Meet John McCallum and Victoria Young

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.

DATE:
March 27th, 2008

TIME:
6:00 – 7:30 pm

LOCATION:
LIUNA Station,
360 James Street North,
Hamilton, ON L8L 1H5

TICKETS:
$100
(A tax receipt will be issued up to $60)

RSVP:
Crystal at crystal@victoriayoung.net

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.

Liberal Finance Committtee members calls on the Auditor General to investigate the tax leakage claims

“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,” Liberal Finance Critic John McCallum February 29, 2008

The Harper government have offered no credible explanation to Canadians on questions surrounding Income Trusts and alleged tax leakage.

• Canadians are given 18 heavily censured pages instead of the transparency and accountability the Conservatives promised.

• Finance Committee members are given no information by which to verify the Conservative claims.

That is why it is important the Auditor General investigates the questions on alleged tax leakage the Conservatives refuse to answer.

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Full text of Liberal's letter to Auditor General

Sheila Fraser, FCA
Auditor General of Canada
240 Sparks Street
Ottawa, Ontario
K1A 0G6

February 29, 2008

Dear Ms. Fraser,

We are writing to you today to urge you to investigate the government’s allegation that the income trust sector was the cause of an annual tax revenue loss of $500 million to the federal treasury. As identified in the Auditor General Act, you are the “auditor of the accounts of Canada, including those relating to the Consolidated Revenue Fund,” and we feel that this matter is of great concern to the balance of that consolidated revenue fund.

As you indicate in one of your 2005 reports, “One of Parliament's most important roles is to hold the federal government to account for its use of taxpayer dollars. To fulfill its role as watchdog over the public purse, Parliament needs objective, accurate information on how well the government is managing public funds. The Office of the Auditor General is an independent, reliable source of such information.”

In terms of the government’s claim that income trusts cause tax leakage, both Parliament and Canadians need your help to provide them with objective, accurate information on how well the government is managing public funds.

We look forward to your response.

With best regards,

John McCallum
MP for Markham-Unionville

Garth Turner
MP for Halton

John McKay
MP for Scarborough-Guildwood

Massimo Pacetti
MP for Saint-Léonard—Saint-Michel

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Another Conservative non-answer









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

Flaherty's Mini Budget: What became of leveling the playing field?

John McCallum asks a question of the Harper government

Q-1492 — November 29, 2007 — Mr. McCallum (Markham—Unionville) — With regard to the tax on income trusts announced on 31 October 2006, using the same model that was used to calculate the government’s estimates of tax leakage described by the Minister of Finance during his appearance at the Standing Committee on Finance on January 30, 2007, what would the government’s estimates of tax leakage have been if the corporate tax rate had been 15% rather than 21% as they were in 2007?

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Trusts Redux: Tax Policy Suitable for Halloween

As an economist I welcome Minister Flaherty’s October 30 announced intention to boost Canadian productivity and prosperity by reducing the general federal corporate income tax rate to 15 per cent by 2012. The measure should be embraced by all: It will position Canada favorably in the global economy for decades to come. But while I laud the strategic direction on corporate taxes, I continue to question the government’s consistency on tax policy in general.

A year ago today the Minister announced in his Tax Fairness Plan his intention to “restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations,” to eliminate tax leakage and to remove distortions in investment decisions. To paraphrase the Department of Finance’s analysis, the avoidance of corporate taxes from entities after conversion to an income trust is not totally offset by the taxes paid on income trust distributions from individual unit-holders; therefore tax leakage. The Minister estimated that annual tax leakage was in the order of $500 million and stated that something had to be done “to restore balance and fairness in the tax system”. The Minister’s solution to create “tax fairness” and eliminate tax leakage was to implement a 31.5% Distribution Tax on trusts in 2011 and to not allow any new conversions to the income trust form. The market response to the “Tax Fairness Plan” announcement was very negative.

