Sheila Fraser is now officially in bed with Manulife

Isn't it strange that Canada's Auditor General Sheila Fraser refused to investigate whether the Harper government's claims of tax leakage from income trusts was a valid policy argument or not? In her role as Canada's Auditor General she was asked on numerous occasions by numerous groups and many thousands of Canadians to do so and refused. She even refused the written request of the Liberal Members of the Finance Committee to report on the validity of tax leakage, or not, thereby making a total mockery of her mandate which is described on her website as "Parliamentarians need objective and fact-based information about how well the government raises funds." Evidently not!

One of the greatest beneficiaries of the Harper government's move to kill income trusts and Sheila Fraser's dereliction of duty and one of the groups that lobbied hardest for this regressive government policy was Manulife Financial, since they were having a hell of a time selling their inferior retirement investment products in the face of Canandians' growing preference for income trusts. So what was Manulife's strategy? Engage in massive government lobbying and position yourself to benefit from the litany of falsehoods about income trusts, such as the allegation that income trusts cause tax leakage, which any Auditor General worth her salt could have easily proven was a crock of nonsense.

Is is any wonder that Sheila Fraser has now been appointed to the board of Manulife?

Here's the letter from the Liberals that Sheila Fraser ignored:

For Immediate Release
February 29, 2008

Liberal Finance Committee Members call on Auditor General to Examine Government's Claims of Income Trust Tax Leakage

OTTAWA - Liberal Members of the Standing Committee on Finance today called on the Auditor General to investigate the tax leakage claims that the government used as the basis for its October 31, 2006, decision to tax income trusts.

"I think that this government's stonewalling has gone on long enough and it's time that Canadians got to see that the Government simply made up its story that income trusts cause federal tax leakage," said Liberal Finance Critic John McCallum.

"Prime Minister Stephen Harper promised to Canadians that he would never tax income trusts. Then he went back on his word, costing Canadians billions overnight and in the wake of his silence on the issue we feel that only the Auditor General can shine some light into this matter."

All four Liberal Members of the Finance Committee signed a letter to Auditor General Sheila Fraser asking her to investigate the matter, particularly the government's unproven allegations about income trusts causing tax leakage.

"This has clearly become much more than just another instance of the government not doing its homework before acting. It has become a full-blown scandal and cover-up," said John McKay, Member of Parliament for Scarborough-Guildwood. "We have tried virtually every tool at our disposal to get the government to show us how they came to their conclusions about tax leakage and the Auditor General may be Canadians' last resort."

An Access to Information request asking for the Department of Finance's assumptions, data and methodology resulted in the release of only 23 pages of documents that are almost entirely blacked out.

A direct request from the Finance Committee to see the data was met with two thick binders of superfluous information that did not contain the data or methodology originally requested.

A written question was placed on the Order Paper asking the government to recalculate its estimate of tax leakage using the 15 per cent federal corporate tax rate that will actually be in effect in 2012, the year after the income trust tax begins, as opposed to the 21 per cent tax rate that was in effect at the time of the announcement. The government's response to the question indicated that that this would be a hypothetical calculation and therefore impossible to do.

"That's not a hypothetical, that's what the federal tax rate will be," said Garth Turner, Member of Parliament for Halton. "If the government can't manage to run the new 2012 corporate tax rate through their calculators then I have no reason to believe they ran the old one through their calculators in October of 2006."

In 2006, Stephen Harper ran on a campaign commitment to never tax income trusts. The Conservative election platform characterized any attempt to impose such a tax as, "An attack on retirement savings."

"That election commitment was obviously a falsehood. Unfortunately the voters who believed it and invested even more money in income trusts lost a significant portion of their nest eggs," said Massimo Pacetti, Member of Parliament for MP for Saint-Léonard-Saint-Michel.

"Even today, 15 months after they broke their election promise, Members of Parliament still hear from the thousands of Canadians whose retirement plans were shattered by this deception. Liberal Members of Parliament continue to stand up for them."

-30-



Here's perhaps the reason why:

Sheila Fraser appointed to Manulife Board of Directors

TORONTO, Nov. 3, 2011 /CNW/ - Manulife Financial Corporation and The Manufacturers Life Insurance Company announced today that Sheila Fraser has been appointed to their Boards of Directors, effective November 2, 2011. Ms. Fraser will sit on the Audit Committee and the Conduct Review and Ethics Committee.

