Freedom FROM information

Image: One of the recalled documents that Flaherty did not want to be in the hands of Canadians. Click on image to enlarge

Too much information in the hands of the people is a dangerous thing....even blacked out documents. The Liberals could have had a field day over this, but did not. Why not?

Ottawa seeks return of trust tax documents
STEVEN CHASE

Globe and Mail
April 20, 2007

OTTAWA — The Harper government is asking a Calgary income trust analyst to give back heavily censored documents Ottawa sent him that detail calculations used to justify last fall's controversial trust tax.

Warning that its lawyers have decided the information is top secret, Ottawa is also requesting that BMO Nesbitt Burns analyst Gordon Tait stop sharing this information with other Canadians.

It's hard to see how Ottawa benefits from recouping the documents, which summarize how it calculated that trusts are costing it hundreds of millions of dollars in annual lost tax revenue.

That's because nearly half of them are blacked out by a federal Finance Department censor's pen.
Related to this article

Mr. Tait made news headlines this year after he requested details from Finance Minister Jim Flaherty's department on how it determined that trusts were a drain on federal coffers.

In response, Finance sent him 28 pages, 13 of which were heavily blacked out. These appeared to detail the calculations and methodology used.

Now the Finance Department wants about 18 of those pages back.

“Subsequent to the Department of Finance's ... release of information to you, the Privy Council Office Counsel has confirmed that portions of the released information, namely 1-5 and 9-21, are confidences of the Queen's Privy Council for Canada,” a Finance official wrote in a letter to Mr. Tait this week.

“We would like to ask for your assistance in returning these pages and also that this information not be disseminated further.”

The letter has left Mr. Tait scratching his head because he and other trust advocates have already widely circulated the heavily excised documents.

“It's a bizarre situation. They're trying to put the toothpaste back into the tube,” he said, adding that he's learned that other Canadians are receiving similar letters asking them to relinquish documents.

Mr. Tait said he will return the original documents, but will warn Ottawa that “I and thousands of others have copies of this.”

He said most of the pages that Ottawa wants returned are heavily censored. “It's a request for information that was never divulged in the first place,” Mr. Tait said, however adding that the largely blacked-out pages nevertheless reveal some details of the methodology used in calculations.

The Finance Department did not immediately return phone calls.

Tax revenue losses were central to Mr. Flaherty's rationale for breaking a Conservative election promise and slapping a levy on trusts.

He justified the new levy last Halloween by saying that annual tax leakage was already $500-million and would have risen to $800-million had BCE Inc. and Telus Corp. converted to trusts.

Income trusts pay little or no corporate tax, instead shovelling out the bulk of earnings to investors, who are taxed individually. Ottawa says it never recoups all the tax these businesses would have paid had they been structured as corporations instead of trusts.

Trusts have produced experts to counter Ottawa's tax leakage estimates, but Mr. Flaherty has steadfastly defended his department's calculations, which suggested losses for the federal government and provinces could exceed $1-billion.

The Finance Minister had also warned that tax revenue hemorrhaging would only grow if left unchecked until it threatened the federal government's ability to fund priorities such as health care, education and infrastructure.

Why it makes sense for Liberals to attack Jim Flaherty

Globe and Mail Article of the same title here

My posted comment here:

Scott Brison failed to mention the $35 billion of Canadians' retirement savings that Jim Flaherty destroyed with his income trust tax that was predicated on the complete hoax argument of "tax leakage". The only tax leakage from income trusts was the one created by Jim Flaherty himself from the wave of takeovers of vulnerable and devalued trusts by foreigners who pay NO taxes, like the $5 billion takeover of Prime West Energy trust by Abu Dhabi Energy, to name but one of the 45 takeovers. Flaherty is inept and incompetent in the extreme, not to mention completely lacking in integrity.

"Canadians must trust" Stephen Harper in emails to trust investors November 21, 2006

Canada hits bottom on freedom-of-information ranking, new study finds
By: The Canadian Press
January 9, 2011


OTTAWA - A new study ranks Canada dead last when it comes to freedom of information.

