Garth Turner speaks on Income Trusts, tax and interest rate pressures on Canadian families in the House of Commons - October 25/07

MP Paul Szabo (Mississauga South, Lib.) presents petition to House of Commons (2)

Excerpt from October 25th Hansard:

Mr. Speaker, pursuant to Standing Order 36, I am pleased to present another petition on the income trust broken promise, submitted to me by Mr. Robert Longmore, of Calgary, Alberta, who remembers the Prime Minister boasting about his apparent commitment to accountability when he said that the greatest fraud is a promise not kept.

The petitioners remind the Prime Minister that he promised never to tax income trusts, but he broke that promise by imposing a 31.5% punitive tax which, in less than two days, wiped out over $25 billion of the hard-earned savings of two million Canadians, particularly seniors.

The petitioners therefore call upon the Conservative minority government to admit that the decision to tax income trusts was based on flawed methodology and incorrect assumptions, secondly, to apologize to those who were unfairly harmed by this broken promise and, finally, to repeal the punitive 31.5% tax on income trusts. Paul Szabo, House of Commons, October 25/2007

Related:
Member of Parliament Profile (Current) - Paul Szabo
Stephen Harper on Accountability - Election 2006

Halloween Gathering in Ottawa - Yorkdale Bus Pickup Details

Toronto - Yorkdale Bus Pickup Details

For those traveling to Ottawa on Wednesday October 31, 2007 by bus from Toronto, please find attached two maps.

The first map is called “zoomed out” and gives the broad co-ordinates of where the bus will be picking up passengers, marked by the green arrow.

The second map is called “zoomed in” and provides greater details on the pickup point, again marked with a green arrow. The pick up will be on the south side of the road, at the north exit/entrance of the Yorkdale subway station, and situated under the Allen Road bridge.

It is also conveniently located across from the Yorkdale Go Bus Terminal, and parking is available nearby.

The bus will arrive at 6:45 am and depart immediately at 7:00 am. If the bus is not there between these two times, it is because there is a limit on how long a bus can stand idling.

Your coordinator for the bus trip will be Brent Fullard, who can be reached on the day of departure on his cell phone at 647 505-2224. He will arrive by 6:45 am at the pick up point.

The bus will be departing Ottawa between 4:30 and 5:00 pm, and is expected to arrive at Yorkdale about five hours later.

The bus is 54 seat motor coach operated by PMCL and has a washroom facility on board. No food will be provided and there are no planned stops on the trip. Please plan accordingly.

Also please print out both of the attached maps and bring them with you to avoid any confusion on the departure day.

For a detailed description of the Ottawa and Calgary events click here

Zoomed OUT



CLICK FOR FULL SIZE IMAGE


Zoomed IN



CLICK FOR FULL SIZE IMAGE

Months after destroying Income Trust sector, Flaherty admits his 'tax leakage' analysis is flawed.

Canadian tax-exempt investors, such as Canadian pensions and RRSPs, are subject to tax neither on Flow-Through Entity income nor on dividend income. Jim Flaherty, October 31 2006

"The purpose of the pension funds, ultimately, is to ensure they can honour their pension obligations. And there is taxation, of course, when pensions are paid out," Jim Flaherty, July 4 2007

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No wonder the Conservatives think there is tax leakage - they left out almost half of the taxes!

The term tax leakage is used to describe a situation in which it is believed that the Government of Canada collects fewer taxes from one form of business ownership structure relative to another form of business ownership structure. Many who oppose the income trust form of business ownership would like Canadians to believe that Income Trusts cause tax leakage when compared to corporations.

Tax leakage has to be determined by looking at the taxes paid not just by the business itself but also the taxes paid by its owners on the distributions/dividends paid from the business to its owners (shareholders/unitholders).

On this basis income trusts do not cause tax leakage, rather it is the Department of Finance's analysis (which to date our Minister of Finance refuses to release to his fellow MP's or Canadians) that causes tax leakage, since this analysis completely ignores 31% of the good when it performs its good/bad analysis of Income Trusts relative to Corporations.

The Department of Finance does not include the taxes (retirement taxes) that it receives on the 31% of Income Trusts that are held in retirement accounts (RRSPs and the like) in the false treatment of retirement accounts as being "tax exempt" Charities and not-for-profits are "tax exempt" , retirement accounts and RRSPs clearly are not "tax exempt".

