that is not even being properly hedged? Unless we are masochists by nature, why in the world would Canadian policies favour the issuance of more product, namely guaranteed income products, that experst in the indsurty like Warren Buffett consider to be “crazy” in terms of the risks that these products entail for both the insurance companies and those who buy them? ( see http://ifawebnews.com/2009/05/07/buffett-says-life-insurers-took-%E2%80%98crazy%E2%80%99-risks-on-variable-annuities/)
Meanwhile we have a perfect example here in Canada about the risks that were foretold by Warren Buffett, which almost led to the collapse of insurance giant Manulife via these very products and their inherent risks. Why would we take advice from Manulife or the insurance indsutry lobby group on the question of pension security, in the face of this kind of reckless and wanton fallout?
Manulife served with OSC notice
CFO retirement 'unrelated'
John Greenwood And Barbara Shecter,
Saturday, June 20, 2009
Manulife Financial Corp. has received an enforcement notice from the Ontario Securities Commission related to its disclosure of risks associated with its variable annuity guarantees and segregated fund products.
The notice, which arrived this week, indicates a "preliminary conclusion" by OSC staff that Manulife failed to properly disclose before March the potential impact its investment product guarantees would have in the event that equity markets declined, the company said in a statement released after markets closed yesterday.
Meanwhile, Manulife announced the departure of Peter Rubenovitch, its long-time chief financial officer and right-hand man of former chief executive Dominic D'Alessandro. The company said the two issues were unrelated.
As a result of guarantees on its investment products , Manulife took losses that were so significant its capital levels were affected.
Manulife shares have declined 43% from their peak in December 2007.
Manulife, which believes it satisfied disclosure requirements related to its investment products, said it has the opportunity to respond to the notice before OSC staff come to a decision on whether to commence proceedings.
Toronto-based Manulife enjoyed a spectacular rise during much of the current decade but got into trouble in the financial crisis when it had to make good on guarantees it made on investment products.
Bay Street began asking questions about Manulife's risk-taking and failure to hedge its variable annuity products late last year, just after the giant insurer had to obtain a $3-billion, five-year loan from the major Canadian banks to bolster its capital reserves.
In a conference call to discuss Manulife's financial results, a senior analyst asked, "Why didn't you start to hedge once you went through your tolerance level at 15%?"
According to the Insurance Journal, Mr. D'Allesandro responded: "We didn't expect the volatility in the markets that actually transpired.... We clearly did not appreciate that markets would fall quite as sharply as they did, and expose us to the level of potential risk that they have."
Posted by Fillibluster at 11:46 AM
You will recall that the Liberals "Forum on Pensions" was sponsored by this very Insurance lobby group. Sheesh.
Image: Frank Swedlove. President of the CLHIA and the CLHIA's logo that appeared on LIberal's Forum on Pensions that took place this week.
As evidence of how aligned the Liberal Party is with the life insurance industry, you will recall that the Liberal’s forum on pension reform was sponsored by the Canadian Life and Health Insurance Association [CLHIA] . Talk about a conflict of interest and an indication of the degree to which the Liberal Party has been co-opted by the insurance companies who have an agenda that is completely counter to the interests of virtually all Canadians, as evidenced by their role in destroying income trusts as a way of maintaining the status quo and killing their competition for Canadians’ retirement savings.
Now they want to do the same for Canada’s pension system by protecting the status quo. Wel of course they do, as that is what is in THEIR best interests, as opposed to Canadians' best interests. Same deal with income trusts and the life insuarace industry's insidious lobbying to kill that form of competition for Canadians' retirement savings.
Here is the insurance industry’s self interests exposed in today’s Financial Post. If Jonathan Chevreau of the Financail Post can figure it out and see through it then it’s clearly not beyond the comprehension of Liberal MPs:
Why insurance industry sees no need to reinvent pension wheel
October 29, 2009
While the insurance industry clearly has its own unique perspective on pension reform, today's article in the Financial Post by Frank Swedlove [pictured] took a refreshingly no-nonsense line: New government pension plan not necessary.
Swedlove, who is president of the Canadian Life and Health Insurance Association [CLHIA] rightly observes that there's plenty to like about the existing retirement system: the workplace-funded Canada Pension Plan (CPP) is "recognized around the world as a successful universal DB [Defined Benefit] plan." Add to that the publicly funded Old Age Security and in the direst cases the Guaranteed Income Supplement to the OAS, and that's a pretty good base to build on. As Swedlove notes, the basic public pensions were never meant to be the only source of retirement income.
Even so, as Mercer actuary Malcolm Hamilton has noted, the combination of OAS and GIS plus some provincial mean-tested programs means a senior couple that "never worked a day in their life or saved a penny" could enjoy $20,000 a year in income, much of it tax free. The only catch is they have to get to age 65 to do so.
Clearly, most of us do work and it behooves us to "save a penny" and then some out of our working incomes.
As the ACPM noted in yesterday's blog, Canadians need to save more, whether in tax shelters like the RRSP or the new TFSAs or in so-called taxable or open investment accounts. If you do all of that PLUS you're a member of an employer-provided pension, arguably most should be in a position to retire comfortably some time between age 60 and 70.
10 billion reasons why Manulife and insurance companies like the status quo
So what's the insurance industry's agenda here? Nothing insidious but at some point they're going to do a gangbuster business selling annuities. And a type of variable annuity called the Guaranteed Minimum Withdrawal Benefit (GMWB) has also proved to be a boon to the industry: just three years after it launched its Income Plus, Manulife Financial has accumulated a whopping $10 billion in Income Plus. This is aimed at Canadians who don't have a proper employer-sponsored pension plan and especially not the old fashioned Defined Benefit plans that guarantee a set income for life. Another half dozen Canadian insurance companies are also selling similar products, including Canada Life, Sun Life and Desjardins Financial.
Swedlove refers to this but only obliquely near the end of the piece in the Post, when he says "Canada's life insurers already offer guaranteed income products that allow individuals to securely shift from asset accumulation into the retirement payout phase." These newer insurance products build on this, providing "potential market growth while guaranteeing a base level of income." Swedlove goes so far as to to declare they "combine the income security of traditional DB pensions with the predictable costs of DC plans."
As the boomers age, the industry will also sell plenty of life insurance, critical illness and long-term care insurance policies, much of this integral to the estate planning business and intergenerational transfer of wealth (first from the boomers' parents to the boomers, then from the boomers to the boomers' children).
Industry could also benefit from streamlined multi-employer plans for smaller employers
Where the CLHIA sees room for improvement in the status quo is the realm of multi-employer pensions. The CLHIA's Wendy Hope says the industry firmly believes the "fastest, most efficient and cost-effective" route would be for governments to streamline and simplify pension legislation to facilitate multi-employer pension plans or MEPs. This would be particularly effective for small and medium-sized businesses that may not have the scale to run their own pension plans.
And to whom would those smaller firms turn to cope with the "costs and compliance" burden? You guessed it: the life insurance companies!
Hope says MEPs are already available to some Canadians who work for more than one employer, such as construction trade workers. "All that would be required is to eliminate the current requirements for an employment relationship between the sponsoring institution and the plan members."
CPP top-up would be a mistake; some pension problems are unsolvable
Little wonder the CLHIA views a move to radical proposals like top-ups or supplements to the CPP as a "mistake." If this happened, it raises the spectre of a "monopoly" and "increased risks to the taxpaying public." In bad economic times, "there would be an expectation that governments will guarantee benefit levels if returns fall short. This could have major fiscal implications in the future and create inequities relative to participants in other plans."
