February 07—Your (Jim Flaherty, Finance Minister of Canada) correspondence regarding the Tax Fairness Plan from a Canadian in Australia (See letter below this one)
I invite you Jim, to email me personally, not some canned email I received,  after you read this email and give me your reaction.  Because I would be more than happy to provide you the real facts of life, rather some pasteurized versions from minions who have never experienced what living is all about.  They are gatekeepers Jim, as all they do in life is watch the gates and say no.  Saying yes confuses them.  I see this in Asia all the time, but the difference is, in Asia people work around the system, and the gatekeepers are relegated to the back seat.  But one thing they all understand is that too much tax kills the golden goose.


LET'S LOOK AT SOME FUNDAMENTAL PROBLEMS!!!

I'm in Australia - and lets look at how people are doing better here than in Canada.

Let's look at some big differences between a country of 20 million to one of 30 million. 

1.      Costello and John Howard run a budget surplus and no debt.

2.      Let's talk about income taxes.  I did check out the comparative taxes the other day. Bearing in mind it does not factor in any tax breaks or individual breaks. Here are some rough results ( just used the various tax calculators from the web comparing the ATO and Alberta Finance, and I tried to keep it simple):
 
  25,000 a year:          AB      $3744             AUS     $3261
  50,000 a year:          AB      $11108           AUS     $11610
100,000 a year: AB       $28260            AUS      $32050

When you compare to Alberta, which has the lowest tax rates in Canada, and factor in the CPP deduction, add in UI payments for someone working at a job, factor in Medicare payments - not paid here in Australia, but there is a $1500 tax levy built into income taxes for high income earners, someone in Alberta pays more at basically all levels of income, but perhaps comes close to Australia at $100,000.  When you consider that there are no different Australian State tax rates - it's uniform regardless where you live, and factor in Alberta is the lowest in Canada, then generally speaking, other Canadians are getting ripped off from the tax system, and Alberta has it right.  It's not all Federal taxes, its the combined taxes.

But the big thing to remember is that Australia that has shifted the gap between higher and lower incomes compared to Canada  over the past few years, in other words, they have become more competitive relatively speaking than Canada.  They have made big changes, you giveth with one hand and taketh away with the other . 

AND HERE IS THE BIG ONE GUYS FOR SENIORS

3.      They also announced last year that seniors - 60 and over can put up to $1,000,000 (if you have it, but with house prices being what they are, that day comes for many) into their RRSP equivalent  (called superannuation) - one time - and withdraw it and the earnings - get this tax free!!!!   Then after July this year, you can put in only 150,000, then it's 450,000 a year - or maybe the other way around (not sure right now).  But you can receive all the earnings on it tax free!!!!!!  So if you have equity tied in your home, or other cash, you can take it out and get earnings from it tax free.  It might make the difference between being a pauper and living somewhat with dignity.    In the icy hills of Canada, they look at taxing seniors to the hilt, and kicking them in the groin when they aren't looking.  Here they say, go for it mate, and what you earn in your super is withdrawn without paying tax

And let's see now, you graciously give a $1000 tax credit - get real! 

BUT THERE'S MORE

4.      Australia has experienced 14 years of growth, whose national unemployment rate is UNDER  5% - with a regional variance of a high of 5.5% and a low of 2% for the Northern Territories and 3% in Western Australia. (Yesterday's numbers).  Canada struggles to keep a national average at 6.2%, Alberta 3.8% and Newfoundland - 8 or 9%.

AND MORE

5.      In 2005 the average Australian net worth per capita is $215,000 (source Australian Bureau of Stats and  Australian Treasury) compared to the Canadian $131,000 (same Canadian sources).  An article was written here in the Australian Financial Review, entitled " How Did We Get So Rich" which came out the same  time the TD bank said Canadians had not prospered with the standard of living for the past 15 years.  So, tell me what you are going to do to rectify this.  Taxing trusts so people's wealth is further eroded.  Good plan, NOT!!

ARE YOU FEELING SICK YET,  BECAUSE THERE'S MORE

6.      Minimum wage is also more decent.  It's about $13/hour plus benefits on top, which includes the payments into the superannuation, which I believe is 9%, but am not sure of that.  I am aware and have talked to young girls. about 17 - one works part time in a drug store, and her part time wage was $17.50 an hour, but no benefits, the other was working as a hostess in a restaurant getting paid $20 an hour. This is the norm.   In Canada, people should be grateful if they get $7 an hour - a joke isn't it.

AND HERE'S ANOTHER

7.      This is one of my pet peeves.

Why do the people who suck at the public trough, who are paid by the people who pay the taxes that feed them, make bad decisions for those same people, and then after a long "hard" day at the office, can go home knowing that they will be the few people left in the labour market that can get guaranteed, indexed pensions.  The remaining people who pay the cost of pensions of these cast of minions, will have to figure out how to scrape by. 

THERE'S AN AND

That same cast of minions get to enjoy the benefits of travels  - and then get to stay at Mom's and get a tax allowance TAX FREE with NO RECEIPTS required of $75+/- for meals depending where you travel to - in Tokyo its $125/day, plus 15% for incidentals (and you can eat in Tokyo quite well thank you for about $60 a day), and then by staying at Mom's you get to have an accommodation allowance of only $50 a day because it's private accommodation, not a hotel. And you know what, they see this as a right! 

The average shmuck gets lucky if he gets to claim what he spends, and he must provide receipts and justify it.  You want tax fairness, then either get the civil servants off that gravy train, or put every hard working bloke who travels with the same rights. All you do is perpetuate second class citizenry.