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All withdrawals from retirement accounts are taxed at the highest marginal rate of personal taxation, just like income from employment. In fact retirement income is the second largest source of personal income taxed by the Government, second only to income from employment. During 2004, the most recent year for which data is available, Canadians paid $9 billion in retirement taxes on $52 billion of retirement income. Retirement taxes are not tax exempt, but rather they are tax deferred. When comparing income trusts to corporations in its analysis, the Department of Finance is not even "internally consistent" in its treatment of deferred taxes. The deferred taxes paid by income trusts held in retirement accounts are totally ignored, whereas the deferred taxes paid by corporations are included.

This profound analytical bias by the Minister of Finance and the Department of Finance causes tax leakage. Income trusts do not cause tax leakage.

Finance Minister Flaherty needs to justify his actions. Tax leakage is a discernable fact. Canadians need facts not fiction. MPs need facts not fiction, before voting Flaherty's so called "Tax Fairness Plan" into law. If there is no tax leakage why are we doing this?

Canadians will lose an important investment choice for both today and the future. Canadians have sustained a loss in their hard earned savings of $35 billion as a sole consequence of Mr. Flaherty's actions. This is profoundly wrong. This can not be justified. Source: caiti.info

Related:
Simple to the extreme
To: Finance Minister Flaherty, Your Tax Leakage Analysis is Fraudulent
CAITI Mythbusters

Flaherty was pilloried unfairly according to Keith Woolhouse - Brent Fullard responds

Evidently this reporter thinks its preferable that Middle Eastern oil sheiks (Khalifa bin Zayed al Nahyan of Abu Dhabi Energy) and Hong Kong billionaires (Li Ka-Shing of Cheung Kong Infrastructure) own these companies with "internal problems" like Prime West Energy Trust and TransAlta Power, rather than Canadians who are trying to provide retirement income in a protracted low interest environment.

I guess that fact that these foreign buyers will not pay the draconian 31.5% double taxation or be limited by Flaherty's growth restrictions and yet Canadians will be, is the reporter's idea of tax fairness and leveling the playing field.

Why can the government sponsored pension plans like the federal civil servant's own Public Sector Pension Plan own Thunder Energy Trust without being taxed, and yet the average Canadian holding that very same trust in their RRSP is?

The only internal problems at hand are the internal thought processes of this reporter. Meanwhile the real problem facing these trusts is the external problem brought down upon them by a double talking, double taxing two faced government.

Good thing this government has friends/shills in the press who are happy to practice yellow journalism, since no civilized and fully informed society would let this kind of egregious policy of gross unfairness to ever go down. Do you suppose if this reporter knew that once these trusts are all relieved of their "internal problems" by foreign private equity and government sponsored pension plans that Ottawa's tax collection will be reduced by an ANNUAL amount of $7.5 billion. That's the equivalent of a 1.5% GST increase.
Brent Fullard, October 25 2007

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High-yield income trusts offer choice, but not for faint of heart

Keith Woolhouse, Citizen Special
Published: Thursday, October 25, 2007

It was at this time last year that federal Finance Minister Jim Flaherty was set to rock the markets with his Tax Fairness Plan that effectively slammed the door shut on corporations converting to income trust status and gave existing trusts a four-year window to convert back.

The ensuing hue and cry from investors was predictable as the S&P/TSX composite index plunged and most trusts lost around 22 per cent of their value.

Flaherty was pilloried, unfairly so, as it turns out. The sector's recovery and ensuing acquisitions have largely vindicated him. Those who still believe otherwise may argue that unit values and the distribution rates have suffered. That's a moot point. Most of the still depressed companies have internal problems.
Read the Complete Article

Related:
Perpetuating the Big Lie
Conservatives signal foreign takeovers OK until next year

Why Leaders Fail

A leader's credibility is the result of two aspects: what he or she does (competency) and who he or she is (character). A discrepancy between these two aspects creates an integrity problem.

The highest principle of leadership is integrity. When integrity ceases to be a leader's top priority, when a compromise of ethics is rationalized away as necessary for the "greater good," when achieving results becomes more important than the means to their achievement -- that is the moment when a leader steps onto the slippery slop of failure.

