Posted: March 19, 2008, 6:03 PM
There remains trouble in Toryland over finance minister Jim Flaherty’s non-sensical tax on energy trusts and the income trust debacle cost the party a byelection in B.C. this week. Its candidate cited income trusts as the major concern in the election. It is an issue that simply will not go away because it should not. Prime Minister Stephen Harper, at Flaherty's urging, reneged on a firm promise which is good leadership.
The issue is the single biggest reason why the Tories have not, and cannot, get a majority in the polls. Their foolish and flawed flip flop against trusts devastated and alienated their base. Some $35 billion in value disappeared overnight, affecting two million Canadian investors.
Taxing the energy trusts too, when other countries do not, has been a major policy blunder and Albertans are determined to prove how foolish it all has been with an initiative announced last week.
Energy trusts have joined the Liberals who have asked the Auditor General of Canada to investigate Flaherty’s claims that taxing the trusts was necessary to staunch tax leakage.
It was nonsense then and still is.
“$110 a barrel oil prices have camouflaged what is a big mistake in policy,” said Sue Riddell Rose in a phone interview with me last week. She is CEO of Paramount Energy Trust and the Coalition for Energy Trusts spokesperson.
Trusts used everywhere else
Trust structures are used, and recognized, around the world as a more efficient means of managing commodity companies which find planning difficult due to price fluctuations. Flaherty exempted real estate trusts but not energy trusts, a damaging inconsistency.
About 20% of the country’s 33 energy trusts (which pay considerably more taxes than all the foreign-owned oil companies combined) have been swallowed up by foreigners or other entities.
Ottawa’s attack has ruined the junior oil sector too since October 2006 despite soaring oil prices, she said.
“The junior oil sector is no longer vibrant. There is no exit strategy which was to sell oil and gas assets to trusts,” she said. Put another way, if oil prices had remained the same as when Flaherty made his tax announcement on Oct. 31, 2006, the oil patch would be in “dire” straits.
“They did not do their homework. They did not understand the industry and they have deceived the Canadian public,” she said.
Trusts really dumb idea
Flaherty’s leakage excuse was debunked in a report by accounting giant Deloitte weeks ago in a study that showed that the reverse has happened: where there was no leakage there is not massive leakage.
The mistake, or omission, made by him and Mark Carney – author of the scheme and rewarded by becoming Governor of the Bank of Canada -- was to exclude the massive downstream income trusts flowed to unitholders who paid top taxation rates.
It was amateur hour and the harm has been ongoing and will worsen, Riddell explained.
“In 2006, there was no leakage at all and revenues were enhanced by the trust structure,” she said. “We’ve tried to get breakdowns from government as to the percentage of its cash surpluses that are coming from this but cannot get anywhere.”
She said a rough guess is that Flaherty’s folly has cost governments at least $1 billion in tax revenues, but only the Auditor General, with her special access, can do the analysis needed for taxpayers.
“It’s a big number,” she said. “There are two things we would like them to do: Go through their analysis re the actual, downstream revenue and then to analyze what has been foregone as a result of the changes.”
Why isn’t she and others giving up?
“We continue to believe a proper analysis was not done and that the wrong decision was made to enable the efficient recovery of resources for Canadians,” she said. “I personally feel deceived by them because they misrepresented information to Canadians. Something else is driving these decisions and I think Canadians should know. I don’t.”
Wednesday, March 19, 2008
Tuesday, March 18, 2008
We will never know if 50 or 500 Income Trust Investors voted against Harper Conservative candidate Deborah Meredith in the March 17, 2008 Quadra Byelection.
However Murray and Meredith freely admit that after 1 1/2 years since the surprise October 31, 2006 announcement the Income Trust taxation issue is still on voter's minds.
Harper lost Quadra due to income trust issue, has Mark Carney to thank
Cadman and income trust scandals on the campaign trail
Join host Victoria Young candidate for Hamilton Centre for an evening with John McCallum, Liberal Finance Critic, former Secretary of State, Cabinet member and Chief Economist for the Royal Bank of Canada.
