The Marshall Savings Plan is the best possible outcome for all Canadian taxpayers, who to date have lost over $1.5 billion in annual tax revenue from the takeover of artificially devalued income trusts, by foreign entities, non taxable entities, state owned enterprise and through private equity buyouts. To date there have been 51 such takeovers totaling $59 billion. Examples include:
- $5 billion takeover of Prime West Energy Trust by state owned Abu Dhabi Energy who will not pay the 31.5% tax
- $4 billion takeover of Harvest Energy Trust by state-owned Korean National Oil Company, who will not pay the 31.5% tax
- $2 billion takeover of Teranet Income Fund by government pension fund OMERs, who will not pay the 31.5% tax
- $1.7 billion takeover of Union Energy Waterheaters by US private equity leveraged buyout firm Allinda Capital Partners, who will not pay the 31.5% tax
- $629 million takover of TransAlta Power Income Fund by Hong Kong billionaire Li Ka Shing, who will not pay the 31.5% tax
- $356 million takeover of Sleep Country Canada Income Fund by billionaire Thomson family, who will not pay the 31.5% tax
- $206 million takeover of Thunder Energy Trust by Overlord Capital, division of government pension fund PSP, who will not pay the 31.5% tax
If this is the government's idea of “leveling the playing field” and/or stemming tax leakage, then something is seriously wrong. This outcome achieves the exact opposite result of what the policy promised.
The Marshall Plan will however achieve both of these stated goals of “leveling the playing field” and stemming any further tax leakage from the 169 trusts that presently are in Canadian taxpayers hands and will protect this major source of tax revenue to the government of $6 billion a year, while preserving Canadians investment choices and investment savings.
Tax leakage never existed in the first place.
This was proven by HLB Decision Economics who are the only group to work collaboratively with the Department of Finance in the Public Consultation process in the Fall of 2005.
Their study entitled “The tax revenue implications of income trusts” proves there is no tax leakage and that ant claims of tax leakage onlt arise when the government, improperly, leaves out all the taxes collected by the government from the 38% of income trusts held in RRSPs and pension accounts. Doing so is totally contradictory to basic fiannce and to the rule laid down by Canada’s Auditor General and Canada’s Parliamentary Budget Office. Those rules are called the rules of “Accrual Accounting”.
The HLB Study can be downloaded here.
The false notion that tax leakage existed was advanced by people like Jack Mintz, who worked at the Department of Finance and then worked at an organization funded by big business, the C.D. Howe Institute. His public pronouncements about tax leakage are completely refuted by what he confided in an email to Brent Fullard (of CAITI) on November 26, 2006 when Jack Mintz wrote:
"I do want to point out that there is a serious flaw in many of the analyses especially on the taxation of pension and RRSP accounts. Finance was not right to treat the impact as ZERO.”
Other quotes on this matter of alleged tax leakage include:
"The discrepancies between ourselves and the Finance Department led us to conclude that the Finance Department is 'sharply overstating tax leakage'. Specifically, we concluded that the true tax leakage is about 'five percent of the Department of Finance's figures." Dennis Bruce of HLB Decision Economics.
“Income Trusts do not cause tax leakage, it is the Department of Finance's methodology that causes tax leakage. It's that simple and it's that wrong." Brent Fullard of CAITI
"I guess, if we were incompetent, we wouldn't admit to it." Brian Ernewein, Senior Department of Finance Official at the Public Hearings on Income Trusts
"Parliamentarians need objective fact based information on how well the government raises funds (read:taxes)." The Auditor General of Canada.
Meanwhile what is the governments proof of tax leakage? 18 pages of blacked out documents that were subsequently demanded to be returned for the simple fact that they contained more damaging information about the game that the government was playing in concocting their argument about tax leakage. See Globe and Mail article Finance refuses to divulge key trust data.
See study by Deloitte entitled Income trust buyouts: Lots of activity, little tax revenue.
The Marshall Savings Plan
The Marshall Savings Plan will stop the ongoing massive erosion to Canada’s tax base for the benefit of all Canadians taxpayers and relative to the “do nothing” alternative will be tax revenue positive to the government of $6 billion a year, while at the same time turning any future taxes paid on the income trusts held in RRSPs (now held in MSPs) into current cash taxes for the government, which will eliminate this argument that Jim Flaherty used to justify his prior policy actions:
“As Minister of Finance, I have a fiduciary obligation to the taxpayers of Canada today, not tomorrow, an obligation to pay for needed social, environmental and economic programs today, not tomorrow. I cannot, and I will not, fund today’s programs from tomorrow's revenues.” Jim Flaherty, January 30, 2007, Finance Committee Public Hearings on Income Trusts.
For this to be an honest statement by Jim Flaherty, can only mean that he has a fiduciary responsibility to the taxpayers of Canada to adopt the Marshall Savings Plan as a key measure in his upcoming 2010 Budget. If not, there must be some hidden agedna going on here to kill income trusts for reasons unrelated to tax leakage, as the premise of tax leakage was how this policy was “sold’ to 99.5% of Canadians. That false tax leakage argument has been torn to the ground, and the failure to adopt the Marshall Plan will cost all taxpayers the loss of $6 billion in annual tax revenue, the equivalent of a 0.75% increase in the GST, with no increase in the GST required at a time that Canada is running a $56 billion budget deficit.
Where is that tax revenue going to come from otherwise?
SUPPORTERS