Ms. Fraser served as Auditor General of Canada from 2001 to 2011. Prior to joining the Office of the Auditor General as Deputy Auditor General in 1999, she was a partner at Ernst and Young for 18 years.

Her contributions to the accounting and auditing profession include her current role as member of the International Federation of Accountants-International Public Sector Accounting Standards Board (IFAC-IPSASB). She has also chaired two committees of the International Organization of Supreme Audit Institutions (INTOSAI) as well as the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.

Ms. Fraser earned a Bachelor of Commerce from McGill University, is a Chartered Accountant and among her many honours has received the designation "Fellow" from the Institute of Chartered Accountants of Ontario and the Ordre des comptables agréés du Québec.

"Ms. Fraser's financial background, management experience as Auditor General of Canada and leadership roles on international accounting issues make her an important addition to Manulife," said Manulife Chair, Gail Cook-Bennett. "We are delighted to welcome Sheila Fraser to our Boards."

Stockwell Day signs up for reverse mortgage scam

Stockwell Day has signed on as a Director of HOMEQ Corporation, who are engaged in the field of reverse mortgages, where seniors strapped for cash resort to selling their homes for 40 cents (or less) on the dollar. I consider that a scam and an act of financial desperation/exploitation.

Thanks to people like Stockwell Day, Canadian seniors are more strapped for cash now than ever what with the protracted low interest rates providing them with less income from their limited retirement savings.

As a prominent member of Stephen Harper's cabinet, Stockwell Day participated in the destruction of income trusts, which had emerged as the Canadian capital market's solution to the problem of Canadians providing for themselves with sufficient income during retirement, rather than resort to means like reverse mortgages. That preferred solution was summarily taken off the table when the Harper Conservatives made the fraudulent argument that income trusts cause tax leakage, denying Canadians that choice and casuing great financial hardship.

Meanwhile here is what the duplicitous Stcokwell Day wrote while in opposition on the matter of income trusts:


November 8, 2005.

Dear Mr. Laxton

Thank you for expressing your concerns about the confusion the Minister of Finance has caused on income trusts.

Income trusts have helped numerous Canadian companies grow and flourish and enabled ordinary Canadians to generate more income for their retirement years. The federal Liberal government's reckless decision last September to cancel advance tax rulings on income trusts caused Canadian businesses to lose billions of dollars in market capitalization and Canadians to lose thousands of dollars of personal savings.

Canadians investing in good faith to save for their retirement deserve certainty, not a government review of how the Liberals can grab more taxes from them.

We know that Canadians draw regularly form their investments to supplement their retirement savings. When the value of their investments drops as a result of government indecisiveness, so does their retirement income. It is time the government stopped penalizing our citizens.

My colleagues and I in the Conservative Party are committed to maintaining income trusts as a valuable savings and investment tool for Canadians.

Thank you again for contacting me,

Yours sincerely,

[signed Stockwell Day]

Stockwell Day, M.P.
‘Okanagan-Coquihalla
Official Opposition Foreign Affairs Critic

Mark Carney on the Canadian Wheat Board

"It is imperative there is widespread democratic support for those measures," said Carney.

Sorry, Mark Carney was talking about Greek citizens and their bail out package, and NOT Canadian wheat farmers and their Canadian Wheat Board. Surprised?

Ooops! Could Mark Carney have been more WRONG on Greece?!

THEN: Carney supports Greek referendum
November 1, 2011 | 16:04
By MARK DUNN, Senior National Reporter | QMI Agency


OTTAWA - Canada's top banker says he fully respects a bombshell decision by Greece to hold a referendum on a bailout package that sent global financial markets into a tailspin Monday.

Bank of Canada governor Mark Carney appeared before a Commons committee Tuesday, on the eve of a G20 summit in France, where the crisis in Greece has prompted calls for the country to be tossed from the European Union.

"If this is Greece's decision, we fully support that," Carney said about embattled Greek prime minister George Papandreou's declaration to let his countrymen decide whether to accept last week's eleventh-hour rescue package.

"It is imperative there is widespread democratic support for those measures," said Carney.

The worsening financial situation and the potential for Greece to reject the $180-billion bailout risks sending the country into default.