March 27th, 2008
6:00 – 7:30 pm
360 James Street North,
Hamilton, ON L8L 1H5
(A tax receipt will be issued up to $60)
Crystal at firstname.lastname@example.org
Hamilton Centre is a federal and provincial electoral district in Ontario, Canada, that has been represented in the Canadian House of Commons since 2004. It first elected a member to the Legislative Assembly of Ontario in the 2007 provincial election.
It was created in 2003 from parts of Hamilton East, Hamilton West and Ancaster—Dundas—Flamborough—Aldershot ridings.
It consists of the part of the City of Hamilton bounded by a line drawn south from the city limit along Ottawa Street, west along the Niagara Escarpment, southwest along James Mountain Road, south along West 5th Street, west along Lincoln M. Alexander Parkway, north along the hydroelectric transmission line situated west of Upper Horning Road, northeast along Highway No. 403, east along the Desjardins Canal to Hamilton Harbour.
Monday, March 10, 2008
CALGARY, March 10 /CNW/ - Following a move by the Federal Liberals, members of the Coalition of Canadian Energy Trusts (CCET) are also asking Auditor General Sheila Fraser for a formal investigation into the tax leakage claims made by the government as a basis for its October 31, 2006 decision totax income trusts.
"After 17 months and many requests for the details of the Finance Department's calculations, we remain stonewalled by the federal government on this issue," says Sue Riddell Rose, president and CEO of Paramount Energy Trust and co-chair of the CCET. "Neither we nor other experts could find evidence of tax leakage to back up the government's claim, so we are encouraged that the Auditor General may be able to set the record straight with an investigation."
In December 2006, the Coalition presented a 251-page report detailing the role played by energy trusts in the Canadian economy and outlining the expected negative results of the government's broken promise not to tax income trusts (Canadian Energy Trusts: An Integral Component of the Canadian Oil and Gas Industry). In the report, the CCET disputed the claim of tax leakage and publicly invited the government to disclose its calculations. The government has yet to respond.
A formal request through the Freedom of Information Act, seeking data on which the government based its decision to tax trusts, yielded no information other than blacked-out documents.
"Canadians deserve to know what facts the government used for such an important change in policy," says Riddell Rose. "This broken promise by the Conservative government continues to have lasting and disastrous affects on the average Canadian investor, and it has shaken the industry to the core. As advocates for our unitholders, many of them seniors, who were severely mistreated by the government with the sudden change in the rules, we will continue to press the government for the answers we've sought since the beginning." The CCET continues to believe that any concerns the government may have had about energy trusts can be rectified through communication and
understanding leading to a solution that would not be so harmful to innocent unitholders.
The Coalition of Canadian Energy Trusts represents over 30 energy trusts headquartered in Canada and employing thousands of Canadians. It also represents the millions of Canadian unitholders who saw the value of their investments drop by $35 billion following the announcement of the so-called Tax Fairness Plan on October 31, 2006. More information about the Coalition and its partners can be found at www.canadianenergytrusts.ca.
For further information: or to schedule interviews, contact: Daorcey Le Bray, NATIONAL Public Relations, (403) 444-1482, email@example.com
Jim Flaherty would like to be seen as the friend of ordinary Canadians. Unfortunately he is not. He is a friend of special interests, including his own.
When he announced that retired people would be able to take advantage of income splitting, he left 85% of them out in the cold.
How? By saying that only seniors who were members of defined pension plans could participate in this tax break. Unfortunately, a mere 15% of Canadians belong to this kind of pension plan. As for the others, they are out of luck.
Not Jim though. He is a member of not one but two gold-plated pension plans. The one he'll get from the Ontario government AND the one he'll get from the federal government. No wonder he's concerned about those future tax breaks.
As for the rest of us, what breaks do we get Jim?