Wednesday, October 31, 2007

One year after Stephen Harper's Income Trust Betrayal: The Top Ten questions still unanswered.

OTTAWA, Oct. 31 /CNW/ - Stephen Harper broke his election promise to never raid seniors' nest eggs through taxing income trusts, by doing that very thing on Halloween 2006. 365 days later, the following questions for Stephen Harper remain unanswered:

(1) Where is your government's proof of alleged tax leakage? 18 pages of blacked-out documents are all that you have provided to back up this claim.

(2) Why were the taxes paid by 38% of all outstanding income trusts held in RRSPs and pension accounts not included when evaluating possible tax losses to the government?

(3) Where is the promised transparency and accountability? Such a sweeping change in tax law should at the very least have involved public consultation.

(4) Why did the Department of Finance demand the return of the 18 pages of blacked out documents issued under the Access to Information Act?

(5) How could the proposed conversions of BCE and Telus into income trusts have had any effect on tax revenue when neither were paying taxes as corporations and were not expected to for several years?

(6) What policy advantage is there, now that BCE has been taken private through a highly debt levered buyout, and which has caused a loss of the $793 million more PER YEAR that BCE would have paid as an income trust?

(7) How is the stated objective of tax fairness and leveling the playing field achieved when government sponsored pension plans are allowed to own trusts, free of tax in their private equity portfolios, while 70% of individual Canadians are not? Why are government sponsored pension funds exempted both from the punitive 31.5% tax and growth restrictions of this policy? Furthermore, why does income splitting for seniors only benefit the 30% of Canadians with pensions, and not the 70% without? Why is this government deliberately creating a two-tiered pension system in Canada? Is this the government's response to the retirement time bomb of an aging population?

(8) Why was the 15% withholding tax paid by foreigners on interest on leveraged buyout loans reduced to zero as part of this same tax policy, at a cost to Canadians of $300 million a year? This special foreign tax loophole makes Canadian public companies more susceptible to leveraged buyout foreign takeovers, at the same time as the trust tax causes them to become grossly undervalued, because of the discriminatory nature of the tax, which only applies to Canadians and not pension funds or foreigners. As such the government has, in effect, introduced tax subsidies to encourage foreign takeovers. Why?

(9) What effect will the loss of $2 billion in annual tax revenues arising from the $65 trust takeovers to date (including BCE) have on the average Canadian taxpayer or Canada's social program spending? Will individual taxpayers be the ones to make up the shortfall? Once the entire sector is taken over by foreign private equity and government sponsored pension plans, the loss in annual tax revenues will rise to $7.5 billion, the equivalent of a 1.5% GST increase. What plans are in place to address this inevitable shortfall in light of all the other tax reductions contained in yesterday's fiscal update amounting to $60 billion. At what point will the cupboard be bare?

(10) Stephen Harper wrote the following in the National Post on October 26, 2005. "Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine." If so, then why did he so abruptly and without notice or public consultation reverse his promise, leaving investors and seniors with losses of $35 Billion and their incomes reduced by 31.5% and in some cases 50%? How is this socially just or fair?

(11) Meanwhile, why is Jack Layton and the NDP supporting this policy when they profess to be against wholesale foreign takeovers of Canadian businesses and supposedly in favour of protecting seniors' dignity and seniors' retirement savings? Where is Jack Layton's and the NDP's proof of tax leakage? Is the NDP in possession of confidential insider information that would underlie the basis for the following claims contained in correspondence from NDP MPs to their many concerned constituents:

"I have spoken with the NDP party's Finance Critic, Judy Wasylycia-Leis, and she assures me that the government's estimates of future tax revenue losses, are solid."
Jack Layton

What is the basis for these assurances from Judy Wasylycia-Leis? Canadians are demanding of answers from both the Leader of the NDP and the Prime Minister of Canada on this cornerstone assumption.


Taken as a whole, this is a travesty of democracy, starting with the breaking of a promise, the false premise for breaking the promise, the complete absence of consultation and the litany of adverse policy repercussions as the aftermath of a policy borne out of zero accountability and a complete lack of government transparency. All Canadians are adversely affected. Narrow special interests have successfully manipulated Canada's New Government for their selfish ends.

Alleged tax leakage is the cornerstone assumption behind this tax policy. It constitutes two of the five provisions of the Ways and Means Motion. The other three provisions of the Ways and Means Motion are verifiable constructs as well. Meanwhile transparency and accountability are the cornerstones of a democracy. The real danger to Canadians is that the Conservative Government is flagrantly undermining our democratic institution known as Parliament, if major tax laws are being enacted and passed on the basis of their foundations being assumed to be true, when in fact no proof whatsoever has been provided by the Government.

Dangerous Precedent:

This is an extremely dangerous precedent to have established, since it gives extraordinary powers to the Government to pass important legislation by invoking fact based arguments, that are devoid of fact based evidence. If this is allowed to occur under circumstances like these, then the risk for future abuse of our Parliamentary democracy under matters that are not verifiable in nature, is limitless.

Public Inquiry:

Stephen Harper together with Jack Layton, and the members of their respective parties are acting in concert to abrogate Canadians' democratic institution known as Parliament. As such, we are calling for a Public Inquiry, to fully examine the matter of alleged tax leakage, particularly in light of the Government's announced reduction in corporate tax rates by a staggering 32% from 22% to 15% in 2012. If the original policy intent on income trusts was to "level the playing field" with corporations, then this changed tax regime for corporations announced by the government yesterday, demands a re-examination of the extent to which these most recent measures will have tilted the playing field in favour of corporations and to the detriment of income trusts.

Furthermore, all Canadians need to establish whether Professor Jack Mintz was correct when he stated:

"I do want to point out that there is a serious flaw in some analyses especially on the taxation of pension and RRSP accounts. Finance was not right to treat the impact as zero".
Jack Mintz

This level of uncertainty over the central premise of tax leakage is significant and fails to meet the standards of the Auditor General, who states:

"Parliamentarians need objective fact based information on how well the government raises its funds (taxes)".

Until this standard is met, Canadians will never know whether the following policy measure of this new tax is fact or merely political deceit:

"strengthening Canada's social security system for pensioners and seniors" (Ways and Means Motion)"

Brent Fullard
President & CEO
Canadian Association of Income Trust Investors

For further information please contact the:
Canadian Association of Income Trust Investors or by calling (647) 505-2224

Source: CNW