THEY WHO PAY THE PIPER..

THEY WHO PAY THE PIPER CALL THE TUNES
Canadian Prime Ministers, especially from the days of Pierre Trudeau, have been controlling Canadians -- often to the national and/or personal disadvantage.
When it served their purpose they have denied Canadians their basic right to representation by forcing party MP’s to vote the “Party Line” disregarding the wishes of those who voted them into office.

A commentary by Victor Drummond ©
February 2010

The introduction of corporate Employee Share Purchase Plans (ESPP)’s) and Employee Share Option agreements (ESO’s) is a prime example of a situation where the original intent of a program was to benefit Canadian Corporations and their key employees – but was turned into a tax trap that penalized the very people it was supposed to benefit.

It is difficult to imagine the parliament that passed the original legislation -- empowering the Canada Revenue Agency (CRA) to tax equities acquired via an employer’s ESPP or ESO agreement as a taxable benefit at the moment of exercise of those equities -- ever intended honest, hard-working Canadians would be taxed, sometimes into poverty, on deemed income money that never actually existed, i.e. phantom income.

It took the crash in the shares of Hi-Tech corporations beginning in July 2000 to expose this obscure defect in the Canadian Income Tax Act dealing with ESPP/ESO acquired equities.

After fifteen years of Hi-Tech corporation shares enjoying boom time conditions suddenly thousands of unsuspecting Canadians were shocked to discover they were now being levied horrendous taxes on their ESPP/ESO Purchased equities that were essentially worthless by the time the taxes levied on them were revealed.

The Canadian Liberal government was immediately deluged with appeals for fair taxation when this travesty of justice was first revealed in 2001. The draft budget for 2001, prepared by the Hon. Paul Martin, appeared, at first, to be amending this flawed piece of legislation but by the time the final 2001 budget was read in parliament the only tax relief proposed was to introduce a tax deferral option in the way of a form T1212.

Even the introduction of the form T1212 tax deferral option was not clearly understood at first and many tax advisors, and victimized taxpayers believed they would only pay tax on the gain, (if any), that the employee actually realized at the time they sold their equities.

The government, however, wasn’t going to let loose of the millions of illicit tax dollars so easily extorted and the ruling came out that the victimized taxpayers would still be taxed on the temporary value their ESPP/ESO had at the moment of exercise regardless of the value actually received at the time those equities were sold.

Any real loss the tax victim may suffer -- at the time their ESPP/ESO equities are sold -- that loss is morphed from a taxable benefit to a Capital investment loss which the government will not allow the tax victim to use to offset the theoretical “benefit” that the victim might have received – but didn’t.

Of course if the victim was lucky enough to sell their equities at an additional gain over the deemed taxable benefit then that additional gain would also trigger a capital gains tax.

How about that for a “fair” system of taxation? A system where the government is guaranteed to win if the employee might have made a gain but the taxpayer is exposed to a potentially huge tax loss if they even might have made a gain – even when the gain was never realized. A win-win set up for the government and for the tax victim a potential financial disaster.

Although several MP’s in Canada’s 38th, 39th and 40th parliaments have written letters to Canadian government authorities -- ranging from the Prime Minister the way down to the back-bench MP’s – supporting their victimized constituents appeals for fair taxation those appeals have been ignored.

Even when the Right Honourable Stephen Harper acknowledged this tax system was unjust and unfair -- by signing the Gary Lunn Tax Remission Order” (TRO) thereby approving revoking of this outrageous tax for a mere 37 former employees of the SDL Optics/JDS Uniphase plant in the riding of Saanich Gulf-Islands British Columbia – all other victims of this legalized extortion have been denied this same tax treatment.

Somehow the current conservative government has succeeded in domineering our Members of Parliament -- who were democratically elected to represent the best interests of their constituents and the best interests of all Canadians – to the extent they remain silent on the abuse being heaped upon thousands of honest, hard-working Canadians.

Not only has the House of Commons been silenced on this outrageous issue but those fearless, outspoken watchdogs of the party in power – Her Majesty’s leaders of the Loyal Opposition Parties are equally cowed when it comes to declaring their position on this abuse of power.

Anyone who doubts the authenticity of my foregoing claims need only contact their riding MP’s (Conservative, Liberal, NDP, and/or Green Party) and ask them their party position on the phantom income tax issue. If you get a definitive answer let me know and be sure to vote for that candidate.

The thousands of requests for that information – issued by the group: “Canadians for Fair and Equitable Taxation” (CFET), have been ignored so far which is a violation of everyone’s right to know before they vote for anyone to represent their interests in Canada’s parliament.

Before you decide which candidate to vote for in the next federal election remember who is paying their above average salaries with above average perks and working conditions.

Make sure you are possibly going to get the service you are paying for before committing to vote for any candidate or any federal political party.

And one thing you must receive is a commitment to restore your right to equal treatment under Canada’s Tax Laws and that taxing Canadians on an income that never happened must be corrected.

Regardless of the claims made by our Hon. James Flaherty regarding the fairness of taxing phantom income – few, (if any), Canadians who have taken the time to really get the facts on this issue agree with him.

The U.S.A. congress doesn’t support Flaherty’s view as they have already amended their equivalent phantom income tax legislation and fairly compensated those U.S. taxpayers who had already been victimized by it. Ref: www.reformamt.org

As a Canadian taxpayer you are paying the salaries of every government employee – from the Prime Minister on down so do not hesitate to make your demands for service known to them.

Being one of those who are paying this band of politicians for service you have the right to name a few tunes.

See you at the voting polls for the next federal elction O’Grady.

Victor Drummond ©