Published research by a pair of British academics looking at how well freedom-of-information laws operate in Australia, New Zealand, Ireland, Great Britain and Canada — all of them parliamentary democracies — judged Canada the least open.

New Zealand topped the list, and Canada brought up the rear because its legislation is ineffective and archaic.

The findings published in the journal Government Information Quarterly echo a similar Canadian study from 1998 that showed Canada performs poorly when compared with freedom-of-information laws around the globe.

Critics say the findings are not a surprise, pointing to growing delays in responses to information requests from the public.

And they say it marks a reversal from a decade ago, when Canada was seen as a global leader in freedom of information.

Why did David Dodge stop speaking truth to power on income trusts?

By W.T. STANBURY
Published December 20, 2010
The Hill Times

Speaking truth to power is one of the highest ideals of public servants (see Aaron Wildavsky, Speaking Truth to Power, Little Brown, 1979). It is even more important in the case of appointees who have been given a great deal of independence such as officers of Parliament, and the governor of the Bank of Canada.

Prior to Oct. 31, 2006, then-Bank of Canada governor David Dodge's statements about income trusts were carefully circumscribed by the limited research the Bank of Canada had done, and by Dodge's knowledge of other research. Then things changed dramatically. I try to determine why Dodge changed his views on income trusts after the huge tax on certain publicly-traded trusts was announced on Oct. 31, 2006. I omit his testimony before the Senate Banking Committee on Oct. 26, 2005 as much of the same ground was covered a year later.

Standing Senate Committee on Banking, Trade and Commerce, Oct. 25, 2006

Dodge's comments on income trusts are from the Q&A period. I focus on Dodge's statements and omit the questions for reasons of space. Note that he was speaking just five days before the new tax on trusts was announced on Oct. 31.

"[I]ncome trusts...have a risk return characteristic sufficiently different from either equities or bonds to allow investors to achieve portfolio risk-return combinations not otherwise available. ... They made markets more complete and, hence, were a good additional instrument for markets to have."

"[T]wo areas ... need improvement—those related to accounting and those related to corporate governance."

"We have not done work on how income trusts affect overall Canadian economic performance or productivity. We will not be doing that work. Indeed, that work is incredibly difficult to do...."

"Finally, none of the work we have done relates to the appropriateness of all of the tax system as it relates to the incentives to operate either in the form of an income trust or in the form of a corporation....None of what we have done should be taken to say that we think that the current tax system—taken in its entirety—is necessarily ideal."

"Turning to the two more difficult questions, the impact on research and development and the impact on machinery and equipment, we are not competent to talk about those, and in abstract, it is really not possible to talk about them."

"[I]t is true...that tax exempts [sic. trust units in tax deferral accounts ] and foreigners face a rather different set of incentives or net returns than does the individual Canadian investing outside of his or her RRSP. That is an obvious fact, but I cannot comment on what one might do about it."

Dodge Changes His Views

On Nov. 1, 2006, the day after the new high tax on distributions by income trusts was announced, Reuters quotes a statement by Dodge, distributed by email, saying: "The actions that the government took yesterday... would appear to eliminate the tax incentive to use one form of corporate organization over another. Businesses now face a level playing field in choosing the form of corporate organization that allows capital to be allocated to its most efficient use." The Reuters report also cited Dodge's statements on Oct. 25, 2006 quoted above.

Comments: Why would the then-governor of the Bank of Canada make any statement regarding the new tax—let alone such a bold and unqualified one? Dodge's Nov. 1, 2006, statement contradicts his October 2005 Senate testimony in which he said: "I think the idea of an income trust was a sensible one to try to have a level playing field." On Oct. 25, 2006, Dodge told the Senate that "none of the work we have done relates to the appropriateness of all the tax system as it relates to the incentives to operate either in the form of an income trust or in the form of a corporation." Dodge made no reference to any research in support of his new position. Gone also were the qualifiers Dodge used in the past such as "limited evidence suggests."

Was Dodge prompted to send out the e-mail as part of the larger effort mounted by the Harper Government to create allies and to undermine potential opponents? And if Dodge was prodded, why did he not assert his independence and refuse?

