Saturday, November 18, 2006

When will you say enough is enough ?

Some people are glad that income trusts tax got changed because now their investments are doing a little better as income trust investors are fleeing for safety. This view is VERY VERY SHORTSIGHTED.

This government interference in the public markets is the type of move that is impossible for the government to make right. Its not like simply telling an us individual tax payers that we have to pay additional taxes in June or July or when ever, that can be discussed , reacted to and even reversed without implication.

However the way the tax change and the type of change made to income trusts (public traded companies) causes an instant reaction in the perceived value and the trading of these trusts as soon as the market opens. The loss in this case to investors was about 30 billion $ over a few days.

Even if the government now reversed their approach to this change in taxation, it is now totally impossible for the folks that have taken the loss by selling some or all of these trusts (which many had to do in order to protect their savings) to recover their losses.

It is also impossible for the government to make it right to them by compensating then for their losses because the government never received any of that 30 billions $ lost.

That is the guts of the issue, a promise to keep one corporate entity in place caused people to invest and make investment decisions, the breaking of that promise casued people to lose in some cases 100,000 or more of their lifetime savings.

Oh we can all say so what they must be rich, but these are not business tycoons, these are Mom and pop investors. People that paid their mortgage off, then downsized the home when they retired and put the money into income trusts or some folks that have a run a small buisness ther whole like like a gas bar or a convience store and have no pensions except what they have saved.

Why did they invest in income trusts ? Because these companies were the type of investments that did not need additional capital, so the profits that they made were paid directly to the investors. The investors then paid full tax on this income just like it was interest earned.

When they invsted in other companies like bombardier or Bell Canada thes companies made profits and paid taxes on these profits, but they chose what they would pay to investors and how much they would keep. When dividends were paid out , the income the investor recieives is not tax as regular income as tax was paid by the corporation.

Here's is a simple example.

Income trust makes 100,000 $ , the investor receives his share of this say 1000.00, The invetor pays taxes on that income just like earned income . Lets say 45 % so the tax paid in total on the 100,000 was 45,000 $ (So total tax to gov here is 45,000.00)

Corporation makes 100,000 $ , it pay taxes on this profit of (combined federal & prov) of about 31 % = 31000.00, say it pays the rest out to shareholders as a dividend thats 50,000 to pay out to investors, the tax rate paid by investors is only about 20 - 23 % on the funds received as dividends , so that would be 10,000.00 (So total tax to gov here is 41,000.00)

So there is no real loss of tax to the government. There is some potential to defer some tax by individuals if they are getting this trust income in RRSP, but this is totally recovered when funds are drawn out of your RRSP. (just like your current investmenst and gains defer tax in your RRSP.

The real issue here is pleasing the big corporations who want control of your money. The real issue for Canadians is when something like this can be done by your government, what is next , who is next, and when do we stand up and say enough is enough !!!

It is like I heard in commentray on a radio show discussing the income trust issue, he related it to what may have happened in Germany.

Heres the Cdn version.
1. When they taxed the income trusts, I did nothing as I owned no trusts.
2. When the cancelled RRSP's and wound then down over 4 years I did nothing as I had no RRSP's .
3. When they put in the tax 3 % tax per year on the value of mortgage free homes , I did nothing as I was not a home owner.
4. When I tried to buy a home and there was no more capital available for mortgages. I asked for help but there was no investment capital left.

Thursday, November 16, 2006

Tired of broken promises ? I am

Harper and Falherty stated a promise during the election Campaign, (just a short ten months ago) , and now have broken that promise. This one is pretty serious it affects 1 in every 6 Canadians.

This broken promise has cost Canadian Investors more than 25 billion $ so far. Yes I'm talking about the promise of not taxing income trusts. ''A Conservative government will ... preserve income trusts by not imposing any new taxes on them,'' the Conservative election platform stated.

It is one thing to break a promise on saying you would build a building or pave a road and just not getting aound to it. It is something else entirely to promise to preserve an investment vehicule and then completely reverse your promise .

Many seniors and other canadian savers took the conservatives at their word and made significant investments decisions based on this promise, the result for many is a significant hit to their RRSPs and savings, in many cases as much as a 20 % loss.

Said in another way if your RRSP was worth 300,000 the next day it was likely worth only 240,000.

Your Mom, your Dad, you , your brothers and sisters may very well have been impacted by this broken promise.

It is time to take action on politians that don't keep promises, especially those that don't respect our hard earned savings.

Sign the petition at

After all whats next ? maybe they will just cancel RRSP's or introduce a new tax on houses that no longer have a mortgage.

Or just add new caharge to your double double , after all I bet Starbucks is lobbing the gov now, with reasons why it is unfair for a large Tims to be 1.40 and the same at Starbucks is 2.50

Wednesday, November 15, 2006

Harpers big mistake.

What were Falherty and Harper thinking ?? Strange way to want your name recorded in the history books. I can see the entry now.
On Halloween October 31 st 2006, Canada's finance Minister introduced a very poorly planned reversal of a promise not to tax income trusts.
The move to tax trusts was a result of what's rumoured to be some rapid calculations on the back of a napkin while out for an early supper with Prime minister Steven Harper. The poorly executed calculation and the resulting tax introduced on trusts resulted in the loss of 25 billion dollars and affected millions of everyday Canadians.
Seniors groups, RRSP holders, foreign investors and everyday Canadians reacted quickly to the broken promise and the loss of funds. Millions of emails and faxes were received by MPs, TV shows , newspapers and radio shows covered the issue for many investors as they relayed the stories of Harpers broken promise and the ten of thousands and in some cases hundreds of thousands of savings this had cost them.
The Harper government (known for being very hardheaded and PM Harper even being called a Hardass by some of his own ministers ) stood steadfast on the change.
The Harper conservatives being a minority government could not however withstand the voters displeasure in the election that followed the new tax by about 6 months. Harper and the conservatives were virtually wiped out in the election achieving only 21 % of the popular vote and 18 seats in parliament.