Having worked for the income trust industry and with the Department of Finance on determining the appropriate methodologies for tax leakage, I presented evidence on the tax leakage issue to the Parliamentary Standing Committee studying the issue. To be precise, I raised several concerns with the Department of Finance approach – all of which went to a “sharp over-statement” of tax leakage. The major flaw in the Department of Finance analysis was that it did not take a lifecycle view of the tax leakage issue but rather focused on a 2006 “test year”. By failing to account for the reality that corporate tax rates were legislated to be reduced to 19 percent by 2011, the Department took a short-sighted and punitive approach to the issue. Despite the debate and a dissenting Committee Report “Taxing Income Trusts: Reconcilable or Irreconcilable Differences”, the income trust provisions of the Tax Fairness Plan remain in place.

It is regrettable that the October 30 announcement did not occur a year ago. It would have all but eliminated the perceived tax leakage issue without the punitive distribution tax on income trusts. In fact, the Department of Finance’s own Tax Leakage Model would have given an estimate of merely $80 million in tax leakage when accounting for yesterday’s corporate tax cuts instead of the $500 million stated by the Minister at the time. The Department’s own analysis would not have supported a tax on income trust distributions. If the October 30 announcement had been made last Halloween, the billions lost by investors would not have occurred and the playing field would have been leveled by 2011 – all this according to Department of Finance methods of analysis. These losses cannot be recovered and one has to question the path that led us to this point and Finance’s tax policy strategy.

I believe that even the $80 million estimate sharply overstates the leakage. This aside, yesterday’s corporate tax cuts would now allow the abolishment of the income trust distribution tax all together without incurring federal tax leakage – this, again, according to the Department of Finance’s own model.

Dennis Bruce is Vice President with HDR Decision Economics and has studied the income trust tax leakage issue since 2003. He twice testified before the House of Commons Finance Committee on the question Income Trust tax leakage.

Dennis Bruce
Vice President
HDR | HLB Decision Economics Inc.
1525 Carling Avenue, Suite 500
Ottawa, Ontario
Tel: 613-234-0080
Cell: 709-632-1708

HDR - ONE COMPANY | Many Solutions ™

John McCallum challenges Flaherty with Deloitte report and Government Cover-up

Auditor General: “Parliamentarians need objective fact based information on how well the government raises its funds (taxes)”

Stephen Harper and Jim Flaherty may not believe that, but John McCallum and the Liberal Party clearly do, as witnessed by this question in Parliament on December, 13, 2007:



Deloitte's report reveals the following failures of the Conservative policy on Income Trusts:

Takeover Buyers are largely tax-exempt

Buyers in the 40 announced deals were equally split between strategic and private equity, as well as between domestic and foreign. But in terms of tax revenue for the Canadian government, the news was not so balanced: 70% of the purchasers are tax exempt pension/private equity funds or foreign buyers who pay little if any tax in this country.

What structures were buyers using to acquire trusts? In 22 of the 40 transactions, trust units were acquired; in the other 18, the purchaser acquired shares of subsidiary corporations, trusts or partnerships. The method of acquisition has significant implications for the buyer, trustees and unitholders. The entity left “holding the bag” has to bear the cost and risk associated with the wind-up of the engineered trust. A caveat for future purchasers: all parties should consider the implications of a proposed structure when assessing the value and risk of an offer for a trust.

Based on our involvement with over 20 income trust buyout transactions in the past year we believe that the buyout momentum will continue. The current M&A slowdown is primarily driven by “mega” transactions exceeding $1 billion in size. The income trust market, particularly the business trust segment, is comprised of medium-sized companies that are ideal for financial and strategic buyers. Clearly, volatility in the income trust sector is far from over.

Read the complete report here. Income trust buyouts: Lots of activity, little tax revenue

And contrary to the fantasy and misdirection of Jim Flaherty, the Liberals have been consistent in their position for some time as recently explained by John McCallum on October 31st, 2006:



See also: The Liberal Plan - Feb 16, 2007

Meanwhile the Green Party has called for a public inquiry into the government’s unproven allegation of income trusts. Likewise the Liberals:

Green Party calls for inquiry into the alleged tax leakage of income trusts

Garth Turner interviews John McCallum, Liberal Finance Critic on the Liberal 'Income Trusts' Plan.