And what of the aforementioned Malcolm Hamilton [pictured right], who was unavailable the day Finance Minister Jim Flaherty issued the proposed tweaks to employer pensions? Here's his brief e-mail to me:
"From what I saw he did well...but many of the problems that people are complaining about are not solvable problems and there isn't much he can do about those."
Posted by Fillibluster at 9:09 AM
This control that Power Corporation exerts over the Liberal Party of Canada obviously explains the Liberal Party’s complete dereliction of duty in terms of advocating for all Canadian taxpayers on Harper’s income trust fraud that was perpetrated at the behest of Power Corporation and other equally self interested corporate entities and ne’er do wells.
Evidently The Liberals have little regard for the interests of average Canadians on matters that are of concern to Power Corporation, allowing themselves to b totally co-opted by Bay Street and more so by groups like Power Corporation. Today, Don Newman provides the latest evidence of that insidious relationship between Power Corp and the Liberals.
Why is this? What is the “currency” that underlies this relationship and hold that Power Corporation has over the Liberal Party? I surmise it’s because campaign financing reform may have eliminated corporate donations to candidates in an election, but did nothing to prevent corporations like Power Corporation to completely underwrite some ambitious politicians run for the Leadership of his or her party. This is where Canada’s political leaders get compromised......at the very outset of their leadership bid.....and remain forever compromised thereafter.
The Globe and Mail wrote on November 2, 2006:
High-profile directors and CEOs, meanwhile, had approached Mr. Flaherty personally to express their concerns: Many felt they were being pressed into trusts because of their duty to maximize shareholder value, despite their misgivings about the structure. Paul Desmarais Jr., the well-connected chairman of Power Corp. of Canada, even railed against trusts in a conversation with Prime Minister Stephen Harper during a trip to Mexico, and told him he should act quickly to stop the raft of conversions
Don Newman writes in today’s CBC news:
Interestingly, Cauchon wanted to be a candidate for the party leadership in 2006 when Martin stepped down.
He had left politics in 2003 when Martin's team deposed Chrétien as leader. He joined a law firm and maintained close ties with Power Corp, the giant Montreal conglomerate that is controlled by the Desmarais family and where John Rae, Bob's brother, is executive vice-president.
When Cauchon told his Power Corp. friends that he was planning a run he was told: "Forget it. Bob is running."
Cauchon was surprised at this, along with other people. After all, Rae had been the NDP premier of Ontario, and before that an NDP member of parliament.
But he did as he was told and supported Bob Rae at the convention. That is, until the last ballot when Rae was knocked off and the choice came down to either Ignatieff or Dion.
Most of the Rae people went to Dion. But realizing that, if a fellow Quebecer won, his own leadership hopes would be put off, Cauchon cut a lonely figure as he moved to the appreciative arms of the Ignatieff team.
Posted by Fillibluster at 8:52 AM
Wednesday, October 28, 2009
Ignatieff’s new Chief of Staff, Peter Donolo, stated a month ago that Ignatieff needs to identify and drive some “sharp wedge issues with the Harper government” if he expects to move up in the polls and be embraced by Canadians as a champion of their interests and worthy of becoming Prime Minister himself.
I couldn't agree more.
This is what I have been recommending the Liberals do with the income trust issue for over two years, and renewed this call to the Liberals when the global financial meltdown brought this issue back into sharp focus, with the concerns raised about pension security and how Canadians are going to provide themselves with income during retirement as well as the issue of the government having sufficient tax revenue to fund social programs and dig itself out of deficit.
This income trust issue is the perfect sharp wedge issue to drive into the heart of both the Harper Conservatives, but also Jack Layton and the NDP without whose support this policy would never have been enacted.
If Ignatieff can’t make an issue of the following, then he’s clearly in the wrong line of work:
- Harper lied to Canadians in Election 2006 when he said he would never tax income trusts
- Harper broke that promise on the completely fraudulent premise that income trusts cause tax leakage. This is a total lie and was proven as such during the Goodale consultative round. Meanwhile Harper's only proof is 18 pages of blacked out documents. What's with that for transparency and accountability?
- Harper’s policy destroyed a made in Canada investment that was akin to a profit sharing plan for the little guy and caused these investors to lose $35 billion of their life savings
- Harper’s policy also caused a wave of foreign takeovers of Canadian businesses by the likes of Korea National Oil and Abu Dhabi Energy, for a total of over $100 billion in policy related takeovers
- These takeovers are all done using means that avoid the payment of taxes. Harper’s falsely alleged tax leakage claims of losing $500 million a year, have now turned into a REAL tax leakage of over $1 billion a year. A number that will rise to $7.5 billion per annum once all the dust settles.
Surely Ignatieff can portray Harper as being both a liar and an incompetent on the income trust issue along with Jack Layton, in a way that is afforded by no other issue.
The question is only whether Ignatieff is up to it? This is a litmus test for me and probably the other 2.5 million Canadians who were directly negatively affected along with EACH and EVERY Canadian taxpayer who will pay for this policy’s revenue draining outcome.
Ignatieff needs to go back to being himself, because before he became leader he was referring to Harper’s income trust tax as an act of “vandalism” and Harper’s tax leakage claims as being “fallacious”. That’s what Canadians need from their leaders.....truth and advocacy delivered with a sense of passion and purpose. Come on Michael, prove to us that you are that leader and expose Harper for the utter cold and ruthless deceitful incompetent that he is. Stop taking advise from the self interested corporate connivers at the CCCE and start uncovering the real truths about the income trust scandal.
Otherwise, who needs a PM that has been totally co-opted by Bay Street? We already have one, and his name is Stephen Harper.
Time for Ignatieff to "distinguish" himself....in both meanings of the word.
Posted by Fillibluster at 6:38 PM
Monday, October 26, 2009
Now that Amanda Lang, formerly of CTVglobemedia’s Biased News Network (BNN)has moved over to CBC, the question becomes will she become an honest and legitimate newscaster, more concerned about the truth than advancing the policy positions lobbied for and advanced by her employer?
This new job at the CBC, airing for the first time today, affords Amanda with a clean break. We will soon learn what she is made of. Perhaps she would like to begin by exploring the multitude of foreign takeovers of trusts that have occurred since October 31, 2006 and whether a tax policy that was intended to address the alleged notion of “tax leakage” has done more to cause massive tax leakage, since none existed before, but plenty exists today with all these foreign takeover of trusts by groups like state owned Korea National Oil Company and state owned Abu Dhabi Energy Inc.
I know that Jim Flaherty went out of his way to bid Amanda farewell from her old job at BNN and claimed that he will no longer have to contend with her income trust questions. Surely Amanda’s new job at the CBC was not intended to stifle her inquiry of the government, specifically Jim Flaherty? Meanwhile I am not sure what penetrating income trust questions were ever posed by Amanda Lang, as all I ever witnesses was her incessant cheer leading of a policy that was based on the complete hoax of tax leakage, a falsehood that Amanda never challenged once, when asked to do so.
For example I attended a May 14, 2007 Toronto Board of Trade luncheon at which Jim Flaherty was speaking and at a time when the income trust issue was still very topical, at the end of which I asked Flaherty to justify his use of 18 pages of blacked out documents to "validate" his claims of tax. Flaherty refused to answer my question by saying that I was not from the press. I then turned to Amanda Lang who standing right beside me and handed her the 18 pages and asked her to pose the question instead. Her answer: “I’m not going to ask that question” and then proceeded to lob some lame softball question at Flaherty.