House of Commons Finance Committee, Feb.1, 2007

Dodge began with a statement to the committee (edited slightly). I have inserted some comments in bold.

"[In] our June 2006 Financial System Review... we noted that limited evidence suggests that income trusts can enhance market completeness in a number of ways. Income trusts can provide diversification benefits to investors because trusts can have different risk-return characteristics than either equities or bonds. Second, the income trust structure appears to allow some firms to improve access to market financing."

"... We note ...two areas... where improvement is clearly needed in standards related to accounting and distribution of revenue, and those related to governance. ..."
" Of course, there are very important public policy questions related to income trusts that fall outside the Bank's mandate. The Bank has done no specific research on how the income trust structure affects economic performance, or would affect future productivity in Canada."

"Based on general economic principles and our understanding of the structure of the Canadian economy, I can say that while the income trust structure may be very appropriate where firms need only to manage existing assets efficiently, it is definitely not appropriate in cases where innovation and new investment are key. [ No research cited, and contradicted by empirical research on trusts and the rate of investment.] To the extent that the system was favouring the use of the income trust structure in these cases, the incentives for innovation and investment were reduced, and the potential for future productivity growth was reduced." [ No research cited, and not supported by available research.]

"[D]ifferent risk-return characteristics of trusts may not enhance market completeness if they arise from differences in tax treatment. Clearly, there has been a very significant tax incentive to use the income trust form of organization in cases where this would not have been an appropriate form of organization from a business efficiency point of view."

"By giving incentives that led to the inappropriate use of the income trust form of organization, the tax system was actually creating inefficiencies in capital markets—inefficiencies that, over time, would lead to lower levels of investment, output, and productivity. [In his Senate testimony on Oct. 25, 2006, Dodge referred to the efficiency promoting nature of trusts, and refused to comment on their effect on investment etc., as the Bank had done no research on these matters.]

"We at the Bank have not done any research on how the rules of the tax system could or should be designed so that they do not give inappropriate incentives. [But on Nov. 1 Dodge endorsed the new tax.] The changes proposed by the government last October would appear to substantially level the playing field. [Contradicts Dodge's Senate testimony on Oct. 25, 2006.] For the income trust sector to deliver the efficiency benefits through its enhancement of market completeness, it is absolutely critical that the tax system provide a level playing field." [Dodge cites no research or studies to demonstrate that would be the actual outcome of new tax.]

In response to a question by the NDP finance critic, Dodge said, he had "reasonable faith, that ... a big chunk of that $20-billion to $25-billion [decline in the TSX trust index] has got to be the present value of tax losses to governments, federal and provincial." [Wrong: see below.]

Conservative MP Diane Ablonczy, then-Parliamentary secretary to the minister of finance, sought to get Dodge to endorse the government's action. After a very long and carefully-qualified response by Dodge, Ablonczy said: "So you're telling the committee that you believe what Mr. Flaherty, the finance minister, did, with this announcement, was the right thing to do."

Dodge said, "I think so, I guess from a strict point of view... the right thing is to have a tax system with low rates and a broad base and that is as neutral as possible..."

When asked to clarify his previous statement, Dodge said, "What I said was that a step was taken to levelling the playing field and it was a step absolutely in the right direction..."

Discussion and Conclusions

Why did Dodge so clearly change his position on the taxation of income trusts after Oct. 31, 2006? In his previous statements on income trusts in October 2005 and October 2006, Dodge emphasized the limited research the Bank of Canada had done, and he refused to make statements beyond its limited confines. In his Nov.1, 2006, and Feb. 1, 2007, statements that were supportive of the new tax, Dodge cited no research in support of his new position. Worse, the available research did not support Dodge's claims.

Dodge said he was using general economic principles and his general knowledge of the Canadian economy. But he then made remarks about the relationship of trusts to innovation, investment and productivity—and cited no evidence in support of his claims.

Worse, Dodge said that " a big chunk" of capital losses suffered by owners of trusts "has got to be the present value of tax losses to governments...." That was an elementary error—inexplicable for the governor of the Bank of Canada. The TD Bank Financial Group (news release, Nov. 1, 2006) explains: "Since the valuation of any stock is a reflection of the discounted present value of the future revenue stream, the imposition of the distribution taxes will lower the market assessment of valuations. And.. markets [being] forward looking and will factor in the changes immediately."

