TORONTO, Feb. 13 /CNW/ -
Mr. McCallum and M. Pacquette:
I would like to express our association's gratitude to you and your
parties for making the Public Hearings on the proposed taxation of income
trusts possible.
Much like the process of panning for gold, public hearings can be a very
effective means to wash away fiction from fact.
A motherlode of truth was revealed by these hearings, namely:
(1) Tax leakage was both a baseless assertion and a policy outcome driven
result designed to achieve objectives not contained in the enabling
legislation, The Ways and Means Motion, and therefore not explicitly agreed to
by parliament.
(2) All five provisions of the Ways and Means Motion remain unproven and
therefore baseless. Considerable credible and factual information, studies and
testimony that are now part of the public record prove these five assertions
to all be false.
(3) Canadians and foreign investors have sustained a loss of $35 billion
in their hard earned savings. Lesser amounts being quoted are only reflective
of the myriad variables that have affected markets since the close of trading
on November 2, 2006.
(4) Canadians, in particular those 70% who are not members of employer
pensions, will lose an important investment choice, and will have to resort to
a reduced style of living and/or invest their life savings in foreign markets.
(5) The savings of Canadians will become more captive to the securities
of corporations proper and the products of certain financial services
companies, notably life insurance companies like Manulife, whose CEO gave
vigorous testimony against income trusts. His testimony was highly conflicted
on at least two levels, as the CEO of a Corporation proper and the marketer of
products competing with income trusts for "shelf space". His comments about
capital adequacy are worthy of greater study by the Finance Committee as
perhaps Mr. D'Alessandro was telling you that the Tier 1 Capital Adequacy
Ratios for life insurance companies should be raised to enhance the capital
adequacy of these market participants.
(6) The letters and testimony of Provincial Finance Ministers raise
issues that, if valid, can be readily dealt with through the provincial
sharing formula, which coincidentally is presently being negotiated by these
very individuals with the federal Finance Minister
(7) The Governor of the Bank of Canada has based all his comments
premised on the words "limited evidence suggests"
(8) The PricewaterhouseCoopers study of December 11, 2006 (Income Trust
Report) and the HLB Decision Economics Study of April 6, 2006 (Income Trusts
and the National Economy) are based on exhaustive evidence and prove the
Governor wrong on all accounts. All these reports are publicly available and
have been provided to the Governor of the Bank of Canada following his
testimony.
(9) It appears that The Governor of the Bank of Canada may have allowed
himself, and/or his office, to be politicized in this matter that is before
parliament.
(10) Individuals gave credible and compelling testimony on the losses
they have suffered at the hands of the Tax Fairness Plan and this policy's
impact on their future lives and the lives of their affected family members.
These people have lost money, investment choice, and confidence in their
government and our capital markets. This is also true for foreign investors
who did not testify.
(11) The question concerning the policy reasons behind why Canada's
largest pension plans will be able to hold the economic equivalent of income
trusts in their private equity portfolios and be free of tax and yet average
Canadians will experience double taxation of comparable investments in their
RRSPs, remains wholly unanswered. This is a gross inequity that further
exacerbates Canada's two tiered pension system, defined by those with employer
pensions and those without. How can this be labeled tax fairness? How can this
inequity be voted into law?
(12) The inevitable hostile take out of this important sector of the
Canadian economy by foreign private equity and foreign corporations that many
had predicted at the time of this policy's announcement has already begun, as
witnessed by the announced takeovers of Calpine Power by US-based Harbinger
Capital, Lakeport Brewing by Belgian-owned Labatts, Great Lakes Carbon by
Bombay-based Rain Commodities and Norcast by Swiss-based Pala Investments.
(13) This takeout by foreign investors will result in tax leakage and is
the sole consequence of a policy designed to stem tax leakage, tax leakage
that was proven not to exist in the first place.
(14) The conversion of BCE and Telus would actually have been tax
positive to Ottawa, in light of the fact that both of these companies are not
paying taxes for four years and two years respectively, a so called "tax
holiday" only available to corporations seeking to minimize taxes.
(15) Canadian corporations on average pay taxes at the rate of 6.3% of
earnings, not the statutory rates of taxation.
(16) Canada's largest securities regulator will unveil new rules by
year-end to more clearly define how income trusts report distributable cash.
Conclusion: Therefore as a result of these findings, our association is
calling for a full repudiation of the Tax Fairness Plan in the name of
fairness and good governance.
As such, all the existing income trusts should be fully grandfathered and
be free of growth constraints. Measures should be taken for a transition
period to protect these companies from the takeover frenzy that this policy
has induced. Future conversions should be the subject of further study and
policy evaluation involving stakeholder input through public consultation.
Thank you,
Brent Fullard
For further information: Brent Fullard, (647) 505-2224, President & CEO,
Canadian Association of Income Trust Investors, www.caiti.info,
media@caiti.info