Perhaps with her new journalistic freedom, Amanda could explore Jim Flaherty’s argument that the income trust tax was intended to level the playing field, as if to suggest that fewer taxes were collected under the income trust structire versus the corporate structure, and ask him why a policy whose intent was to “level the playing field” employed the exact opposite measures by imposing a 31.5% tax on income trust held in RRSPs and yet a 0% tax when those very same income trust are held privately within pension funds, which is the sole motivation and loophole behind why CPP is acquiring Livingston Income Trust?
How does that address the fact that RRSPs were created in the first place to allow the 75% of Canadians without pensions to be on the same footing as the pension funds that manage the retirements of only 25% of Canadians.
I look forward to Amanda’s debut performance today on CBC at 4:30 and now that her employer is the taxpayers of Canada, I expect and demand of her a measure of honesty truthfulness, that was clearly not forthcoming in her earlier gig......on CTV’s Biased News Network.
Posted by Fillibluster at 10:07 AM
Auditor General of Canada
Attention: Margot Booth
Manager, External Communications
Office of the Auditor General of Canada
Dear Ms. Booth:
I have been copied on the correspondence below that you had with Mr. L. on the matter of the pending taxation of income trusts, commencing January 2011.
Our concerns have been renewed and heightened as a consequence of the ongoing takeover of income trusts by foreign entities using structures that are designed to evade the payment of taxes in Canada.
For example, the $4 billion takeover of Harvest Energy Trust by state owned Korea National Oil Company announced last week by way of debt leveraged buyout will mean that Canadian taxpayers will forfeit the $908 million in taxes that were collected by the Government of Canada and used to fund needed social programs from the distributions paid by Harvest Energy trust to its unitholders in the last five year period. Harvest is but one example of what is going on here and which will lead to the inevitable loss of $7.5 billion in annual taxes, not to mention the permanent loss of $35 billion in Canadians hard earned life savings. Caused by the income trust tax, whose allegations of tax leakage have only taken the form of 18 pages of blacked out documents as the basis for the Minister of Finances’ “proof”.
However we understand and are somewhat astonished to learn from your letter below that the Auditor General is unwilling to comment on policy or to audit the veracity of the Minister of Finance’s claims of alleged tax leakage from income trusts. We also understand that the Auditor General refused to answer a a similar question posed to her in the attached letter dated February 28, 2008 from Liberal Members of Parliament, this despite the fact that the Auditor Generals defines her role on her website as “"Parliamentarians need objective and fact-based information about how well the government raises and spends funds. The Office of the Auditor General is an independent and reliable source of such information."
Evidently not, since the Liberal MPs’ information request went unanswered by the Auditor General for what appears to only be political reasons?
As such. Mr. Lewicki and I would like to pose a much simpler question to you that avoids asking the Auditor General to comment on policy concerning income trusts or to even provide any transparency or accountability on the matter of alleged tax leakage
Our question, which is two fold in nature is a generic question that pertains to methodology in general, and is a very simple and straight forward question for you to answer without much effort or time required on your part. As such we look forward to a prompt reply.
First, please confirm for us whether or not the Auditor General requires that tax matters and budgeting for the Government of Canada be conducted on an accrual basis or not. Yes or no.
And second, given that we understand that the Auditor General does require the Government of Canada conduct its budgeting on an accrual basis, that it would logically follow that any analysis for any new tax measure be conducted on an accrual basis as well, and as such the taxes that are collected from income trust distributions paid to income trusts held in tax deferred savings accounts, such as RRSPs and pension funds, would under an accrual accounting basis, be fully included, as if they were received in the accounting period in question. Please confirm whether this is true, yes and no and please provide the rationale.
Again, we are not asking the Auditor General to comment on policy or even to provide numbers. We are simply asking a broad based question that is completely generic in nature and fully within our rights as Canadian taxpayers to know the Auditor General’s position on.
Thank you in advance.
Canadian Association of Income Trusts Investors/Taxpayers
Subject: RE: 18 pages of Blacked Out documents as "proof" of tax leakage?
Date: Fri, 24 Apr 2009 16:11:56 -0400
Dear Mr. L.
Thank you for your email of 7 April 2009 requesting an audit of the estimates of tax leakage that the government used in arriving at its decision to tax income trusts. Please accept my apologies for the delay in responding.
The government’s decision to tax income trusts is a policy decision and therefore something we cannot comment on. Our role is to examine whether the government’s management practices, controls, and reporting systems are in accordance with the policies that it has established.
I must further point out that we cannot report information that the government itself has classified as confidential. The information and advice that led to the decision to tax income trusts are considered advice to Cabinet and fall into the category of information that cannot be made public. Even if we audited this, we would not be able to report the kind of information (e.g. analysis) that you are seeking.
Because this is a matter of government policy, you may wish to pursue any income trust issues with your Member of Parliament, who would be in a better position to provide assistance.
Manager, External Communications / Gestionnaire, Communications externes
Communications / Communications
Office of the Auditor General of Canada / Bureau du vérificateur général du Canada
C.D. Howe Building, 240 Sparks Street, West Tower / Édifice C.D. Howe, 240, rue Sparks, tour Ouest
Ottawa, Ontario K1A 0G6
Telephone / Téléphone 613-995-3708
Facsimile / Télécopieur 613-957-0454
Teletypewriter / Téléimprimeur 613-954-8042
Posted by Fillibluster at 8:34 AM
Saturday, October 24, 2009
With Barack Obama, anything seems like it might be possible. With Canada's Stephen Harper, barely anything does
Saturday 24 October 2009 17.00 BST
Down is the new up: Canadians suddenly like Stephen Harper, but for the wrong reasons.
Michael Ignatieff's announcement on Monday that his Liberal party will not "actively seek to defeat" the Conservatives "by proposing their own confidence motions," was an almost direct contradiction to his resounding cry in September that Harper's "time is up". The Liberal threat to dismantle the Tory government is now effectively dead, and many Canadians couldn't possibly care less. We like Harper now. Unfortunately, it will get us nowhere.
The biggest political story of October hasn't been Ignatieff's troubles or the widening poll gap between the Tories and Liberals, or even some Tory MPs slapping their names or their party logo on government (read: taxpayer) stimulus cheques. Instead, it's been Harper's performance of the Beatles song With a Little Help From My Friends at a gala benefit at the National Arts Centre in Ottawa. It sparked an immediate response and softened some of his harshest critics. The media cooed, and Harper – formerly known for his wax-like public persona – became a YouTube hit.
Only days earlier, Harper had stood in a Tim Horton's coffee shop and proudly told Canadians (and the world, who had expected him to address the UN) that the Tim Horton's head office had returned to Canada. With that came the reminder: "The United States is a great place to visit, but let's face it, there is no place like our home and native land, there is no place like Canada."
In a recent column for the Globe and Mail, John Ibbitson speculated on the chances of a Canadian election in the near future. He concluded:
One way or another, the opposition parties will have to find some way to keep this government alive through the rest of the year or face the consequences at the polls. Parliament will then recess until the end of January. And with February comes the Olympics, and who wants an election during the Olympics?
For 17 days, Canadians will become Americans – fiercely patriotic, waving the flag with abandon, cheering on our athletes and celebrating what everyone hopes will be a magnificent games that will make all Canadians proud to be Canadian.
It's mostly true, except the part about becoming Americans. We should be so lucky to have such a vibrant – although obviously at times overly vitriolic – public discourse. While our neighbours to the south struggle with issues that strike at the heart of their national values, Canadians are talking coffee. Why? Because with Barack Obama, anything seems like it might be possible. With Harper, barely anything does.
