Wednesday, April 11, 2012

Andrew Coyne asks: "When governments lie, how do we respond?"


Andrew Coyne writes: The F-35 scandal — when governments lie, how do we respond?

Well Andrew, this same government has been lying since that fateful day on October 31, 2006 when they decided to renege on their 2006 campaign election promise to "never tax income trusts". Their rationale for reneging? Income trusts cause tax leakage they said. As any credible financial institution (eg, RBC Capital Markets, BMO Capital Markets, Pricewaterhouse Coopers, HLB Decision Economics) would have told you, income trusts do not tax leakage. In fact the opposite is true, income trusts maximize the government's take of corporate profits. Just ask someone like senior ex Finance official Len Farber.

So to your question of "how do we respond", well, your response back in October 2006 was to agree with the government and support their patent lie that income trusts cause tax leakage. You missed your opportunity five years ago to call this government what it is.....incompetent liars.

You (along with many in the press) are part of the problem, and not the solution. Reporting the truth is not a selective or subjective exercise, it is an objective exercise and absolute. Otherwise it is just propaganda.

12 comments:

Anonymous said...

We move from lying Brian to lying Stephen.

Dr Mike said...

Andrew Coyne said : " And it is about whether we, as citizens, are prepared to pay attention, and hold people in power to account when they lie to us."

As proud members of CAITI , we saw , we tried , we lost.

Dr Mike Popovich

Anonymous said...

Brent,

You rightly ask where were and where are the members of the media? Their job is to report the facts in an objective manner. Anything else is propaganda.

Railhound

AC said...

This is in fact what I wrote at the time:

But... there is that little matter of the broken promise. The Tories could not have been clearer in the last campaign. “A Conservative government,” the party platform read, will “stop the Liberal attack on retirement savings and preserve income trusts by not imposing any new taxes on them.” Read our lips. Governments are given some latitude for changing course in the face of changing circumstances. But what is there about present circumstances that could not reasonably have been foreseen last January? 
Mr. Flaherty says it was the prospect of a flood of large corporations converting into income trusts that forced his hand, notably the announcements to that effect by two large telephone utilities, BCE and Telus. Fair enough: no government could tolerate either the revenue loss that would entail, or worse, the distortion of economic activity involved in such a massive exercise in tax arbitrage. But everyone knew that this was a prospect, indeed a likelihood, last year at this time. That’s why the last government cut the dividend tax, though it only succeeded in closing part of the gap. 
You say all those corporations rushing to file as income trusts turned a likelihood into a reality? What did you expect? You told them to. "A Conservative government will preserve income trusts. By not imposing any new taxes on them." Apparently they took you at your word.
That’s the part of this that’s going to do the most lasting damage to Conservative election prospects. Keeping their promises was supposed to be part of the Conservative brand: that’s what the “five priorities” were about. Sure, they’ve already fudged, if not broken, about two and a half of them -- the wait times guarantee (still waiting -- perhaps we need a wait time guarantee on the wait times guarantee), the Emerson and Fortier appointments, the promised access to information reforms. But never in such a clear-cut, inarguable fashion, and on a matter as dear to the voters’ hearts as taxes -- money, in other words.
Should they, then, have stood by and done nothing, while corporate Canada poured through the income trust loophole? Should they have kept their promise, even if the promise was bad policy? No. But that doesn’t get around the apparent bad faith involved in making the promise in the first place -- a promise they must have, or should have, known they could not keep. 
But who’s going to call them on it? The Liberals? The party that was going to scrap the GST? The NDP, who’ve never had to keep a promise, never having been in power? In truth, every party is guilty of this, and in consequence none of them is trusted -- even when they’re telling the truth. And with each more extravagant effort to convince voters that, this time, we really mean it -- what, after all, were the Conservatives elected on? -- the damage is greater, and public cynicism grows. 
What will they campaign on, any of them, next time? What promises can they possibly make? Why should anyone believe them?

Brent Fullard said...

Yeah and what you wrote was all patent nonsense starting with your comment of:

"Fair enough: no government could tolerate either the revenue loss that would entail, or worse, the distortion of economic activity involved in such a massive exercise in tax arbitrage".

This statement of yours is just another way of repeating the government's FALSE PREMISE that "income trusts cause tax leakage".

You are simply and shamefully REPEATING the government's lie. Tax leakage is a infinitely provable or disprovable construct. It's not like a debate about same sex marriage. This is a fact based discussion and policy. Where are the government's facts? Where are your facts? The facts do not support your case or the government's case/policy.

The FACT is income trusts do not cause tax leakage and the patent nonsense that you repeated about BCE and Telus is shameful for any journalist to repeat (without proof) and especially so for one who went to the London School of Economics. The FACT is, the reverse of what you said is true.

If you want to know the truth about your false allegation of tax revenue loss fron BCE and Telus, I suggest you go to:

http://www.caiti.info/resources_it_mythbusters.php

and read Myth #3:

The sky is falling... the tax threat of BCE and Telus converting.

As for the rest of what you wrote, it's all patent nonsense as well. I'd be happy to tell you why, if you express an interest in my doing so.

Dman said...

