KILLING THIS CASH COW...

KILLING THIS CASH COW IS FAIR
Why is Canada’s Government reluctant to end
abusing Honest, Hard-Working Canadians
through taxation of phantom income?

by Victor Drummond ©
July 2009

There are few situations where it becomes as difficult to see the logical answer, to a high profile question, as this one. A prize case of not seeing the forest for the trees.

The high profile question is this: Why would two successive Right Honourable Prime Ministers of Canada publicly voice a commitment to correct Canada’s unfair taxation of pretend “phantom” income and then both of them do an about face and go back on their word?

Especially the Right Honourable Stephen Harper who had actually started to “resolve” the problem by approving a “Tax Remission Order” (TRO) revoking the unfair taxation, of pretend income, for 37 former employees of the SDL Optics Inc./JDS Uniphase Corporation.

Finally after months of pondering this mystery a very logical explanation literally jumped out of the blue.

As one of my former co-workers would say, “The penny finally dropped”.

The red-herring explanation for such un-Canadian conduct, is the government’s desire to collect all those millions of tax dollars unjustly extorted from honest, hard-working, Canadians who failed to cash in their ESPP/ESO equities on the date of “exercise” and are now being taxed on huge pretend profits, i.e. “phantom income”.

But eventually I said to myself: “Why would any government put their reputation on the skids just to be able to report they managed to create a surplus budget?” “Why indeed?
Especially during a world wide economic crisis that makes a surplus budget practically impossible.”

Why, when a huge deficit budget is forecast, would a government not use this opportunity to restore fairness to an outrageously unjust tax policy, and thereby come out of the crisis smelling like roses, while at the same time putting economy boosting, discretionary, cash back into the hands of its rightful owners?” Why indeed?

The answer, as it turns out, is so extremely simple I nearly missed it altogether. But just think about this phantom tax scenario for a moment. The phantom tax money, extorted from the taxpayer, goes into the government treasury to be used for day to day government disbursement.

The tax money doesn’t find its way into the personal income of any government members of the House of Commons (HOC), or the Prime Minister or any members of his cabinet. Not one cent of that money ever appears in the coffers of any federal political parties.

So why resist doing the honest, decent, and right thing, i.e. correct the defective legislation, and put an end to taxing pretend income and fairly compensate those already victimized by it? As the U.S.A. government has already done for their victims of phantom income taxation. Ref: www.reformAMT.org

There is a very simple answer. The present system creates an on going,field day for Canada's legal fraternity.

All one must do for the reason to become very obvious is to follow the sequence of events when phantom tax victims decide to fight for their rights and begin a quest for fair taxation and justice.

A victim's first avenue of recourse is to appeal to the Chief of Appeals Officers, located at many offices of Revenue Canada, right across this fair land.

(*) Depending more upon the mood and location of the Appeals Officer than upon the merits of the appellants case the appellant may or, more likely, may not receive a favourable decision. (*)Ref:- Federal Auditors report 2009

A typical phantom tax victim, having been denied a fair deal by the Revenue Canada Chief of Appeals Officer, may then apply to the “Tax Court of Canada” for a hearing and judgment of their case.

Victims considering taking their case to the Tax Court are advised they may present their case with, or without, a lawyer but the Tax Court of Canada preliminary recommendations advises appellants to engage the services of a good tax lawyer to improve their prospect of obtaining a favourable ruling.
A favourable ruling, however, very seldom happens.

An alternative to appealing to the Tax Court of Canada is for victims to apply to have their case tried by an ordinary court of justice. In either case the victim is advised to use a tax lawyer to present their case.

Lawyers go not come cheap. Two victims, that I am aware of, went the court route for justice, spent tens of thousands of dollars for legal services and still had their appeals denied. Their appeals were rejected on the grounds the taxes levied were in keeping with existing law and consequently their appeal was denied.

Bottom line: the CRA kept their ill-gotten loot and the legal fraternity was provided some very lucrative business. This cash-cow for Canada’s legal fraternity is on-going and can be milked repeatedly so long as Canada’s defective taxable benefit legislation remains as-is and new victims are created year after year.

Would any lawyer, in his right mind, support correcting any law that maintains this lucrative cash cow?

Do you suppose a member of the Canadian legal fraternity, who happened to be elected to the position of Right Honourable Prime Minister of Canada, would keep any commitment to “fix” or “resolve” this outrageously unfair but lucrative situation?

If the problem was resolved by any Canadian Political Party leader do you suppose the party coffers would receive any monetary support from the Canadian legal fraternity?

What about voting support from lawyers, their family members their friends. associates and office employees ad infinitem?

Do you suppose their numbers are significant enough to make a difference to the outcome of a federal election?