NOW: Papandreou scraps Greek referendum as internecine erupts in his party
Greece's prime minister clings on to power on day of drama, but is likely to lose Friday's confidence vote in Greek parliament

Helena Smith and David Gow in Athens
guardian.co.uk,
Thursday 3 November 2011 21.29 GMT

The Greek prime minister, George Papandreou, has been forced by open warfare in his socialist party to cancel a planned referendum on the latest bailout package for his near-bankrupt country as he fought for political survival amid mounting scepticism over the crisis-hit nation's future in the eurozone.

After a day of high political drama, intrigue, farce and rumour, Greece descended further into chaos as Papandreou, clinging desperately to power, insisted on holding a confidence vote in his administration on Friday. But, as his majority shrivelled to just one, he also said talks over the creation of a unity government were already underway.

Stevie the Steamroller strikes again

My comment on: http://www.facebook.com/pages/Stop-The-Steamroller/311592005521756

Only a lunatic (i.e. Harper) would take such an unwarranted action of destroying the Canadian Wheat Board. Of which, the net benefit to Canada and all Canadians will be VASTLY negative. Any chance that Brian Mulroney, Director of US agri-giant ADM is behind this lunatic move? Canada's loss will be ADM's gain and others like it. Small farmers will be marginalized and their land acquired on the cheap by larger (foreign) interests, as the collective selling power of the CWB becomes a free for all in the marketplace for wheat, and farmers lose any control over pricing. Any economist worth their salt would predict that the outcome of this will be negative. I thought Stephen Harper was a "trained economist"? Instead he must be a trained anarchist...... or a total ideological fool.

Steamroller Steve strikes again! Just as he did with the gun registry, income trusts, the nuclear safety watch dog. The list goes on........

Jailing the homeless 2.0

Need you be reminded, the following was written about Jim Flaherty's first failed attempt to become leader of the Ontario Conservatives and his policy of jailing the homeless:

Scourge of the homeless
The Globe and Mail
February 16, 2002
EDITORIAL

"Ontario Finance Minister Jim Flaherty was looking for publicity, and he found it. When quizzed by reporters, he had no idea what his policy of dragging the homeless off somewhere, anywhere, would cost. He just wanted it done. He wanted to solve a complex social problem by sending out special police squads.”


Will Jim Flaherty be the next leader of the Ontario Tories?
By Andy Radia | Canada Politics – Fri, 28 Oct, 2011
Yahoo News

Stephen Harper could be losing his most senior cabinet minister.

A column in Thursday's Toronto Star notes there are good reasons to believe finance minister Jim Flaherty will shift to provincial politics and make a play for the leadership of the Ontario Tories.

"(Flaherty) is reportedly tired of the heavy international travel required in his job, which keeps him away from his Whitby home for long stretches at a time. Also, Flaherty realizes his boss, Prime Minister Stephen Harper, isn't likely to step aside until well after the next election in 2015. Flaherty, who finished second to Eves in the 2002 provincial leadership race, has made little secret that he wants to run his own show," journalist Bob Hepburn notes.

"At the same time, Flaherty's wife, MPP Christine Elliott, who ran and lost against Hudak in 2009 for the party leadership, is said to be tiring of Queen's Park and would happily step aside for her husband to run in her Whitby-Oshawa riding."

Losing Flaherty would be a significant loss to the Harper government.

Canada's finance minister is well-respected both nationally and internationally and is credited for successfully steering Canada through the last recession.

But Canada's loss would be Ontario's gain - and Tim Hudak's pain.

Even without the threat of a Flaherty leadership bid, Hudak, the current leader of the Ontario PCs, was already headed for troubled waters.

Paul Tuns of the Ottawa Citizen suggests there are many Conservatives who blame Hudak for not dislodging the Liberals from power despite a double-digit lead in the polls just 12 weeks before the October 6 election.

Adding to Hudak's woes, is the decision by Tory MPP and former leadership rival, Frank Klees, to break ranks with Hudak and run for speaker of the legislature.

Klees's move is a blow to Hudak because if he becomes Speaker, he would reduce the number of voting opposition members to 53, the same number the minority Liberal government has.

And, by virtue of parliamentary tradition, the Speaker votes with the government on crucial issues, which would result in the Liberals staying in power until 2015.

The Conservatives' constitution requires the party to hold a leadership review vote at the first party convention after an election defeat, notes Hepburn.

If Flaherty were to declare his intention to seek the leadership before the convention planned for early 2012, it could spell the end for Hudak's reign as PC leader.