Often such leaders see their followers as pawns, a mere means to an end, thus confusing manipulation with leadership. These leaders lose empathy. They cease to be people "perceivers" and become people "pleasers," using popularity to ease the guilt of lapsed integrity.
Source: Mark Sanborn, CSP, CPAE

Related:
The only thing a politician has is his word. A message to Stephen Harper from Ralph Klein

Singapore gains altitude by gaining taxes.....

Singapore is different than us. Their politicians in office excelled at academics and also understand life’s realities and the need for income amongst their aging population as well as the need to attract investment capital in a competitive global economy.

Our politicians in office, neither excel, nor understand. They issue daily ultimatums and respond by panicked policies induced by false fear. Such as the taxes that would presumably have been lost by the twin conversions of BCE and Telus. One troubling question among thousands of unanswered questions still remains. How can the government lose taxes that were never being paid in the first place?

Neither BCE nor Telus were paying taxes at the time of Harper’s policy borne out of panic and neither were expected to pay taxes for at least another 6 years (combined). As income trusts they would have paid combined taxes of $1.2 billion MORE PER YEAR starting immediately. Go to Myth #3: The sky is falling... the tax threat of BCE and Telus converting

Stephen Harper Houdini. Our fear mongering misleader in office.
Brent Fullard, October 23 2007

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GE Aviation-backed trust to have 14 planes on IPO

SINGAPORE, October 12 (Reuters) - The world's first listed trust with aircraft as assets, backed by General Electric (GE.N: Quote, Profile, Research) unit GE Commercial Aviation Services (GECAS), will have an initial portfolio of 14 leased planes.

Reuters had reported in August that the trust planned to raise $400 million from the initial public offering in late 2007.

Singapore, which is one of Asia's top centres for Real Estate Investment Trusts, is also home to several specialised investment trusts, including shipping trusts.
Read complete news release

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Singapore Altitude Trust Sees 2008 Distribution Yield At 8%

SINGAPORE October 23 (Dow Jones)- Altitude Aircraft Leasing Trust, which is planning an initial public offering in Singapore to fund a fleet of 14 jets valued at about US$650 million, said its distribution yield could grow to 8% next year from an estimated 7.39% this year.

The IPO will create the first aircraft-leasing trust to list in Asia, and follows a recent string of Singapore IPOs by vehicles invested in ships and infrastructure assets.

Business trusts have gained in popularity in the city-state, where they can pay distributions directly from operating cashflows rather than from accounting profit.
Read complete news release

Halloween Gatherings in Calgary and Ottawa

With only nine days to go, I want to remind you about the two events being organized for Halloween (Wednesday of next week, October 31, 2007) by two dedicated CAITI members.

• Ottawa at the Parliament Buildings (plus entry to Question Period)

• Calgary at Stephen Harper’s constituency office.

The time of the Calgary event has been changed from 7:30 pm to 2:00 pm to better accommodate more people’s schedules. Please make every effort to attend these events or ask a friend or relative to attend in your place. For those who are able to attend, the numbers would double if everyone brought someone else along with them. A free bus is being provided for the Ottawa event with round trip passage from Toronto (departing Yorkdale Shopping Center at 7:00 am).

Details and contact names are provided below.

Thank you very much,

Brent Fullard
President and CEO
Canadian Association of Income Trust Investors
www.caiti.info

647 505-2224 (cell)

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Ottawa, Ontario: October 31 - Gathering and Question Period Attendance

• Meet at the Justice Building on Wellington Street, rear of building, 12:30PM to 1:00PM
• Arrive on Parliament Hill 1:00PM
• Remembrance Gathering on Parliament Hill 1:00PM to 1:30PM
• Attend House of Commons visitors gallery for Question Period entering at 1:30PM
  

Ottawa Event Co-ordinator:

David Marshall
phone: 613-938-0810
email:
grumpymarshall@sympatico.ca



Ottawa Meeting Place Map - click on blue placemark for further information

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Calgary, Alberta: October 31- Gathering:

• Meet at 2:00 PM.