Dodge changed his views dramatically on aspects of the income trust issue for which he had previously said the Bank had done no research. Yet an hour on the internet would have revealed to Dodge the careful studies of consultant Dennis Bruce re: the claims of "tax leakage," and contrary evidence on the reinvestment, growth, and competitiveness argument that were available at the time cited in Stanbury, The Hill Times, Nov. 8, 2010).

During his Feb.1, 2007, testimony, Ablonczy refused to accept Dodge's carefully-framed answers even though they had gone far beyond anything he had said in the past. For all his record of bluntness, it is a mystery why Dodge did not tell Ablonczy to stop trying to put words in his mouth. He had a great deal of experience in testifying before Parliament. He would have won such a "face down," given his status in Ottawa was far greater than hers. But Ablonczy was able to "break the witness" as the lawyers say. Later, the Harper Government played up the fact that the governor of the Bank of Canada had endorsed its new tax, even though his comments only amounted to "I think so, I guess..."

When it really counted, Dodge failed to speak truth to power—which is the central justification of having a position of great independence as a public official.

W.T. Stanbury is professor emeritus, University of British Columbia. This column is drawn from his forthcoming book on income trusts which contains a longer discussion of the change in David Dodge's views.

Tories reject call to enhance Canada Pension Plan

Editorial cartoon in today's Calgary Herald

Tom Petty to Jim Flaherty: You're jammin' me

You're Jammin' Me

You got me in a corner
You got me against the wall
I got nowhere to go
I got nowhere, but to fall

Take back your insurance
Since nothin's guaranteed
Take back your losin' streak

You're jammin' me, You're jammin' me
Quit jammin' me
Baby you can keep me painted in a corner
You can walk away, but it's not over

Take back your angry slander
Take back your pension plan

Why Canada can't afford Stephen Harper

By: Daniel D. Veniez
Dec 19th, 2010
Vancouver Observer

It’s a good time to debunk the biggest Stephen Harper myth there is: “We are good economic managers”. Repeating a lie does not make it true.

We need to spend $15 billion on jails because unreported crimes are rising? Don't believe them. We need to stop the long-form census, because the census-takers are going to send you to jail? Don't believe them. We need to kill the long-gun registry, because the police are leading a cult conspiracy to take away everybody's guns? Don't believe them. We awarding a $19 billion untendered contract for new jets because the Russians are coming? Don't believe them. This is a government that is counting on fear, driven by lies, to earn the votes it needs to win again.

Is it true that only a Harper Conservative government can bring sound management to the economy? Don't be fooled. Look at the record.

In recent months, we’ve been treated to more stellar economic and fiscal management, such as a double-digit increase in spending for Harper’s own office, shutting down downtown Toronto for 72 hours for a cost of well over $1 billion, not to mention the ignored Charter rights of Canadians, and triggering an unprovoked conflict with the United Arab Emirates that will cost us at least $300 million.

In their first year in office, the Conservatives blew the $13 billion budget surplus they had inherited. They did that through an old-fashioned combination of massive double-digit spending increases and imprudent tax cuts.

After promising in their written platform not to touch income trusts, Harper did just that and cost investors, many of them retirees, billions. The 2 per cent decrease in GST was a political gimmick that cost the treasury tens of billions with no discernible economic benefit.

Every mainstream economist argued for cutting personal income taxes to improve productivity and standards of living. But to pay for the GST cut, the Conservatives actually raised personal income taxes. This was in comparison to prior Liberal government polices, which favoured multi-year reductions, removing low-income earners from the tax rolls, and helping Canadian families with real measures, including doubling the duration of maternity and parental leave under the employment insurance program and strengthening the Canada Child Tax benefit.