Creating perception of a crisis to sell the huge tax on income trusts in 2006

By creating the perception of crisis—when none in fact existed—the Harper government made it easier to sell an extreme policy action to voters, one that effectively eliminated a useful form of business organization.

Income trusts: One of the most important elements of the Harper government’s strategy for selling the new 31.5 per cent tax on most publicly-traded income trusts, announced on Oct. 31, 2006, was to convey to the public the idea that the government faced a crisis induced by a series of exogenous events, argues columnist W.T. Stanbury.

By W.T. STANBURY | Oct. 10, 2011
The Hill Times

One of the most important elements of the Harper government’s strategy for selling the new 31.5 per cent tax on most publicly-traded income trusts (announced on Oct. 31, 2006) was to convey to the public—largely through the news media—the idea that the government faced a crisis induced by a series of exogenous events. Recall that when he was opposition leader, Stephen Harper had repeatedly and clearly said less than a year earlier that he would not tax income trusts—as he claimed that the previous Liberal government was about to do (see Stanbury, The Hill Times, Jan. 26, 2009).

Crises Can be Useful Tools to Effect Major Changes

A crisis situation, or the perception of a crisis, may well induce people to see things in a different light, and to allow—even approve—changes that were previously held to be “unthinkable.” Under such a situation, managers may introduce a series of changes that they have wanted to make for some time, but could never gain sufficient support to be implemented. Note that some of the changes need not be related to the problem at hand.

The perception of a crisis may cause people to panic—and thereby act irrationally or at least fail to carefully evaluate the alternative possible (and practicable) responses to the problem situation.

A real crisis is a situation where—if appropriate action is not taken promptly—will almost certainly result in great harm to people and or property. And it may be that some aspects of the harm are not reversible later.

A government can use the perception of a crisis to take strong actions, and then justify the move later by providing “evidence” that there was a crisis that forced it to act as it did. The evidence is couched in emotive rhetoric that usually emphasizes the very bad things that would have happened if the strong action had not been taken.

Note that the government’s stated justification need not be the real reasons for the strong actions—they only need to be seen as plausible. A widely-shared perception of a crisis can make the stated reasons for strong actions far easier to accept. The crucial element here is the creation of fear.

Even with its extraordinary array of communications machinery, it is difficult for a government to create the widely-shared perception of a crisis “out of whole cloth:” i.e., where there is—in truth—no indication that a crisis situation exists (think of the movie Wag the Dog). But what is far easier for a government to do is to build upon exogenous events whose meaning is somewhat ambiguous, and to change the public’ perception of them from “a matter of concern” into a “crisis” by proclaiming them to be fearful—justifying rapid and strong action. To create a widely-shared perception of a crisis requires the artful manipulation of the news media. This can be done both prior to and after the government acts. An important part of the phony crisis strategy is to keep the decision-making process secret and limited to a few people

Elements for the Creation of a Phony Crisis

First, it is much easier to create a phony crisis if there are exogenous events that have already raised legitimate concerns among Ottawa policy-makers. Note, however, that the true nature of the problem may not be well understood or could be misunderstood due to the mindset (analytical frame) of the officials in the department responsible for monitoring these events/developments (in this case, Finance). These exogenous events can be built upon to create the perception of a crisis, for example, by exaggeration and the failure to provide perspective.

Second, there must be one or more high status persons inside government who act as “pushers” for certain policy actions and they must be prepared to try to create a faux crisis to “sell” those actions to the public. (The pushers within government may be responding to pressures from interest groups. CEOs and directors lobbied in secret in 2006 and pressed the government to kill the trusts for entirely self-interested motives, although their justification was couched in terms of concerns about reinvestment, growth and competitiveness.)

Third, there must be a comprehensive communications plan to use the news media to get the public to believe there is a crisis—or that there was a crisis. The support of the news media is essential to help disseminate to voters the idea that there was a crisis situation requiring strong and swift action. Support in this context may mean nothing more than reporting the government’s claims without comment or effort to ascertain their veracity. The claimed perils of the situation were the justification for the hug e-tax on income trusts, and the reversal of the PM’s solemn promises made in the fall of 2005 when he was opposition leader.