Harper's schmaltzy publicity stunts are only striking a chord because, thanks to the way his government has framed Canada's current objectives, there's nothing else that can. "Our priority is the Canadian economy. Nothing takes precedence over the economy," said Harper's representative, Demitri Soudas, after the Tim Horton's appearance.
Granted, Canada must recover now in order to spend money later, but focusing only on economic recovery limits discussion by omitting other topics. It also frames discourse in such a way that future policy ideas – even important ones like those on climate change or healthcare – are discussed solely based on their current price tag, not their potential future benefit.
In other words, challenging the framework is political poison. Any suggestion of future government spending that isn't in the form of a stimulus cheque seems immediately outrageous, and makes people like Ignatieff look crazy. Conversely, it allows Harper to appear all the more in control, because essentially, there are no future plans. And the more Harper appears to be in control, the more Canadians can relax.
Under Harper, there is no pressure on Canadians to make decisions about the future, apart from what we'll wear to the Olympics. We just get our money. Under Ignatieff, with a more extensive outlook, all bets appear to be off – he is uncertainty personified. Harper's popularity might be on the rise, but it's not because of his piano playing or aw-shucks coffee shop patriotism. It's because he allows us to be apathetic. And the less we care, the better he'll look.
Posted by Fillibluster at 1:13 PM
Friday, October 23, 2009
What do the Liberals think they are doing hosting a National Pension and Retirement Income Security Forum in Room 200 West Block, House of Commons. On October 26, 2009 that is sponsored by the Canadian Life & Health Insurance Association Inc.?
What do we have paid elected members of Parliament for, to simply off load their duties to those with massive commercial interests at stake, such as the membership of the Canadian Life & Health Insurance Association?
If nothing else, these optics stink.
This supposed Forum is biased toward the interest of the Life Insurance industry before it even gets started. The Life Insurance industry have a business agenda at play here. Are the Liberals not able to host a forum on this important topic without the assistance of commercial interests? The life insurance industry have proven themselves to be up to no good, when they successfully lobbied the Harper government to eliminate income trusts in order to lessen their competition for the synthetic investment wares of the life insurance companies. This confirms my worst suspicions about the Liberal Party and their flaccid advocacy on behalf of income trust investors, whose life savings were destroyed by the hoax called tax leakage perpetrated at the behest of the membership of the very Canadian Life & Health Insurance Association, who the Liberals have appeared to accede to on these matters of pension security. This is like inviting the fox to guard the hen house.
Meanwhile we have the Liberals kowtowing to the usual list of suspects at their policy forum on pensions, starting with CARP who have proven themselves to be nothing more than a faux seniors’ advocacy group/front organization for the life insurance industry, or are the Liberals too out to lunch to know that?
National Pension and Retirement Income Security Forum
Hosted by Hon. Judy Sgro, PC, MP – Official Opposition Critic, Seniors & Pensions
Room 200 West Block, House of Commons
Proudly supported by Canadian Life & Health Insurance Association.
Susan Eng, VP, Advocacy, Canadian Association of Retired Persons
Jean‐Luc Racine, Executive Director, Fédération des aînées et aînés francophones
Mike Hale, Immediate Past President, Canadian Institute of Actuaries
Phil Benson, Lobbyist, Teamsters Canada
Joel Harden, Pension Policy Expert, Canadian Labour Congress
Michael Boychuk, President/CEO Bimcor Inc. (Representing the Group of 7)
Catherine Swift, President/CEO, Canadian Federation of Independent Business
Sue Reibel, Senior Vice President & General Manager
Canadian Group Savings & Retirement Solutions Manulife Financial
(Representing Canadian Life & Health Insurance Association Inc.)
Diane A. Urquhart, Independent Financial Analyst
James Pierlot, LL.M., Towers Perrin – Toronto
Kelly Law, Associate Director, Canada Without Poverty
Posted by Fillibluster at 3:44 PM
Notice how the Globe and Mail spins this story about the takeover of Harvest Income Trust in today’s paper. They cite the fact that Harvest was constrained for capital without any reference as to causality. The causality is obvious. Harper effectively shut down access to domestic capital for income trusts and the energy sector on October 31, 2006, leaving them both devalued and vulnerable. That is a known fact that the Globe fails to acknowledge in their ongoing attempt to conflate the facts about income trusts and Harper’s destructive actions, adversely affecting all Canadians. Harper also placed arbitrary constraints on income trusts ability to grow in classic Central Politburo fashion, as the final nail in their coffin. This had the effect of making beggars of 20% of Canada’s oil patch and the rest of the once vibrant $225 billion income trust market, not to mention the beggars that he made of Canadian taxpayers who had based their retirement plans on Harper’s deceitful and empty promise to never (double) tax income trusts.
This is the real Harper door knob story of the day.
These companied were “set up” to fall victim to foreign takeover by state owned enterprises and those with deep pockets looking for artificially “event driven” lowered value. That “event” which artificially depressed their value was Harper’s Halloween Surprise. This “set up” has played our exactly as I and other had predicted, which can only mean that our trained economist PM was acting with foresight when he made these companies vulnerable to foreign takeover and income stripping techniques like leveraged buyouts.
In the oil patch we have witnesses state owned Abu Dhabi Energy and Korea National Energy acquire $9 billion in artificially devalued trusts whose access to capital was destroyed by Harper, Flaherty and Carney.
And now for the absurdity of all absurdities, the absence of capital for Harvest CAUSED by Harper/Flaherty?Carney is about to become the sole rational and “net benefit” upon which Harvest and the Korean state will justify this purchase to Industry Canada, whereas the basis on which Harper’s self destrictive income trust tax was based and “sold” tp Canadians, namely tax leakage, will probably not even be a factor, for if it were then this proposed transaction wouldn’t have a hope in hell of being approved, because gone will be the hundreds of millions in taxes collected annually from Harvest’s present income trust unitholders, to be replaced by the complete absence of taxes paid by Korea, since they will acquire Harvest with debt whose interest payments are serviced by the pretax earnings of Harvest and leave this country FREE of taxes and FREE of withholding taxes.
Why is the Globe and Mail intent on spinning its lies and falsehoods about Harper’s income trust tax and not reporting on the truth about the circumstances that set Harvets up for foreign takeover?
Here was an email I received from a trust company CEO not long ago that testifies to this reality and dynamic in the marketplace now that the once vibrant income trust market which afforded these companies with abundant capital was yanked from beneath their feet with ZERO warning, ZERO justification......but aided throughout by the Globe and Mail and their grossly biased and incorrect reporting
“I'm on way to New York tomorrow for meetings with US investors (much more frequent since the SIFT rules drove RRSP money away from the trusts). Keep pushing. Income trusts are tax efficient vehicles that are perfect for RRSPs. Unbelievable that politicians would legislate against the made in Canada income trusts and then support the fast money ideas like ABCP, derivatives and hyper leverage. Mind boggling, and they wonder why their tax revenue has shrunk so dramatically. Maybe they need to cut and paste those 18 pages back in and have a good look.”
South Korean firm snaps up Harvest Energy
State-owned company pays $1.8-billion to get a stronger foothold in Alberta's oil sands
Calgary — Globe and Mail Update Published on Thursday, Oct. 22, 2009 8:15PM EDT Last updated on Friday, Oct. 23, 2009 6:23AM EDT
One side was struggling under a heavy debt load, strapped for cash and searching for new partners. The other was smarting from a high-profile loss against China.
And so, weeks after state-owned Korean National Oil Co. was the loser in a bidding war for Addax Petroleum Corp. in the summer, it began takeover negotiations with Harvest Energy Trust (HTE.UN-T9.792.4934.11%) .