Stephen Harper's Constituency Office
Suite A203, 1600 90th Ave. SW
On west side of Glenmore Landing Shopping Centre, which is on northwest of 14th St

Calgary Event Co-ordinator:

Bruce Benson
phone: 403-285-8491
email:
BruceBenson@shaw.ca



Calgary Meeting Place Map - click on blue placemark for further information

Fairborne Energy Trust Announces Plan to Convert to a Growth Oriented E&P Company and a $100 Million Equity Private Placement

"Here we have a US tax flow through entity, Denham Capital Management Limited Partnership, funding the conversion of a Canadian tax flow through entity, Fairborne Energy Trust. We can't own what they can. We are double taxed. They aren't. We are subject to growth constraints. They aren't. We pay taxes on these earnings, they don't. We sell undervalued investments, courtesy of our government. They buy undervalued investments, courtesy of our government.

We are second class citizens in our own country. So much for the fruits of being a energy superpower, as Harper likes to call us. It's more like being an energy supermarket in which Canadians work the check out counter and stack the shelves. Meanwhile our Prime Minister is stacking the deck in favour of uber wealthy middle eastern oil sheiks and Hong Kong billionaires and every foreign private equity firm known to man. Denham Commodity Partners Fund IV Limited Partnership in aisle four-eight."
Brent Fullard, October 22 2007

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TSX: FEL.UN
Oct 22, 2007 02:01 ET

CALGARY, ALBERTA--(Marketwire - Oct. 22, 2007) - Fairborne Energy Trust ("Fairborne" or the "Trust") (TSX:FEL.UN) is pleased to announce its plan to convert into a growth oriented, exploration and production company (the "Reorganization"). Concurrent with closing of the Reorganization, Denham Commodity Partners Fund IV LP ("Denham"), a U.S.-based private equity fund advised by Denham Capital Management LP, will subscribe for, on a private placement basis, approximately 13.4 million common shares of the new corporation (the "Corporation") at a subscription price of $7.45 per share (the "Subscription Price") for aggregate proceeds of approximately Cdn$100 million (the "Private Placement"). The Subscription Price represents a premium of 8% to the closing price of Fairborne's trust units on October 19, 2007 of $6.90 per unit and 13% to the volume weighted average trading price of $6.57 per unit over the last 30 trading days. Denham's investment is conditional on the successful closing of the Reorganization.

Proceeds from the Private Placement will initially be used to reduce outstanding indebtedness. Fairborne plans to continue its current monthly distributions until the closing of the Reorganization, including the November distribution payable on December 17, 2007. Denham's investment will significantly improve Fairborne's financial flexibility and position the reorganized Corporation for growth. Following the Reorganization, Fairborne plans to reinvest 100% of its cash flow to fully exploit its attractive drilling opportunities and grow its production base, while retaining use of its credit facilities for acquisitions. After giving effect to the Private Placement, the reorganized Corporation will have approximately $85 million of net debt drawn against its current borrowing base facility of $220 million.

Fairborne's current production is 13,100 Boe/d (75% natural gas) and the Trust anticipates exiting 2007 at a production rate of approximately 13,400 Boe/d based on recent drilling successes at Columbia/Harlech and Marlboro. The 2008 capital program for the reorganized Corporation is planned to be between $125 million and $150 million.

ABOUT DENHAM

Denham Capital Management LP is a private equity firm focused on the energy and commodities sectors, including natural resources, power and utilities and energy-related infrastructure and services. It invests globally, with investments currently in the US, Canada, South America, Europe and Asia, and across all stages of corporate and asset lifecycle, from development projects to mature, operating businesses. Denham typically targets equity investments in the $50 million to $250 million range. It currently has offices in Boston, Houston, New Jersey and London.

PLAN OF ARRANGEMENT

It is contemplated that the Reorganization will be completed pursuant to a plan of arrangement. Holders of trust units (collectively the "Unitholders") of Fairborne will receive an equal number of common shares of the new Corporation that will hold the assets previously held, directly or indirectly, by the Trust. Exchangeable shares will be exchanged for common shares in the new Corporation based on the then current exchange ratio. This will result in approximately 83.2 million common shares of the new Corporation being outstanding after giving effect to the Reorganization and the Private Placement. Fairborne's outstanding convertible debentures bearing a coupon rate of 6.5% and a conversion price of $13.50 will be assumed by the new Corporation and be convertible into common shares of the Corporation with no change to the terms. One representative from Denham will be appointed to the board of directors of the Corporation on completion of the Reorganization. The Reorganization is subject to receipt of all required regulatory approvals and securityholder approval by at least 66 2/3% of the votes cast by Unitholders and holders of exchangeable shares. It is anticipated that an information circular and proxy statement in connection with the special meeting to consider the Reorganization will be mailed to securityholders of the Trust in mid-November, in connection with the meeting of securityholders relating to such approvals anticipated to be held in December, 2007.