AND NOW FOR THE FINAL CURTAIN AND THIS ONES A DOOZEY AND SAD

The basis of this was written to a journalist in February 2005 and it's still relevant today.  It had to do with national identity and with that through song.  I asked this well known Canadian journalist if he could name a national song, or combination of songs sung and learned by all Canadians.  The only song that  the reporter could come up with was Maple Leaf Forever, but as he said, it can't be sung because it offends French Canadians.  So ask your self, how is Canada a united country and through what???

In 2005, I was in Sydney to watch the Edinburgh Military Tattoo - A Salute To Australia ( the second time it has been outside Edinburgh - it was in NZ in 2000 - Canada has not seen it - wonder why??).  It was a brilliant show as per usual.   One thing struck me was that there are so many songs that are routinely sung in Australia that are national in scope, and nationalistic, and many of these are taught in schools.  Children know them.    Waltzing Matilda is just one clichéd example.   I was asked by several Australians does Canada have any songs that are sung by all Canadians, and national in scope.  I said I am not aware of any that people as a Canadian nation would sing.  Farewell to Nova Scotia does not qualify!


Gentlemen, I thought that would be an appropriate denouement to perhaps put some conclusion to this.

Canada is sick, and all you are doing is making it sicker.  Perhaps you have well intentions, but before you make decisions only by listening to some people you should look at the facts.  Excessive taxation destroys wealth, and John Howard and Peter Costello have figured that out.  When you destroy the only solid investment vehicle that was providing the cash flow that seniors who so long and hard worked all their lives  to achieve, what have you really accomplished, and for whom?  Was it the best business model, and should all companies convert to trusts, of course not.  Tweaking is better than throwing the baby out

with the bath water.  The least you could have done was grandfather existing trusts, but leave their model untouched.  That's been done by government many times over.

Why not talk to your counterpart Peter Costello - you might learn something about tax fairness, especially for seniors. —Letter from a Disgruntled Canadian

This standard letter from Jim Flaherty, The Finance Minister of Canada elicited the above reply.
Thank you for your correspondence regarding the Tax Fairness Plan for Canadians announced on October 31, 2006. 

I understand the concerns expressed to me concerning this decision.  This decision, while regrettable, was necessary.  We were seeing a very troubling trend of acceleration of conversions to income trusts in 2006.  In some cases, it was done purely to avoid paying corporate income tax.  If left unchecked, this would have resulted in millions of dollars in less revenue for governments across the country to invest in the priorities of Canadians, including more personal tax relief.  It was important to act decisively to address what had become a clear danger to our economic productivity as a country.

We believe all Canadians should pay their fair share of taxes, including corporations.  We do not believe ordinary taxpayers should pay more because corporations were not paying their fair share.

Our Tax Fairness Plan restores balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations, and will deliver more than $1 billion of new tax relief annually for Canadian seniors and pensioners.

Measures in the Tax Fairness Plan include:

*       A distribution tax on distributions from publicly traded income trusts and limited partnerships.  Distributions of existing income trusts will not be affected by this tax until 2011.
*       A reduction in the general corporate income tax rate of one-half of a percentage point as of January 1, 2011.  As of 2011, the federal general corporate income tax rate will be 18.5 percent.
*       An increase in the Age Credit amount by $1,000, from $4,066 to $5,066, effective January 1, 2006.
*       A major positive change in tax policy for many seniors and pensioners: permitting pension income splitting, beginning in 2007.

The proposed new distribution tax will not punitively tax income trusts.  Recognizing that many Canadians have savings invested in income trusts, existing income trusts will not be subject to the new measures until their 2011 taxation year.  This four-year grandfathering period is both reasonable and appropriate.  A grandfathering period longer than four years would continue to provide income trusts with an inappropriate tax advantage relative to their competitors and retain the unlevel playing field that currently exists between income trusts and corporations.  In addition, under the new measures, income trust distributions will be treated as dividends eligible for the enhanced Dividend Tax Credit.  Together, these measures will help remove the existing tax distortion in favour of trusts relative to corporations and let the underlying economics, and not the tax rules, determine business decisions.  There will not be any additional government revenue generated from the corporate sector.

The increase in the Age Credit amount and allowing pension income splitting will help many of the most vulnerable Canadians, and many investors.  The $1,000 increase in the Age Credit amount will provide tax relief to low- and middle-income seniors, and increase the income level at which the credit is fully phased out, from $57,377 to $64,043.  The pension-income-splitting measure will allow Canadian residents who receive income that qualifies for the Pension Income Tax Credit to allocate up to one-half of that income to their spouse or common-law partner, thereby significantly reducing the tax on that income.  This is a significant and positive new step that will directly benefit thousands of pensioners and seniors across the country.  It will strengthen our social security system even more.

The Tax Fairness Plan builds on steps taken in Budget 2006, in which we delivered significant tax relief for Canadians, with 29 tax cuts amounting to $20 billion in tax relief over the next two years.  We believe that tax relief is one of the keys to ensuring the Canadian economy remains strong and competitive.  Families and businesses still pay too much tax in this country, and our Government will continue to reduce the tax burden on Canadians. 

By introducing our Tax Fairness Plan we are acting in the national interest to ensure a stronger, more productive economy in the future.  We are significantly enhancing the incentives to save and invest for family retirement security.

Thank you for communicating your concerns.

Sincerely,


James M. Flaherty