An interview with Hon. John McCallum Liberal Finance Critic. Hon. Garth Turner and Mr. McCallum discuss the impact of Income Trusts, and the Conservative Government's Mini Budget. Source: MPtv - October 31st Webcast



Related:
Finance Committee Report on Income Trusts
Conservative Government's Decision on Income Trusts Wrong: Standing Committee on Finance

John McCallum, the Liberal Party Finance critic, is visiting the Lower Mainland.

John McCallum, the Liberal Party Finance critic, is visiting the Lower Mainland. Details of a public event at which members can hear Mr McCallum speak on economic issues, and in particular the income trust issue, have been set.

Mr McCallum will be speaking at a Town Hall Meeting in Vancouver on Wednesday September 26th, 6pm (til 7:45pm) at St. Andrew's Wesley United Church, 1012 Nelson St., hosted by local Liberal MPs and CRIIA.

This will be an opportunity to discuss the income trust issue, and hear more about what can be done, and encourage him and the Liberal party to keep pursuing this issue.

Flaherty Must Retract Income Trust Lie

John McCallum Responds to Jim Flaherty's quote in todays Packet and Times

For Immediate Release
July 13, 2007

Flaherty Must Retract Income Trust Lie

OTTAWA – Given that the RCMP has completely exonerated the Liberal government from any wrongdoing concerning income trusts, Finance Minister Jim Flaherty must immediately retract his utterly false claim that Liberals “leaked the information” that caused people to lose money in the stock market, Liberal Finance Critic John McCallum said today.

“Mr. Flaherty knows full well that the RCMP thoroughly investigated whether there was a breach of information, and completely exonerated the Liberal government,” said Mr. McCallum.

Mr. Flaherty is quoted in today’s Orillia Packet and Times commenting on the Liberal plan for income trusts saying:

"The Liberals had a plan to do precisely what we did … They then leaked the information. So, then people lost money on the stock exchanges in Canada due to their incompetence."

Mr. McCallum pointed to the RCMP’s own February 15, 2007, press release which says “the RCMP has conducted an exhaustive investigation.” He further noted that no one associated with the Liberal Party was charged with any wrongdoing and that the RCMP took the extraordinary step of saying that “the investigation into the income trusts matter is now concluded.”

“Mr. Flaherty and his government are rightfully facing a lot of anger from Canadians on their own handling of the income trust issue, but that doesn’t make it a right to lash out and lie about the Liberal government’s handling of this issue,” said Mr. McCallum. “There is a government that cost investors billions of dollars in income trust losses, but that is Mr. Flaherty’s own government.

“I know Mr. Flaherty is angry because Prime Minister Harper hung him out to dry by so brazenly breaking the election commitment not to tax income trusts, but that does not justify Mr. Flaherty deceitfully claiming that the Liberals had ever planned to do what the government did on income trusts or continue his party’s outrageous falsehoods against the Liberals when the RCMP has found the allegations are baseless,” said Mr. McCallum

Mr. McCallum noted that today’s comments were just the latest misstep by the Finance Minister. He listed other examples of Mr. Flaherty’s incompetence including:

• Declaring an end to all federal-provincial bickering while delivering a budget that ushered in the most intense period of fighting between the federal government and provinces in years;

• Being forced to amend his own budget provisions on interest deductibility; and,

• Signing an open letter in a Nova Scotia newspaper that led Premier Rodney Macdonald to break off discussions on Equalization.

Contact:

Office of the Hon. John McCallum
MP for Markham-Unionville
(613) 996-3374

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Flaherty defends income-trust tax; Following John McCallum's recent town-hall meeting in Orillia

Nathan Taylor / The Packet & Times
Friday, July 13, 2007 @ 07:00

Finance Minister Jim Flaherty shot back last night at accusations Liberal finance critic John McCallum made while in Orillia recently.