Those talks ended late Tuesday, in a deal that will mark South Korea's biggest foreign energy purchase and another step forward in its bid to export Canadian petroleum resources to Asia.
KNOC agreed to pay $1.8-billion or $10 a unit for Harvest Energy, in a cash deal whose hefty premium serves as another indication of the strong global interest in Canada's oil patch.
It comes less than two months after PetroChina agreed to pay $1.9-billion for a majority share in two Athabasca Oil Sands Corp. projects, and has raised concerns about the growing ownership of Canada's oil patch by state-owned companies.
KNOC has already picked up a small corner of Canada's oil sands, and a company official said Wednesday that it hopes to ship Alberta bitumen to South Korean refineries. Such a move would mark a further progression in the country's plans to more than quadruple its current production to 300,000 barrels a day by 2012, a goal born of concern over energy security and a bid to move resources from the U.S. dollar into commodities.
In the past few months, the South Korean firm has either bought property or explored for oil in Peru, the U.S. Gulf Coast and northeastern Iraq.
The Harvest deal, which must be approved by unitholders and governments in Canada and South Korea, will double KNOC's oil output.
For Harvest, the rationale was simple: South Korea had money. Harvest, which is based in Calgary and produces just over 50,000 barrels a day of oil equivalent, did not.
A victim of low commodity prices and the credit crunch, Harvest slashed its annual distributions from about $550-million to $100-million in March, and had been casting about for a way forward. Its plans to bring in a partner to help pay for a $2-billion expansion of its Newfoundland refinery had crashed into the credit wall last year.
Though it succeeded in raising $120-million in new equity in June, that was far from enough. Harvest needed to spend $250-million this year just to maintain its current oil flow. It only had the cash to spend $170-million. The markets noticed, and discounted the company's stock. CEO John Zahary was looking at extending the company's borrowing, and contemplated selling assets. “We knew we had to look at our capitalization and see what was the best way to move forward.”
So when KNOC came in with its offer – which totals $4.1-billion once assumed debt is factored in – Harvest couldn't refuse the 47 per cent premium over its previous 30-day average. KNOC has told Harvest it intends to boost the company's capital spending, maintain its assets – including its Newfoundland refinery – and hold on to its 1,000 staff and management.
“At the end of the day, the premium to the trading price, and the certainty – the fact that it was an all-cash transaction – was so compelling I think the board was obliged to present it to the unitholders,” said chairman Bruce Chernoff.
Expectations that further deals may be coming boosted shares at Provident Energy, Penn West and Enterra.
KNOC has yet to produce any oil in Canada, although it hopes to receive environmental approval for the first 10,000 barrel-a-day phase of its already-purchased BlackGold project by year's end. It has supported, although not invested in, Enbridge Inc.'s Gateway pipeline project, which proposes to transport crude from the oil sands to the West Coast for offshore shipping. KNOC sees that pipe as a way to lessen its dependency on Middle Eastern oil, said Byeong-il Kim, the administration and finance manager of the nine-person KNOC Canada.
Buying Harvest will give KNOC access to another one billion barrels of oil sands bitumen. Although that land is not close enough to BlackGold to develop together, if the company can figure out how to profit from the oil sands, it is in a position to buy more, said Tom Grieder, an energy analyst with IHS Global Insight. “KNOC is interested to go there and build its technical expertise,” he said. “If this is working out and it is making money there, then perhaps it will buy other assets in Canada.”
Still, the deal has stoked worry that the Canadian government will eventually step in to block transactions like it, after watching other parts of its oil patch go to other state-owned companies. However, Mr. Zahary said he believes the South Korean commitment to boost spending will win Canadian favour.
“We see this as an opportunity for increased jobs in the country, increased capital investment in the assets,” he said. “Ultimately, I think that's good for all Canadians.”
Posted by Fillibluster at 8:49 AM
Thursday, October 22, 2009
Korean firm acquiring a Canadian oil company
October 23, 2009
By Lee Ho-jeong [email@example.com]
Korea’s self-sufficiency in developing oil and gas is expected to improve with the acquisition of a Canadian energy company.
The Ministry of Knowledge Economy said yesterday that the Korea National Oil Corp. will purchase Canada’s Harvest Energy Trust for $4 billion. Harvest is headquartered in Calgary.
This is the largest amount any Korean company has paid to buy a foreign energy company.
The Korean state-run company will pay $1.8 billion in cash and assume $2.2 billion in Harvest Energy debt.
“With the current acquisition, Korea’s self-sufficiency in developing oil and gas will go up 1.8 percentage points to 8.1 percent,” said Kim Jung-gwan, the Knowledge Economy Ministry’s deputy minister for energy resources development. “This exceeds the 7.4 percent target set by the government earlier this year.”
Last year Korea imported 870 million barrels of crude oil.
Harvest Energy has crude oil and gas reserves of 220 million barrels.
Additionally, the Canadian company produces over 53,000 barrels of crude oil and gas daily and refines 115,000 barrels of oil in eastern Canada.
The Canadian company also has one billion barrels of oil sand.
Following the acquisition of Harvest Energy, Korea’s daily production of crude oil overseas will increase from the current 188,000 barrels to 241,000 barrels.
The Korean state-run oil company is planning to complete the Harvest acquisition, which needs approval of the Canadian government, by the end of this year. Kim from the Knowledge Economy Ministry said the Korea National Oil Corp. is currently examining three to four foreign energy companies. He said the firm would likely acquire one.
By Lee Ho-jeong [firstname.lastname@example.org]
Posted by Fillibluster at 3:56 PM
State owned Korea National Oil Company today announced the takeover of Harvest Energy Trust that had been devalued in the hands of its present Canadian owners, by the income trust tax imposed by Jim Flaherty, Euromoney Man.
Les Parsneau writes:
Harvest has paid out $18.13 in distributions to approx. 150 million unitholders over the past 5 years (2004-2008). That amounts to approximately $2,719,500,000 ( $2.7195 billion) in distribution payouts over the last 5 years. Flaherty would have us believe that nobody pays tax on that money. So for 5 years no one paid taxes on $2.7195 billion dollars. So if we never collected any taxes then let's sell it to a foreign corporation who will pay no taxes and Canada will lose nothing! Sounds fair!
Posted by Fillibluster at 11:58 AM
Image: Full page CAITI ad in the Toronto Star from 2007. Click to enlarge
The evidence in now overwhelmingly upon us. The anniversary date only days away. Halloween 2006 is a day that will live in infamy as a day of treachery and treason, like none other before in this country. The treachery and treason committed by the architects of the income trust tax, Harper, Flaherty and Carney. An act of treason and treachery that needs to be publicly prosecuted, if not by the Leaders of the Opposition, then by me and others concerned about the economic fate of this country:
Treachery and treason on so many levels and adversely affecting every Canadian:
The treasonous and treacherous act of Harper promising Canadian seniors and those saving for retirement during Election 2006 that their investments were secure and that a “Conservative government will never raid seniors nest eggs by taxing income trusts”, only to do that very thing at a cost to Canadians of $35 billion of their life savings.
The treasonous and treacherous act of Harper claiming that this reversal of policy was necessary because income trusts allegedly cause tax leakage, something that is a mere artifice and outright fabrication as determined by any number of credible organizations such as RBC, BMO, CIBC, Deloitte, PWC and HLB Decision Economics.
The treasonous and treacherous act of Harper refusing to disclose the government analysis that supports such a contention and thereby defying any degree of accountability and transparency that is expected of democracies and was promised by the traitorous Harper.