BOARD OF DIRECTORS RECOMMENDATIONS

The Board of Directors has unanimously concluded that the Reorganization and Private Placement are in the best interests of Fairborne and Fairborne securityholders, and has unanimously resolved to recommend that Fairborne securityholders vote their Fairborne trust units and exchangeable shares in favour of the Reorganization. Officers and directors of Fairborne beneficially owning approximately 13% of the issued and outstanding trust units and exchangeable shares of Fairborne have indicated that they intend to vote their trust units and exchangeable shares in favour of the Reorganization. Fairborne has agreed that it will not solicit or initiate any discussions concerning the sale of material assets or any other business combination until completion of the Reorganization.

All of the members of the Board of Directors as well as the CEO, CFO and COO of Fairborne have agreed to waive their right to accelerated vesting of their Restricted and Performance units under the current Trust incentive plan. There will be no change of control or severance payments triggered by the Reorganization for these officers.

RBC Capital Markets acted as financial advisor to Fairborne with respect to the Reorganization and has provided its opinion to the Board of Directors that, as at the date hereof, the consideration to be received by Fairborne Unitholders in connection with the Reorganization and after giving effect to the Private Placement, taken together, is fair, from a financial point of view to Unitholders. Cormark Securities Inc. is acting as a strategic advisor to Fairborne. CIBC World Markets Inc. acted as exclusive financial advisor to Denham with respect to the Private Placement.

TRANSACTION RATIONALE

Strategically, the Reorganization and Private Placement position Fairborne as a high growth natural gas focused exploration and production company with a very strong balance sheet. The Private Placement combined with cash flow from operations will allow the Corporation to aggressively capitalize on over 500 identified drilling prospects, acquisitions and other opportunities identified by its technical staff.

"We see greater value creation to securityholders from investing all of our cash flow in our existing assets and growth opportunities than under the current Trust structure. The Denham investment will significantly improve our balance sheet without diluting existing shareholders as the equity investment is at a substantial premium to the current unit price." commented Steve VanSickle, President & CEO of Fairborne. "The Reorganization will enable us to aggressively pursue identified opportunities on our existing asset base. We are confident that our team can deliver production growth that will more than offset the value of the lost tax shields through the end of the tax fairness period in 2011. We are delighted that, after significant study, a leading private equity firm like Denham, shares our vision and has agreed to acquire approximately a 16% interest in Fairborne," added Mr VanSickle.

"Fairborne's seasoned management team and strong asset base will provide a firm foundation to execute a strategy of growth" said Carl Tricoli, Senior Managing Director of Denham Capital. "We believe that with our strong financial commitment to Fairborne, the Corporation will be well positioned to capture the tremendous value creation opportunities present in the basin today."

Fairborne currently has tax pools of approximately $490 million. Management expects the Corporation to remain non-taxable beyond 2011 as a result of existing tax pools as well as incremental tax pools created through an expanded capital program.

PRELIMINARY 2008 PROGRAM

The Reorganization and the Private Placement will allow Fairborne to transform the growth outlook of the Corporation and significantly increase its reserves, production and cash flow through the development of its large inventory of identified drilling prospects. Fairborne currently has 233,500 net acres of undeveloped land. In addition, the Denham investment will allow Fairborne to reduce debt levels and thereby pursue selected acquisitions.

The Corporation's preliminary 2008 capital expenditures budget will be set between $125 million and $150 million. The budget is balanced between high impact exploration drilling and lower risk infill and step out drilling on well defined existing prospects and is currently planned to include:

- 117 (83 net) wells
- 75% of drilling capital in lower risk locations and 25% directed towards exploration
- $35 mm at Columbia/Harlech
- $25 mm focused on light oil at Brazeau and Clive
- $25 mm in the Deep Basin
- $20 mm for CBM
- The balance of capital will be spent on land and seismic and in other areas.