During a town hall-style meeting Monday, McCallum attacked the Conservative plan to tax income trusts at 31.5 per cent. He then told of the Liberal plan for a 10-per-cent tax that would be refundable for Canadian residents.

The plan is not viable, Flaherty told The Packet & Times.

"The Liberals had a plan to do precisely what we did; they just didn't have the courage or the moxie to do it," he said. "They've had a plan not to tax income trusts. They've had a plan to tax income trusts fully. Now they've got a plan to tax income trusts at 10 per cent.
They don't know what they're doing.

"They operate as they usually do: from a crass political, perceived advantage, and then couldn't even do that well. They then leaked the information. So, then people lost money on the stock exchanges in Canada due to their incompetence."

It's the minister who doesn't know what he's doing, according to one Oro-Medonte Township man who said the decision to tax the trusts has affected him.

"I had about $110,000, and it dropped by about $40,000," Clem Neiman said of his energy trusts.

When the Conservatives took power, Neiman "bought more with the self-assurance that they wouldn't tax them" based on a campaign promise of the same intention.

"Minister Flaherty was over his head and bamboozled by bureaucracy," said the 80-year-old retired general practitioner, who served as Pierre Trudeau's campaign chair in the 1960s and considers himself a "small L" liberal.

Neiman said he doesn't have much to worry about, as he has other investments.

"I sold them and got the hell out. I took the loss," he said, but added "there are a lot of helpless people" who aren't as lucky.

Many senior citizens, for example.

"They tried to soften the blow by saying you can split retirement income. It was merely political pap," Neiman said.

Flaherty admitted a campaign commitment not to tax income trusts.

"It was a tough decision, But what we saw after we were elected was this dramatic increase not only in the number of conversions to the income trust, but (the rate) at which corporations were converting," Flaherty said, citing BCE and Telus. "If we hadn't acted on Oct. 31 last year, right now we would have many of the largest corporations and banks functioning as income trusts, which is a sedentary view."

ntaylor@orilliapacket.com

McCallum blasts income-trust tax

By Nathan Taylor

Tuesday, July 10, 2007 - 07:00

Local News - Three days before federal finance minister Jim Flaherty visits the area, his critic in the Opposition, Liberal MP John McCallum, was in Orillia denouncing the Conservative government’s October announcement that income trusts would be taxed.

At a town-hall-style meeting at Couchiching Golf and Country Club yesterday, McCallum, a former senior vice-president and chief economist with the Royal Bank of Canada, blasted the government’s decision to slap a 31.5- per-cent tax on existing income trusts.

“The Conservative party could not have been clearer during the election campaign that they would not tax income trusts. Partly as a consequence of that, people took the prime minister for his word and flooded into income trusts,” said McCallum, also a former minister of national defence, veterans affairs and national revenue. “Essentially, the government dropped a nuclear bomb on all the existing income trusts.”

Joining McCallum at the front of the room were Simcoe North federal Liberal candidate John Waite and Brent Fullard, president and CEO of the Canadian Association of Income Trust Investors, who is also in opposition to the Conservative plan.

“This tax is designed not to raise revenues. It’s designed to kill this market, force all these income trusts into corporations,” Fullard told the audience of about 25.

After some introductory speeches, the guests opened the meeting to questions from the floor.

“I’ve had bigger crowds, but I haven’t had crowds with better questions,” McCallum said.

Waite set up the forum after receiving numerous inquiries regarding the Liberal plan for income trusts.

“The common response would be to fire back an e-mail telling them to ‘get a life,’” Waite quipped, referring to an e-mail faux pas in April by a staffer for Simcoe North MP Bruce Stanton. “Instead, I fired an e-mail off to the finance critic asking him to come to Orillia to explain.”

Although there’s no set date for the next federal election, McCallum tried to make some fans yesterday by telling the audience of the Grits’ plan: scrapping the 31.5- per-cent tax and replacing it with a 10-per-cent income-trust distribution tax that would be refundable for all Canadian residents.