The treasonous and treacherous act of Harper carving out special exemptions and massive loopholes from this tax for tax deferred pension plans, all the while arguing from the other side of his mouth that tax deferred RRSPs were the alleged source of tax leakage, and thereby favoring the 25% of Canadians with pensions at the huge expense of the 75% of Canadians without pensions.
The treasonous and treacherous act of Harper of choosing the self-interests of corporate managers and CEO over the interests of the Canadian capital market and the very Canadian investors, whose interests these corporate managers and CEOs have a fiduciary obligation to protect, rather than openly subvert and oppose.
The treasonous and treacherous act of Harper of creating a false set conditions that was lobbied for by the CEOs of Canada’s largest lifecos to kill income trusts in order for them to kill the competition for their retirement savings products, many of which were synthetic and derivative products that were insufficiently hedged and which almost caused the collapse of one of Canada’s largest life insurers when they were unable to meet the real world stress test of the global financial meltdown that famously exposed those who were “swimming naked, as revealed when the tide went out” to quote Warren Buffett.
The treasonous and treacherous act of Harper of creating massive tax leakage measured in billions of dollars of foregone annual tax revenue, where none existed before, from the wave of takeovers by non taxable entities using tax avoidance structures that were predicted by many and which have now occurred in droves and will now accelerate in the days ahead
The treasonous and treacherous act of Harper of creating a false set conditions that would see major segments of Canada’s energy sector fall into the hands of groups like Abu Dhabi Energy, Korean National Oil and Hong Kong billionaire Li Ka Shing. Who could possibly be next on the list of non taxable investors favoured by Harper to displace taxable Canadian from investing in their own country?
The treasonous and treacherous act of Harper of creating a false set conditions that would see major segments of Canada’s economy, like BCE, fall into the hands of US and foreign private equity, an outcome that was almost ensured by his income trust tax on Canadians and by his elimination of the 15% withholding tax paid by foreigners on leveraged buyout loans.
The treasonous and treacherous act of Harper of destroying the only credible means for Canadians without pensions to generate sufficient income during times of protracted low interests rates in order to live a dignified retirement after years of contributing to Canada’s economy and scrimping to have enough savings to live on.
The treasonous and treacherous act of Harper of placing Canada at a distinct competitive disadvantage to its largest trading partner, the US, who Harper had falsely claimed had shut down income trusts, when in fact have a vibrant and growing market for MLPs, the very equivalent of an income trust.
The anniversary of Happy Hallowing is upon us. The Hallowing Out of Corporate Canada by a policy whose only predictable outcome was the Hallowing Out of Canadians business by tax favoured foreign entities. The Hallowing Out of Canada’s tax base to the tune of some $7.5 lost annual tax revenue of this absurd policy is allowed to continue unchecked. The Hallowing Out of Canadians retirement lifestyles as they attempt to make ends meet with high risk stocks and low yielding bonds.
In all of this wreckage of treason and treachery there is OPPORTUNITY for the Liberals and for Liberal Leader Michael Ignatieff to demonstrate to Canadians that he has their interests and the interests of this country at heart. The Anniversary of Harper’s Act of Treachery and Treason provides the perfect opportunity to drop the doorknobs and drop the gloves and show us what you are made of what you actually stand for and stand against. That is the mark of leadership.
Advocated properly, Ignatieff could turn Harper’s claims of “just visiting” into counter claims of “just pillaging”, for the act of treason and treachery that Harper unleashed upon Canadians a short three years ago, this coming Happy Hallowing. The evidence upon which Ignatieff can base this case is overwhelming and irrefutable. Will Ignatieff champion the cause of Canadians against the treason of Harper and the sheer and utter incompetence of Jack Layton, without whose support, this policy would never have been unleashed upon an unsuspecting public.
Posted by Fillibluster at 8:23 AM
Wednesday, October 21, 2009
I guess we now know what it means to get in the good books of Euromoney?
First it was Abu Dhabi Energy acquiring Prime West Energy Trust. Then it was Hong Kong Billionaire Li Ka Shing acquiring TransAlta Power Income Trust and now we have Korean National Oil acquiring Harvest Energy. Meanwhile where is Euromoney man’s proof of tax leakage that was the false and fabricated argument for this insane policy? None of these buyers will pay a dime of taxes in Canada on these company's earnings, and are displacing Canadian investors who were happy to pay taxes at the rate of 38%. There's your tax leakage. Tax leakage created by this very policy.
Well done Stephen Harper and Jim Flaherty. You have made it an embarrassment to be a Canadian, as your actions have made fools of all of us.
Korean National Oil to Buy Harvest Energy Trust for $3.9 Billion
By Greg Chang
Oct. 21 (Bloomberg) -- Harvest Energy Trust said it agreed to a C$4.1 billion ($3.9 billion) sale to Korea National Oil Corp.
The buyer will pay C$10.00 per unit for a total cash consideration of about C$1.8 billion, and assume C$2.3 billion of debt. The price represents a 47% premium over the 30-day weighted average trading price of the units on the Toronto Stock Exchange up to and including yesterday.
Last Updated: October 21, 2009 21:12 EDT
Posted by Fillibluster at 10:21 PM
Illustration: CAITI Billboard from March 2007
Good work Jack Layton. First it was Abu Dhabi Energy acquiring Prime West Energy Trust. Then it was Hong Kong Billionaire Li Ka Shing acquiring TransAlta Power Income Trust and now we have Korean National Oil acquiring Harvest Energy. Meanwhile where is Jack Layton's proof of tax leakage that was the false and fabricated argument for this insane policy? None of these buyers will pay a dime of taxes in Canada on these conapny's earnings, and are displacing Canadian investors who were happy to pay taxes at the rate of 38%. There's your tax leakage. Tax leakage created by this very policy.
Well done Jack Layton and Judy Wasylycia-Leis:
Korean National Oil to Buy Harvest Energy Trust for $3.9 Billion
By Greg Chang
Oct. 21 (Bloomberg) -- Harvest Energy Trust said it agreed to a C$4.1 billion ($3.9 billion) sale to Korea National Oil Corp.
The buyer will pay C$10.00 per unit for a total cash consideration of about C$1.8 billion, and assume C$2.3 billion of debt. The price represents a 47% premium over the 30-day weighted average trading price of the units on the Toronto Stock Exchange up to and including yesterday.
Last Updated: October 21, 2009 21:12 EDT
Posted by Fillibluster at 9:47 PM
Nicholson defends refusal to upgrade access to information law
Commons committee sought improvements to 26-year-old law
By Corey Larocque
The Niagara Falls Review
Posted 2 hours ago
When Stephen Harper’s Conservatives broke a promise not to tax income trust funds, the House of Commons finance committee asked for government calculations about why it was necessary. When a 17-page report came back with all but the section headings blacked out, it was a “blatant” example of a government withholding information that should be public, says Liberal MP Paul Szabo.
“Everything else was blacked out,” said Szabo, a Liberal MP from Mississauga.
Now, Szabo is critical of Justice Minister Rob Nicholson for refusing to change Canada’s Access to Information Act despite recommendations from a House of Commons committee he leads, the urging of the federal information commissioner and a Conservative election promise in 2006 to overhaul the 26-year-old law that allows Canadians to ask the federal government for information or records it holds.
Nicholson, the federal cabinet minster responsible for Canada’s Access to Information Act, last week turned down a dozen recommendations Szabo’s committee made in June.
