WHAT WOULD IT TAKE FOR YOU TO BE...SOLD OUT?

THE GREAT CANADIAN SELL—OUT
A commentary on what it takes for Canada’s Government
to forsake you in a pile of debt that they dumped you in.

By Victor Drummond ©
July 1rst 2009

For probably as long as the past 20 years the Canadian Government has enjoyed the financial returns produced by their defective taxable benefits legislation. And during the first 10 years, 1989 to 1999 all was well.

Honest, hard-working Canadians -- fortunate enough to be wooed by their Hi-Tech employers, and invited to share in the employer corporation’s phenomenal growth via participation in an Employee Shares Purchase Plan (ESPP) or an Employees Shares Option (ESO) agreement – had reason to consider themselves to be living under the worlds greatest system of government.

They may have wondered about the reason for taxing their ESPP/ESO equities as of any profit they might realize by selling their purchased equities on the day they were delivered – BUT What-the-heck: all they had to do was sell enough of the shares to cover the tax and hold the rest, for even more gains, or sell them all and pocket the difference.

Although there were, tax ramification, caution notes included in some employers’ ESPP/ESO information notes few, if any participents, ever dreamed of being taxed on gains that remained purely potential: i.e. phantom income: or in tax amounts that often exceeded their gross income for the entire year.

Yet that is precisely what happened when the Hi-Tech market went bust in 2000, and is still happening, to thousands of shocked Canadian taxpayers.

Initially many victims of this insidious tax trap thought the government had made an error and it would be rectified promptly as soon the victim(s) reported the event to the taxman. After all this was Canada not some destitute third world country controlled by some despotic dictator.

And it seemed the government was about to correct this tax rip-off when the government of the time first announced the victims could defer payment of the taxes on phantom income, until the equities were sold or disposed of, by utilizing the features provided per the newly minted form T1212.

The victims were initially under the impression this allowed them to defer payment of taxes on the ESPP/ESO equities until the time of sale and they would only be taxed on the actual gain, (if any) realized at that time.

OH No screamed the tax-man! No matter what profit or loss you have at the time you actually sell those ESPP/ESO equities you still pay the taxes levied on the gain you could have made on the date the equities were delivery to you, (exercise date). If by chance you managed to sell your ESPP/ESO equities later at an even greater profit then you will owe even more tax money by reason of your making an additional “Capital Gain”.

But, If you happen to sell those same equities at a loss – well that’s too bad. You can not apply the loss on those same equities against the taxable benefit taxes previously levied on them.
If you win we all win BUT if you lose we still win. What could be “fairer” than that?

More to the point what could be more unfair than that? Read on and you will find out.

So beginning with the tax year 2000 thousands of Canadian taxpayers found themselves financially ruined due to horrendous taxes levied on money they never saw.

Many sent letters of appeal to every Canadian government official from the Prime Minister all the way down to the farthest back, back-bencher Member of Parliament (MP), to no avail.

Many such appeals were totally ignored and those that did rate a reply were advised the problem was not within the jurisdiction of the recipient Minister but their letter was being forwarded to some other department for consideration, which would be more accurately stated as inconsideration because nothing was ever done to correct the problem.

(For more detail of government response during this period, in time, review the prior posted series:- “Appeals to Reason part 1 to part 17. (This series is currently on hold: pending the result of a motion during FINA meeting No 33. to consider the impact of correcting the problem.”

By the time the federal election of 2005 was pending the shenanigans of the long term Federal Liberal Government were becoming a bit too much for the average, long suffering, Canadian voter to tolerate.

The Federal Conservative Party were making promises, such as providing Canadians with lower taxes, fairer taxation and more accountable government.

This sounded good to most Canadians and so the Conservative party – true to their word – when they formed the next government produced a Tax Remission Order (TRO) that did actually revoke the taxes and related penalties for all of 37 former employees of the defunct SDL Optics Inc. (JDSU) corporation in the Conservative riding of Saanich Gulf-Islands in British Columbia.

The TRO event was announced with great fanfare: by MP, Gary Lunn in the riding, along with the new Prime Minister the Right Hon Stephen Harper. When questioned by a reporter, from the Victoria Times Colonist Newspaper, about the scope of the TRO the Prime Minister replied “We’ll resolve it” and you added: “it will take a change of code” to correct the problem.