The Right Honourable Paul Martin succeeded the Right honourable Joseph, Jacques, Jean Chrétien as Prime Minister of Canada. The phantom tax issue arose under the watch of Prime Minister Chrétien who in addition to a few other short-comings was also a Lawyer, i.e. QC, LLD.

Was the Right Honourable Jean Chrétien aware of the unfair taxation of phantom income in 2001?
If so what did he do about it?

Answer: Yes he was fully aware of this insidious tax trap. He did nothing more than refer all appeals for fair taxation to his Minister of finance the Honourable Paul Martin for consideration.

The Honourable Paul Martin is also a Lawyer, i.e. LL.B . What did the Honourable Paul Martin do about this tax fiasco?

Answer: nothing beyond introducing a phantom income tax deferral option to permit those who where in financial distress to put off paying the tax year by year. The tax levied on phantom income remained unabated and might also collect penalties along the way.

When the Right Honourable Paul Martin became Prime Minister his Minister of Finance was the Honourable Ralph E. Goodale who held that position from 2003 to 2006 until a change of government took place.

Surprise, surprise, the Honourable Ralph E. Goodale is also a Lawyer with a law degree from the University of Saskatchewan. It comes as no surprise then to discover Mr. Goodale did absolutely nothing to correct the unfair taxation of pretend income.

In 2005 the federal Conservative party campaigned on reduced and fair taxation before the 2006 federal election and as soon as the party leader, Stephen Harper, was sworn in as the Right Honourable Stephen Harper, Prime Minister of Canada, he blundered into a “fair Taxation” request by the Honourable Gary Lunn, MP, CP for the riding of Saanich, Gulf-Islands, British Columbia. Prime Minister Harper then appeared to be well on his way to fulfilling his pre-election commitment(s) to the Canadian people.

Note: The Right Honourable Stephen Harper is one of the few people to become prime minister of Canada who does not have a law degree and is not affiliated with Canada’s legal fraternity in any way.

There were some 37 former employees’ of the defunct SDL Optics Inc. JDS Uniphase Corporation plant in MP. Lunn’s riding that were victims of the unfair taxation on pretend income. Gary had applied for a Tax Remission Order (TRO), to revoke this unfair tax, and related penalties for those 37 victimized employees.

Either without the advice, or ignoring the advice of his Minister of Finance -- the Honourable James Flaherty, a lawyer with 20 or more years of prior experience -- Stephen Harper approved Gary Lunn’s TRO and had it signed into law by Canada’s Governor General.

At the time this TRO was proudly publicly announced by both MP Gary Lunn and Prime Minister Stephen Harper there were grand speeches made and great promises made to the effect: “It is not in the government’s interest to tax money never seen.” and “we’ll resolve” this issue.

Shortly thereafter, however, an article appeared in the Victoria Times Colonist Newspaper (Dec 7 2007 issue)under the title: “JDS Deal dangerous precedent, Ottawa told.”

Quoting a few choice lines from this article: “The decision recently published as a ‘remission order’ in the Canada Gazette, was approved by cabinet despite objections from officials at Finance and Canada Revenue Agency.”

“Senior bureaucrats warned such a decision was unfair to other taxpayers and set a dangerous precedent for employees of other high-tech companies who watched their fortunes rise and fall during the dot-com boom and subsequent bust.”

It should be obvious to anyone, who takes the time and trouble to get the facts, that no one really believes taxing honest, hard-working Canadians, on money they never saw, is “fair” or “justified”.

Not even those unscrupulous government leaders, who saw this tax booby-trap come to the surface in the High-Tech market crash of 2000, really believed it was a fair, and justified tax policy.

BUT even the naive new Prime Minister, elected on the promise of lower and fair taxation, lost his will to follow through with his commitment to “resolve” this problem when brought under fire by members of his “Department of Finance” and “Senior Bureaucrats in the Canada Revenue Agency.”

There appears to be only one way for Canadians to free their elected representatives from the grip of a powerful lobby group that has a vested interest in keeping Canada’s unfair, outrageous policy of taxing phantom income ongoing.

And that, one way, is for the average Canadian of voting age to inform their local federal party candidate: “Commit to correcting Canada’s defective taxable benefit legislation, putting an end to taxing honest, hard-working Canadians on money they never saw, and fairly compensating those who have been victimized by this practice since the year 2000" if you want my vote.

The U.S. Government has corrected their comparable tax legislation and Canada has no excuse for not treating Canadian victims just as fairly.
Ref: www.cfet.ca and www.reformAMT.org

Canada’s policy of unfair and unjust taxation has become a private self-serving Cash Cow that must be exterminated if the “right” of every Canadian taxpayer, to fair and equal treatment under Canadian Law, is ever to be fully realized.

See you at the next federal election voting polls O’Grady

Victor Drummond ©