“Zero. It was absolutely zero take-up on anything,” Szabo said. “Basically, I read this report as ‘thanks for all your work, but the legislation as it is works just fine and we have a strong piece of legislation, so bye-bye.’”
Nicholson said Canada’s Access to Information law works well enough now, doesn’t need an update and his time is better spent on cracking down on crime.
“I’m satisfied the Act is working well and we have made substantial improvements to it since we became government. At the present time, all my efforts are taken up with getting my drug bill and other (anti-crime) bills through Parliament,” Nicholson said in an interview.
Nicholson said he has 10 bills before Parliament now, including a new bill aimed at getting tough on white-collar crime he introduced Wednesday.
“They are my priority at the present time. They’re very difficult – to get anything through a minority Parliament,” Nicholson said.
The Conservatives changed access rules shortly after they were elected. The Federal Accountability Act, was one of the first laws the Tories introduced in 2006. Coincidentally, Nicholson spearheaded that one, too, when he was minister of democratic renewal.
Nicholson called it “a huge step forward” to open up Crown corporations like CBC and the Canadian Wheat Board.
But Szabo called it “crap” to view the accountability act as an overhaul of the access law. It didn’t change the way the Access to Information Act works. It added a large number of federal agencies that were covered by it.
Szabo’s committee called for substantial changes, such as an ability to prioritize certain requests so important requests are processed faster than routine ones, an ability to take request denials to the Federal Court of Canada and the end to the protecting correspondence between ministers as privileged “cabinet confidences.”
The recommendations Szabo’s committee want are very complex, Nicholson added.
“It wouldn’t be an easy piece of legislation. It would be very complicated to do that,” he said.
Access legislation is a critical tool for journalists, watchdog agencies, academics, politicians and even voters. In a democracy, access to government-held records gives voters what they need to make informed decisions, Szabo said.
Article ID# 2140436
Posted by Fillibluster at 7:55 PM
Andy Willis of the Globe had the following observation in today’s paper:
“To date, financial buyers have dominated income trust takeovers. As the trust sector winds down ahead of a new tax regime, many of these companies are being swallowed by pension funds and private equity players. that put a high value on these cash-spinning plays. The coming battle for Enerflex Systems Income Fund will mark a welcome change in this trend.”
(1) Yes it will mark a welcome change, perhaps to Andy, because every other trust takeover to date has proved what that Globe had predicted would happen to these undervalued trusts to be completely WRONG. The Globe had naively thought these trusts would simply revert to corporations, when all the knowledgeable people (myself included) had said from the OUTSET that these trust were sitting ducks for the pension plans and foreign private equity and offshore buyers.
(2) Again the Globe has a difficult time admitting and reporting on the truth, with the comment that “swallowed by pension funds and private equity players. that put a high value on these cash-spinning plays.”
This is OBFUSCATION at its worst, and is intended to divert people’s real attention from the HARD FACT that pension funds (like the one that manages the Globe reporters pension fund) can acquire these trusts and be completely exempt from Flaherty’s 31.5% tax, whereas the 75% of Canadians without pensions CAN NOT and will pay an additional 31.5% tax. Does Andy not understand the simple concept that one holder who DOES NOT pay a 31.5% tax will value that asset at a higher value than the current holder who does pay the 31.5% tax? This value disparity has NOTHING to do with what Andy Willis is insinuating and everything to do with Flaherty’s UNLEVEL PLAYING FIELD that favours pension funds and foreign private equity over Canadians taxable investors and RRSPs.
These buyers place a “high value on these cash-spinning plays” for the simple fact that they DO NOT PAY the 31.5% income trust tax, whereas average Canadians do. This is Harper and Flaherty;s idea of a Tax Fairness Plan, Tax average Canadians’ savings, and give tax breaks to pension funds and foreign private equity.
Of course these buyers will pay more for these trusts' cash flows, since these "exclusive" and "tax favoured" buyers get to keep 100 cents on the dollar of these trusts' cash flows, whereas Canadian investors only get to keep 68.5 cents on the dollar of these trusts cash flows, starting the year 2011. Is that too hard a concept for Andy Willis to wrap his mind around and report correctly on?
Come on Andy, show us you aren’t so gullible and naïve. Try to report the truth for once and explain to your readers what a complete fraud this income trust tax is. From the fraudulent argument about tax leakage. To the fraudulent argument that this tax would level the playing field, when in fact, it achieve the opposite, and only served as a form of grease for the pension funds and private equity to rip off Canadians investors and all Canadian taxpayers. This exemption for the pension funds was their form of policy payola for supporting Flaherty’s absurd and grotesquely unfair income trust tax, as per this press release from Ontario Teachers of November 1, 2006:
Teachers' response to new federal income trust policy
The Ontario Teachers’ Pension Plan has advocated for a taxation policy on income trusts that does not discriminate against pension funds [just against RRSPs and the 75% of Canadians without pensions, the people we consider suckers*] , and we are pleased to see that this is the case with the government’s announcement yesterday (October 31, 2006).
The reality is that, in a protracted period of low interest rates, it is important to find alternate investments with yields that help make up the difference. Income trusts have allowed us to do that in recent years. The challenge will be to find the investment vehicles that will replace the income and cash flow that income trusts have represented to us, but we are confident that our investment team will find them. The four-year implementation period for this new policy will enable us to gradually make any necessary adjustments to our portfolio.
There is good news for pensioners and other seniors over age 65 in this new policy [but which has no bearing whatsoever on the returns that Ontario Teachers' will generate, but we were asked by Jim Flaherty to make a glowing statement anyway to help him politically*] which will help take the sting out of the new tax policy on income trusts for them [except it only benefits people with "pension income" who were the least likely people to hold income trusts in the first place, and therefore this income splitting is nothing more than a smokescreen as it does nothing to benefit income trust holders, but rather the 25% of Canadians and politicians with pension plans*]: the age exemption tax credit will be increased by $1,000 and income splitting will be permitted.
Director, Communications and Media Relations
Ontario Teachers' Pension Plan
* Editor's note
Posted by Fillibluster at 9:09 AM
Monday, October 19, 2009
What are the chances the Liberals will hold a Halloween press conference on Harper's income trust fraud?
Hey, is that a gold plated door knob paid for by taxpayers that Liberal MP Wayne Easter is holding?
Perfect. It will match his gold plated pension plan that is also paid for by taxpayers. One is professed to be bad, the other inherently good?
What do you suppose the chances are that the Liberals will hold a press conference on Halloween to expose Harper’s lies about tax leakage and the damage inflicted to all taxpayers from Harper’s income trust policy, not to mention the $35 billion in Canadians' life savings that was destroyed?
Or are the Liberals only focused on the "big stuff", namely the stuff that matters to them, like door knobs as evidence of Harper's wrong doing? How about Harper’s lying to all Canadians about tax leakage, as a better example of wrong doing? Or would exposing that patent falsehood alienate certain “door knobs” on Bay Street to which the Liberals seem increasingly beholden to?
Door knob replacement justifies signs advertising federal economic plan
By Joan Bryden (CP) – 1 hour ago
OTTAWA — The Harper government is plastering signs promoting its economic action plan on federal buildings that are receiving what Liberals say is routine maintenance.
Liberal MP Wayne Easter says a huge "propaganda" sign has been posted outside an RCMP building in Charlottetown, where "internal door hardware" - otherwise known as door knobs - are being installed.
"That seems to me like it should be regular maintenance," Easter told a news conference Monday.
"Do you think this is stimulus, putting a door knob in an RCMP building in this country? (Prime Minister) Stephen Harper calls this stimulus?" he said, holding up a door knob for emphasis.