Flaherty will be at the Horseshoe Resort Thursday evening with his wife, Whitby-Ajax MPP Christine Elliott, for a Simcoe North Provincial Progressive Conservative Association fundraiser.

ntaylor@orilliapacket.com

Orillia Packet & Times

Town Hall Meeting in Edmonton with special guest John McCallum

The Town Hall Meeting Tour goes west!

Edmonton

June 26, 12:00 p.m.

Norwood Royal Canadian Legion
11150 82 St NW
Edmonton, AB Click for Map

Phone - (780) 479-4277

MPtv Interview with Hon. John McCallum Liberal Finance Critic - June 4/07

Related:

Is it over? - weblog.garth.ca

John McCallum's Apr 12 Calgary Town Hall Meeting on CBC

John McCallum's Apr 19 Toronto Town Hall meeting discussed on BNN's Squeezeplay

John McCallum's Apr 12 Calgary Town Hall Meeting on Global

The Liberal Plan

Date: February 13, 2007

For Release: Immediate

Liberals Propose New Income Trust Policy to Counter Conservative Mismanagement

Ottawa – The Liberal Opposition has a plan that could return as much as two thirds of the losses suffered by investors in the wake of the Conservatives’ broken promise on income trusts, Liberal Opposition Leader Stéphane Dion and Finance Critic John McCallum said today.

“When this minority Conservative government undertook what it knew would be a harmful action to Canadians, it should have taken the utmost care to minimize the damage it would cause its citizens,” said Mr. Dion. “The government broke a promise and imposed a radically higher tax that resulted in a $25-billion blow to the savings of hard-working Canadians.”

After hearing from numerous witnesses at the Standing Committee on Finance, the Liberal Opposition has a plan. It is proposing that the government repeal its planned 31.5 per cent tax regime and replace it with a modest 10 per cent tax, to be paid by the companies, that would be refundable to Canadian residents. The tax would be imposed immediately with the revenue shared equitably with provincial governments.

“Rather than considering what is best for Canadians, the Prime Minister simply decided that he was going to put an end to the income trust sector,” said Mr. McCallum. “After hearing from dozens of expert witnesses we have developed a proposal that is fair to Canadian investors, to corporations and the income trust sector as well as federal and provincial governments.”

Underpinning the Liberal proposals are four main policy objectives that should have been considered by the government:

• minimizing the loss of savings for Canadians who invested in income trusts;
• preserving the strengths of the income trust sector, notably a high-yield instrument for savers and for the energy sector;
• creating tax fairness by eliminating any tax leakage caused by the income trust sector; and,
• creating tax neutrality by eliminating any incentive to convert from a corporation to an income trust purely for tax purposes.
  

The Liberal Opposition also proposes that the ban on new trust formations be continued, but that the government should commit to considering representations from sectors which can conform to the policy objectives listed above.

The proposal has already received support from Gordon Tait, an analyst with BMO Capital Markets, who had previously told members of the Finance Committee that extending the phase out period to ten years would likely return one-third of the investors lost savings.

“This new proposal would likely return at least of two-thirds of the losses experienced by the holders of income trusts after the October 31 announcement,” said Mr. Tait. “It would also ensure that Canadian investors continue to have a high-yield investment vehicle available to them.”

Dirk Lever, Managing Director for RBC Capital Markets, agreed with that assessment.

“I would concur with Gordon Tait’s view that at least two thirds of the lost value will be recovered,” said Mr. Lever. “It could be more.”

Yves Fortin, a noted economist who formerly worked for the Department of Finance, indicated that the proposal would put an end to any tax leakage alleged by the government.

“While I am not convinced that there is tax leakage, and expert opinions differ as to the existence or the extent of the tax leakage, this proposed 10 per cent tax would more than cover the problem,” said Mr. Fortin.

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Contact:

Press Office
Office of the Leader of the Opposition
(613) 995-5904

David Hurl
Office of the Hon. John McCallum
(613) 996-3374