This budget is based on achieving capital efficiencies of $25,000 per flowing Boe (consistent with Fairborne's three year average) and an operating netback of approximately $30 per Boe (based on CDN$6.00/mcf and US $80.00 per bbl)

Source: Marketwire

Related:
The environment has now turned quite good for Private Equity
Fairborne Energy to convert from trust, raise $100M in equity financing - Oilweek
Fairborne Energy Trust Announces Plan to Convert - Trading Markets

Senator Larry Campbell’s Weblog: How Stephen Harper trapped Randy Kellen

November 16, 2006

I’m 52 years old, self employed most of my working life and of course no organized pension fund other than what I have managed to save over the years. I’m a saver, frugal even, we have RSP’s but it is not a great amount; both my wife and myself have other savings, my house is paid out and we have also managed to put some money into a resp for my daughter should she decide to carry on her education.

In planning for our retirement I have being looking for several years on options to continue an income stream upon retiring; and in so doing happened upon Trusts about 4 years ago and started slowly to create a portfolio of diversified and royalty trusts. We educated and informed ourselves regarding trusts and what to look for as to sustainability of income flows. We did not invest blindly into trusts!

In doing financial planning for my self and wife we will need to earn almost $80,000 before tax to continue with the same life style that my wife has become accustom to. I was surprised at this amount and repeated it several time only to continue to come up with this same figure. We are not big spenders, three quarters of the after tax money went straight to living expenses.

So you see why I had fallen in love with Trusts, it would allow us to enjoy a life style that we had grown accustom to and potential growth. So, over the past few years we have slowly added to our portfolio to the point I could see some light at the end of the tunnel and perhaps a retirement date in the near future.

Last year, when the Liberal government suggested that trust should be tax or the structure of trusts be change we lost on paper a fair amount of capital. We along with all trust investors were quite relieved when they decided to not proceed with these changes. Further, a new conservative government stated that no future changes would be needed or attempted.

Now I am in a bit of a quandary, under the presumption that this new government would not touch trusts, we made application for a margin account and of course purchased more trusts to take advantage of the low prime rate and the attractive over all return on our basket of trusts. What could go wrong, we were finally on top of our financial future by using all the tools and resources legally allowed to us and sanctioned by our own government! We have lost far more money now than we ever thought possible!

This week, like tens, thousands, hundred of thousands, perhaps millions of others, have run the full range of emotions from disgust, to fear, to loathing this government. We have lost a fair amount of capital, and we still owe the margin amount to the bank.

The future looks grim for us and many others, we will have less capital, less money to spend, less trips and our standard of living if and when we retire will be lowered substantially. With less spending from the so-called “boomers” what will happen to the Canadian economy. Business communities have being gearing up for the future spending of this group that I think will not be as great now as it could have been. Tax loss selling and expenses will no doubt be greater this and following years to offset there income from years previous. We will ultimately pay fewer taxes to help fund Revenue Canada and many trusts will be at risk of being purchased from other than Canadian companies. Our resources are slowly being purchased and controlled by non-Canadians along with any income, tax revenue (if any is available after write offs) and the ultimate spending benefit from such.

What is ultimately the trickle-down effect, we are not the only Income, Reit or Royalty trust holders. Many individuals from mutual fund investors, to pension funds, to CPP, to perhaps even yourselves. How is this multi billion dollar loss in investors portfolios going to affect spending habits of the so called “boomers”. For the last ten years we have been hearing about this massive group of individuals that will have money to spend or at least did until this attack on fixed income retirees and those of us who where close to retiring. Spending from this group will affect every business from restaurants to cosmetic surgery.

The future looks grim for ourselves and many others, we will have less capital, less money to spend, less trips and our standard of living if and when we retire will be lowered substantially. With less spending from the so-called “boomers” what will happen to the Canadian economy?

To me this ill-advised, knee jerk reaction that this Government has proposed will ultimately hurt not only our country but those that have built this country by paying their taxes in the past. My wife and I, since owning trusts, have never paid so much tax as we have these past four years.
As I mentioned above that our future retirement timing, capital and income has been affected greatly by this government decision.

Please add your voice; say no to this incredibly destructive proposal!

Source: Senator Larry Campbell's Weblog

Related:
Stephen Harper lays his trap