WHEN this Pathetically Stupid Steve HARPER ATTACK PARTY OF Canada does nothing but LIE and when everything that STEVE Crooked HARPER touches turns to animal excretion, I say : GATHER UP YOUR PERSONAL STUFF; SECURITY STAFF WILL PERSONALLY ESCORT YOU OFF THE PROPERTY; DO NOT COME BACK ONTO THIS PROPERTY ... YOU HAVE BEEN TERMINATED, FOR YOUR BLATANT WILLINGNESS TO PARTICIPATE IN A FRAUDULENT ENTERPRISE & FOR TOTALLY INSULTING CANADIANS FROM SEA TO SHINING SEA, over & over & over again ... GOOD LUCK IN FUTURE YOU CROOKED POS !!!

Bruce Benson said...

Dman, you comments are bang on but my comments would not be so kind.

Geoffrey Laxton said...

AC: BCE and Telus announced shortly after the Halloween Massacre taht they weren't going to be paying any tax for several years. Left to the free market as income trusts, they wouldn't be able to play these tax arbitrage games as Canadians receiving distributions in their retirement accounts would pay income tax on this money. Since some commentators think that paying out a consistent income stream to investors is “lazy capitalism”, then what do they think about corporate managers and executives who direct a significant amount of corporate resources toward buying back their shares? How hard can it be to pick up the phone and buy some of your own shares? Another way to look at it is this: Why should shareholders and fund managers pay corp executives hundreds of thousands of dollars a year in salaries + bonuses + stock options to simply buy their own shares. Fund managers can buy shares – a lot more efficiently and cheaply than corp executives can. Investors don’t need to pay executives millions of dollars to do something they can do themselves. What they need are executives that can build asset value, or failing that, pay out a reliable income stream from their assets. Both of those activities take management skill and effort. Why don’t any of these commentators ever question this well-trod corp strategy?

Anonymous said...

Brent,

As usual, the media in the guise of folks like Andrew
Coyne use weasel words to allow them to take a position either way. This is so much easier than doing research on a subject and reporting on a fact basis versus an opinion basis.

It is a simple statement of fact that Income Trusts did not cause tax leakage. As you pointed out, there are many firms that have done the research to prove this point. There is also research that one can do for oneself. Say, wouldn’t that be a fine thing for a journalist to do?

To put this debacle in perspective, the entire fleet of over priced F-35s and the maintenance contract to service them over their lifetime could have been bought with money lost by Canadian investors.

If that were only the worst of it we would be lucky as Canadians as a whole. Except that Harper’s decision continues to cost billions of dollars in tax leakage per year. They actually created a problem of tax leakage.

If Andrew Coyne had one ounce of journalistic integrity, he would at least spend the time required to understand whether this truly was the biggest financial blunder of all time for a Canadian Government or not.

Sorry Andrew. Weasel words just don’t cut it.

Railhound

Anonymous said...

Dear AC,

Anyone who did even the most rudimentary analysis would see the total flaw in the arguments that Flaherty put forward and your acceptance of them.

For example your statement, “That’s why the last government cut the dividend tax, though it only succeeded in closing part of the gap.”

This statement is flawed in so many ways I could write pages on the subject but here are two fundamental issues.

1) The dividend tax credit is in place to ostensibly offset taxes already paid by the corporation paying the dividend. That’s a flawed concept in and of itself because there is no correlation between the taxes paid by the corporation and the dividend tax credit provided.

Both BCE and Telus were paying dividends even though they were not paying any income taxes because they had so many losses and write-offs they could use.

Therefore, a dividend tax credit was being given when no tax at all was paid by the corporation. Why should a dividend tax credit be available for corporations that don’t pay tax? That’s real tax leakage. In fact, all that Harper did by this measure was to increase the tax leakage.

2) By providing a dividend tax credit in the first place, the government is only skewing the market using Canadian taxpayer dollars. If a corporation wants to compete in the investment market place it had better be efficient and profitable so it can provide a competitive return for investors.

The fact is that the dividend tax credit only encourages inefficiency and corporate largesse and is the same as subsidy. Corporations know that they can set their returns at a certain level and still compete in the market place because the Canadian Government with subsidize the return. That leaves more for the multi-million dollar pay packages of the corporate executive.

If you contrast that with the very efficient Income Trust model, where excess profits were returned to the unit holders and hence taxed at full individual rates (read much higher tax rate) you can easily start to see the differences in value both to the investor and the Canadian Government.

In order for an Income Trust to compete, they had to maintain a competitive distribution. To do that, they had to be very efficient managers of the corporate purse, operations and business development. (Hardly coupon clipping but that’s another story). Essentially, every month the Trust had to meet the investor distribution “payroll”. No need at all for a dividend tax subsidy.


That’s really the issue. The CCE and other lobbyists did not want to give up on their gravy train. They couldn’t compete while on the gravey train with Income trusts so they coerced Harper et al to kill Income Trusts.

Do some research. This was the biggest financial blunder of all time by a Canadian Government.

Railhound

Anonymous said...

AC

Where was the media on the income trust tax leakage lie?

The truth about he income trust lie from the Harper FLAHERTY GOVERNMENT IS RIGHT HERE on the CAITI site.

ACDC read and learn

MC

Anonymous said...

AC

Where was the media on the income trust tax leakage lie?

The truth about he income trust lie from the Harper FLAHERTY GOVERNMENT IS RIGHT HERE on the CAITI site.

ACDC read and learn

MC