A change of “code”? What code? Were you referring to the government code of “ethics” or the flawed taxable benefit legislation?

You must have been thinking of the government code of ethics because the exclusive nature of the TRO merely made a bad situation worse for those who were also taxed into financial ruin but were excluded from the tax relief granted to a mere 37 victims.

Two years have gone by since you made that remark and so far nothing more has been “resolved” in regard to the unfair taxation of phantom income..

Now our esteemed Minister of Finance, the Hon. James Flaherty, is telling us the victims of taxation on phantom income are all treated the same and the tax system, as presently operated, is “FAIR”.

Do those government persons who initiated, and authorized, the Saanich Gulf-Islands TRO agree with you? I hardly think so.

If they truly believed the existing system was “fair” they would have merely advised those 37 former SDL Optics Inc. employees to follow the same appeal system as was, and still is, available to all other similar victims.

But they knew the system was corrupt and grossly unfair so the Saanich Gulf-Islands TRO was produced.

What happened then? Why were the remaining thousands of Canadians, who are caught in the same outrageous tax trap, left in various states of financial devastation by the very government that had campaigned on the promise of “reduced” and “fair” taxation for all Canadians?

According to the article “JDS deal dangerous precedent. Ottawa told” which appeared in the Victoria B.C. newspaper “The Times Colonist” on December 7, 2007, “Senior bureaucrats warned such a decision was unfair to other taxpayers and set a dangerous precedent….” “A similar warning came from Canada Revenue Agency Commissioner William Baker.” “In a memo to National Revenue Minister Gordon O’Connor, he warned that waiving taxes in this case was inconsistent with the laws and policies applied to all other Canadians.”

So what are those “Senior Canadian Bureaucrats really saying? It is obvious they recognize something about the policy of taxing honest, hard-working Canadians, on money they never saw, (phantom income), is definitely “NOT FAIR.”

The wording of the warning they gave Canadian government authorities reveals that they believe denying all such tax victims truly fair tax treatment is preferable to providing the same truly fair tax treatment for all such victims.

So it appears in real terms, on the scale of “fairness”, it is more unfair to give only some victims a “fair tax deal” than it is to apply the same unfair tax policy to every such victim.

In their own words they stated: providing “fair” tax treatment to any victims of an outrageously unfair tax policy is “setting a dangerous precedent”

Why would any “DECENT” Canadian prefer to: (a) maintain an obviously unfair tax policy which was, and still is, causing financial devastation upon thousands of honest, hard-working Canadians, and their family as compared to: (b) correcting the defective legislation and treating all victims to truly fair taxation?

The answer being: that anyone who denies, tolerates, and ignores the harm being done, to Canadian citizens, by this insidious, indecent, unfair, tax policy is obviously not a “DECENT” Canadian.

Our very own government authorities, from our Right Honourable Prime Minister on down to our loyal opposition leaders, have sold us out for the modern equivalent of those notorious 30 pieces of silver.

How much money is really involved in this sell-out? Even if anyone knows, no one is saying.

But does it really matter? What difference does it make if we are being sold out for mere millions or many billions of dollars? The fact remains – the integrity, honour and decency of our government, its officials and Canada’s world image – has a price tag.

Is there anything you or I can do about this atrocity?

Yes there is! You can contact the group: “Canadians for Fair and Equitable Taxation” (CFET) at their web page: www.cfet.ca

You can sign their petition and post a comment that expresses your support for the CFET objective of Fair and Equitable Taxation for all Canadians – not just a favoured few.

You can join the CFET group to give them more members and a bigger voice in dealing with the Canadian government. There are no membership fees, or dues of any kind.

You can follow the advice of the CFET Director of Communications and send your Member of Parliament (MP) letters (postage free) and/or e-mails informing your MP that you demand they support the CFET objective of “fair taxation” for all phantom income tax victims.

And you want action by the Canadian government equivalent to that taken by the U.S. government when they put an end to taxing Americans on phantom income. See www.reformAMT.org

If we all do our part our government will eventually do theirs, or, they won’t be our government.

Do not waste your vote power – it is very valuable – so get something of value in exchange – not just a bagful of useless political rhetoric.

See you at the Voting polls for the coming federal election O’Grady.

(Who is O’Grady? – if you don’t know -- read “What O’Grady Sez” posted 23 Jan 08 in this series of blog postings)

Victor Drummond ©