"For every (time) he screws a light bulb in a building, he'll probably have a sign out in front of it and it's your money."
Liberals contend the door knobs are further proof that the Conservatives are using taxpayer-funded stimulus programs to promote their partisan interests.
They've filed complaints with Parliament's ethics commissioner against 55 Tory MPs who have presented personalized cheques or used the Conservative party logo while announcing government funding.
And they've accused the Harper government of ensuring that infrastructure funding disproportionately benefits Conservative ridings.
They pounced Monday on a report that the government spent $108,000 to stage a carefully scripted town-hall style meeting to unveil its second progress report on the economic action plan. The June event in Cambridge, Ont., replaced a simple tabling of the report in Parliament at little or no cost.
"The partisan abuse which is going on around Canada is now completely out of control in that it represents the single largest propaganda effort in Canadian political history,"said Liberal MP David McGuinty.
Easter pointed out that the economic action plan website was initially salted with photos of the prime minister and included a link to a video of Harper playing the piano and crooning a Beatles tune at a recent National Arts Centre gala. After media reports, many of the Harper photos were removed and the link to the video disappeared over the weekend.
"So I believe clearly that the prime minister knows he was over the line," said Easter. "It's an admission of guilt of abusing taxpayers' money."
The generic signs posted on projects trumpet the economic action plan but don't specify the work being done, which Liberals said violates Treasury Board rules.
McGuinty suggested the ploy is aimed more at boosting the governing party's popularity than informing taxpayers how their money is being spent.
Easter said federal officials have told him that more than $800,000 has been allocated for repair and restoration of federal buildings and facilities in Prince Edward Island - each of which features large signs advertising the action plan.
The projects include installation of a boiler room door in one building, an air-exchange system in another and elevator upgrades in a third.
They also include moving an iron fence at one site and modifying walkways, ramps and washroom doors to make another building more accessible.
Easter said the latter improvements are particularly hard to understand because they're in a building that opened only a few years ago and should have been accessible in the first place.
Copyright © 2009 The Canadian Press. All rights reserved.
Posted by Fillibluster at 4:55 PM
The US has their Balloon Hoax. Canada has Harper’s Tax Leakage Hoax.....gleefully advanced by complicit news organizations with commercial reasons to mislead the public on income trusts, namely the Globe and Mail, CTVglobemedia, Torstar and Canwest Global. Some country we live in, where the media lies to the public on hard factual matters like tax leakage, providing the false justification for Harper to destroy $35 billion of Canadians savings and usher in a whole wave of foreign takeovers, simply because it serves the narrow self interests of those who control these media whores.
Sheriff: Media Outlet May Be In On Balloon Hoax
Monday, October 19, 2009
FORT COLLINS, Colorado — The story that a little boy had floated away in a giant helium balloon was a hoax concocted to land a reality television show, authorities said, and the boy's parents will likely face felony charges.
Investigators are examining the possibility of other conspirators, "including the possibility that even some of the media outlets may have had some knowledge about this," Alderden said.
Posted by Fillibluster at 11:11 AM
This Vanity Cheque Scandal is the same mentality and partisan abuse of taxpayer's money that was behind the Sponsorship Scandal, especially given this.
Posted by Fillibluster at 8:33 AM
How many retirement nest eggs were destroyed by Harper's lies? What are the Liberals doing about it?
Broken Nest Eggs from Calgary writes in the Globe:
"Vernon" and "On the Water", you guys are absolutely correct.
How many nest eggs were destroyed by Harper's Lies?
Because of the lies, many people's retirement dreams were destroyed. The tax fairness plan was a fabricated hoax (double tax and double cross) in order to suck unknowledgeable people into their dirty plan to destroy the Income Trust market. Flaherty's justification was to provide 18 pages of blacked out documents.
Is this the Honest, Open and Accountable government Harper promised when he was elected? So by destroying the Income Trust Market, who were the main beneficiaries? I suggest it was the Life Insurance Companies and Canada's Controlling Corporate Elite (CCCE). It was Income Trusts that were in direct competition to the Insurance companies so they had to be destroyed. To hell with the average Canadian Investor many of whom were seniors.
This government supports Foreign Investors but Canadian Investors get to eat dirt. Mainly profitable Canadian owned Trusts were sold on the cheap to foreigners who won't pay a dime in tax. I suggest that the Globe and Jackie McNish are part of the cover-up and are guilty of enabling the CON's game of lies and distortion.
From my vantage point, none of the facts are being made available to Canadians who are being kept in the dark. When Harper and Flaherty keep repeating the same lies often enough it now becomes the truth. Why doesn't the press does not call them on it? I suppose the reason is the press is run by the CCCE.
A real shame and Canadians and democracy are the victims.
Posted by Fillibluster at 8:18 AM
Sunday, October 18, 2009
Comment on Globe and Mail's weekend story about Retirement Lost by "Just a humble man":
Nobody has brought up Income Trusts yet so i guess I will. Canadians had public equity Income Trusts as a source of income for their retirement but our good friends Harper and Flaherty decided that would not be the case anymore and destroyed/stole our capital. Its funny, private trusts, offshore trusts, and public pension plans owning companies and managing them as trusts are still ok. Look who benefits and look who suffers. The wealthy in this country make the laws and rules that favor themselves but it comes at the expense of other good Canadians. Yes, trust NO ONE. They all LIE. Look after yourself.
Posted by Fillibluster at 11:25 AM
Friday, October 16, 2009
I expect the Globe will completely ignore the $35 billion in retirement losses caused by their "courageous" Jim Flaherty
Retirement Lost: Pension bankruptcies and sour investments create a harsh reality for Canadian retirees
Globe and Mail series examines the impact of today's economy on
TORONTO, Oct. 16 /CNW/ - Today's current economic conditions have created a harsh reality for many of today's retired Canadians and for the future retirement plans of others. This Saturday, The Globe and Mail launches "Retirement Lost", examining the implications the economic downturn has had on Canadian retirees, the fate and future of pension plans, and questioning a need for change.
One-quarter of Canadian workers have pension plans, and for Canadians relying on their pensions, low investment returns, or worse, pension bankruptcy means retirement may not happen as planned, or at all. As businesses face the nightmare of economic failure, The Globe and Mail provides insight into the many Canadians whose dreams of retirement are shattered, through a week-long multi-media series, Retirement Lost.
"The past year has been centred around the plight of today's economy and the direct impact on working Canadians. Retirement Lost will reveal the financial and emotional challenges retiring Canadians face as they suffer through failed investments, under funded pensions and corporate bankruptcies," said Elena Cherney, Editor, Report on Business. "The series sheds a light on this time of instability and uncertainty for retirees."
Led by reporters from the Report on Business, the special series will run daily from Saturday October 17 to October 24 in the Report on Business section of The Globe and Mail and online at www.globeandmail.com/retirement, featuring personal stories and analysis, an in-depth timeline and breakdown of the pension crisis, expert commentary and a look at those most vulnerable.
Also online and part of the series:
- Online discussion with retirement expert Malcolm Hamilton
- Planning and protecting your retirement
- Are you ready for retirement? Interactive investment calculator and
online scenarios to evaluate your retirement plans
- Visit globeandmail.com/retirement and share your retirement plans
The Globe and Mail, Canada's national newspaper, is a division of CTVglobemedia, a dynamic multimedia company, which also owns CTV Inc., Canada's number-one private broadcaster.
For further information: or to arrange an interview with Jacquie McNish or Janet McFarland, please contact Jennifer Hills, (416) 999-7118, email@example.com
Posted by Fillibluster at 3:04 PM