While taking down government revenues just before the recession, Harper was driving annual increases in government spending to double-digits. In the summer and fall of 2008 – in the midst of the most severe and dramatic economic meltdown we’ve ever seen – Harper urged Canadians to seize this “buying opportunity” and buy stocks. During the election campaign that followed, he proclaimed that a Conservative government would never run a deficit. In Harper’s own words just four days before the Oct. 14 vote: “This country will not go into recession next year".

After the general election of 2008, as the world economic system was collapsing, Finance Minister Jim Flaherty tabled an economic statement that all presumed would recognize the unfolding global reality, including the failure of key U.S. financial institutions and unprecedented emergency measures being adopted by the European and U.S. administrations.

Instead of summoning the country to action against the backdrop of an unfolding global financial cataclysm, all the Harper Conservatives could come up with was terminating the right to strike of public sector unions, ending pay equity, and eliminate the subsidy to political parties. Hardly an intelligent response, and well short of the leadership that Canadians were looking for, as confidence dropped like a stone and jobs were lost at a dizzying rate. The denial and rank incompetence was breathtaking.

Real leadership can be seen in the prior Liberal governments' decision not to relax the rules for the Canadian financial services industry and the determination to maintain strong regulatory standards for Canadian banks. Real leadership was in the prior Liberal governments' success in reducing the national debt from more than 70 per cent of GDP to almost 30 per cent of GDP in less than a decade. Harper and the Conservatives have been surfing on the Liberal legacy for almost five years.

After the launch of a stimulus program to protect jobs and the economy, the February 2009 budget unveiled the largest deficit in Canadian history and “Canada’s Economic Action Plan” was born. It soon became painfully clear that Harper had no credible long-term plan to modernize Canada’s crumbling infrastructure. So in the rush to show that it was doing something, it developed the most egregious example of old-style pork-barrel politics the country has ever seen. Since then, federal tax dollars have funded swimming pools, gazebos, tennis courts, curling rinks, nature trails, snowmobile trail equipment, outdoor bathrooms, and hockey arena roofs.

At a time when such huge stimulus investment could have been directed to infrastructure that would have improved Canada's pensions or badly lagging productivity and competitiveness, transforming Canada's ability to meet 21st-century economic challenges and creating real wealth and long-term jobs for Canadians, the Harper stimulus boondoggle proved once again that the Harper Conservatives are more interested in scoring cheap political points than introducing sound public policy. They blew the opportunity of a lifetime, and their legacy is a low-growth economy where productivity is slipping, full-time high-skilled jobs in industry are being replaced with part-time, low-skilled jobs in services, and the Canadian standard of living, especially for the poor and middle income Canadians, is slipping.

To make matters worse, Harper bribed British Columbia and Ontario with the cash incentive for the HST. Whether this is sound long-term policy or not is beside the point. Imposing a tax shift from corporations to the hard-hit consumer in the middle of the worst economic downturn since the Great Depression is dumb economic management.

From a trade perspective, Harper has been patting himself on the back for trade deals with countries like Columbia while spending three years insulting China and ignoring South East Asia and India, Canada’s most important emerging markets.

Harper has started calling us “tax-and-spend Liberals,” stealing yet another line from U.S. Republicans and their radical right-wing cousins in the Tea Party. The problem with that cute line is that Liberals under the Chrétien/Martin regime have a record of over a decade of aggressive debt and deficit reduction, trade expansion, and investment in research and innovation, all the while steadily reducing taxes for both businesses and consumers.

When Harper assumed office, he inherited the healthiest balance sheet and income statement in the industrialized world. He then squandered much of it, ballooning the government and spending recklessly, instead of putting it towards productivity- and competitiveness-enhancing investments to improve the long-term standard of living for all Canadians.

As part of that, Liberals reduced the corporate tax rate to one of the most competitive in the G8. Liberal Leader Michael Ignatieff said that his government would put a pause on further corporate tax cuts until our fiscal house is cleaned up. We don’t believe that borrowing money to fund further corporate tax cuts makes much sense, particularly when the middle class will be have the burden of repaying that debt.

Has Harper really been a strong economic manager?

Hardly. Like so much else in Harperville, the horrendous myth of this government's claim to be fiscally responsible is exactly that – a myth. With our economic future at stake, Canadians cannot afford this “good manager” any more.