The creation of a phony crisis was helped by the proposition that, in politics, perception, not substance, is everything. The related important points are these: (i) initial perceptions can be created near instantaneously, (ii) they can be created on very limited “evidence” or information (think of the half-second appraisal people give when meeting a person for the first time), (iii) the perception can be misleading, distorted, even utterly false in terms of the substance, (iv) perceptions—even false ones—can be very hard to change. See Stanbury, The Hill Times, Aug.15, 2011, and Aug. 22, 2011.

In the case of the income trust tax, the ability of the government’s communications plan to convince the news media and through them to the public that there was a “crisis” was greatly assisted by the complexity of the income trust tax issue.

Further, the simple, frequently-repeated message created by the so-called “Tax Fairness Plan” (see Stanbury, The Hill Times, March 7, 2011) overwhelmed the few deeper analyses of the issue which showed that the government’s central claims (most notably about “tax leakage”) were false or seriously misleading.

The Minister of Finance, Jim Flaherty, was the single largest purveyor of the statements after the “Halloween Surprise” of false, misleading and unverifiable statements intended to create the perception of a crisis words were used as tools to create certain images in the minds of his listeners to achieve his political objectives.

Details Related to Creating the Phony Crisis:

Here are some of the things the Harper Government did to create the perception of a crisis:

• The new tax was announced in the most dramatic possible fashion—on Halloween.. This is what Flaherty’s director of communications called an “event.”

• The rapid rate of growth in the in the trust market was emphasized—and made fearful. Fear is a powerful motivator.

• Denigrating comments were repeatedly made by the minister of Finance to the effect that Canada was becoming a “trust nation” and a “nation of coupon clippers” and the stagnation in the growth of our economy with companies that are alleged to not reinvest in their business or in new technology. This argument was intuitively appealing and was the conventional wisdom of the executives who secretly lobbied against the trusts in 2006.

• In the technical paper released Jan. 28, 2007, Finance’s estimates of so-called “tax leakage” not only failed to include deferred taxes (serious methodological error), but also contained several other errors, each of which had the effect of inflating the estimate. This was proven by Dennis Bruce in his testimony before the Commons Finance Committee on Feb.1, 2007. He estimated the revenue losses for the federal government in 2006 to be $164-million, not $500-million as claimed by Finance—and that by 2010, the leakage would be just $32-million per year.

• Finance officials (and the minister) invoked the (supposedly) prestigious name of professor Jack Mintz whose own estimates of the revenue losses were larger than those of Finance for 2006. Mintz publicly defended the tax and defended Finance’s flawed methodology which omitted deferred taxes. Privately, however, Mintz was critical of the serious omission of personal income tax on units inside tax deferral accounts.

• The government provided no sense of perspective for the claimed “tax leakage:” $500 million for 2006, then later $1.1-billion (per Mintz) assuming Telus Corp and BCE Inc. had converted to trusts as they had announced they planned to do on Sept.11 and Oct.11, 2006 respectively. However, both estimates were grossly exaggerated. Yet they sounded large to ordinary folks, but they were tiny when put into a proper perspective. For example, the federal government’s total tax revenues in 2006 exceeded $160-billion. Corporate income tax revenues in 2006 were $37-billion. The federal surplus was then $12-billion.

• The minister made repeated reference to rumours of more possible conversions of large corporations to trusts, and claimed that such conversions would have near apocalyptic consequences—including the end of fiscal transfers to the provinces and big cuts in money for health care. The minister and other spokespersons made endless slanted or false statements where reporters were present. No reporter knew enough about this complex issue to “call” the minister on any of his statements. Columnist Diane Francis was a conspicuous exception.

• The “building blocks” for the rhetoric that there was a crisis and the government had to act quickly and strongly: The claimed growing “tax leakage”– in time to absorb all the surplus and return to deficits (horrors!); Rapid growth in the number of trusts– “becoming a trust economy;” It was claimed that the Telus and BCE announcements changed the nature of the problem, and not just as a matter of size. The minister (after the new tax was announced) emphasized that there were also rumours of big financial corporations planning to convert; rumours of energy giant EnCana Corporation was planning to put its mature assets into an income trust. It would have been a $20-billion deal.

Conclusions

The creation of a phony crisis by a government can be a powerful tool to sell an excessively strong policy action. This technique is closely related to the more explicit appeal to fear among voters which has been a staple strategy of the Harper government (see Scott Feschuk,www.macleans.ca, Oct.14, 2010).

W.T. Stanbury is professor emeritus, University of British Columbia.

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