The tip of...

THERE IS MORE TO THIS THAN MEETS THE EYE
A Commentary on the Canadians for Fair and Equal Tax (CFET)
Organization -- by Victor Drummond ©
March 2008

The incentive -- for Canadians victimized by outrageous “Income” taxes levied on them
above and beyond any real “Income” they received – to become organized and fight for true and fair taxation is clearly explained in the preceding series of Victor Drummond postings.

Things that may leave non-victims wondering are questions such as:- who is making an issue of this unjust tax? And why now?

If the problem with outrageous taxation became obvious seven years ago – why wasn’t the fight for fair taxation settled long ago?

And why should Canadians need to fight for a fair deal in the first place?

That last question, above, is the core question. And according to the image Canada’s Government presents to us – and to the rest of the world -- no Canadian should ever need to fight for fair and equal taxation.

A hidden defect in the taxable benefit legislation did not become apparent while the stock markets were running normally -- with corporation shares fluctuating within the normal range of plus or minus a few percentage points each trading day.

In fact between the years 1995 to 2000 the shares of many high tech corporations were experiencing growth of 100% , and greater, from one year to the next.

Investors in the shares of most Hi-tech corporations were having a field day -- with whopping profits -- and laughing all the way to the bank.

This included a few corporate employees who had purchased their employer’s shares through Employee Shares Purchase Plans, (ESPP’s) and/or Employee Shares Options Plans, (ESO’s)

But not all. Many, possibly most, were blind-sided by an obscure flaw in the taxable benefit legislation.

Be aware – most of the people caught in this trap are not market savvy individuals.
They are assembly line workers, clerks, secretaries, -- ordinary people who were encouraged by their bosses and co-workers to participate in the employers ESPP and/or ESO stock plans.

People, who acquired their shares via an ESPP and/or an ESO, plan were a bit more handicapped than ordinary stock market investors/speculators due to restrictions integral to the plans.

While ordinary investors could buy, hold, sell and even short sell their chosen stocks -- on a minute to minute basis -- shareholders who purchased shares via an ESPP/ESO often had to wait up to a year before receiving their shares and were additionally handicapped by plan blackout periods during which they could neither buy nor sell shares.

Regular investor speculators had a well defined cost of acquisition, per share, and a well defined selling price, per share, from which real gains or losses could be determined accurately.

Taxes levied on regular investors were applied equally, and fairly, based upon any real gain, or any real loss that could then be applied to previously taxed gains -- and/or future profit.

These investors only paid tax when the shares were sold and the tax levied was then applied at the inclusion percentage for that specific year.

There would be no problem IF shareholders were all treated alike. But they are not.

Many shareholders -- who acquired their shares by way of an ESPP/ESO -- are taxed on the basis of unfounded assumptions and a calculated Fair Market Value, (FMV).

The generated FMV may not be anywhere near the actual value of the shares when bought and/or sold.

Even though the taxable benefit legislation operated to generate taxation in such a hit and miss manner ESPP/ESO shareholders -- who ended up with real gains -- were not too badly abused as they had tangible profits from which they could pay the taxes levied.

That is until the year 2000 when an overdue -- stock market -- correction hit Hi-tech stocks, around the world -- with a vengeance.

Suddenly ESPP/ESO shareholders were levied taxes on potential profit – a gain THEY MIGHT HAVE REALIZED -- IF -- they had an opportunity to sell their shares at the moment they took control over them. A nebulous – non-existent -- pie-in-the-sky profit.

Those who did not -- or could not -- sell their ESPP/ESO shares on the date of delivery
were ASSUMED – by the Canada Revenue Agency, (CRA) -- to have made a deliberate decision to play the markets – at their own risk -- in the hope of making even more profit.

The Treasury Board and CRA – based upon the unfounded assumption further assumed the right to tax ESPP/ESO shareholders as though they had somehow actually received income equal to those unrealized gains.

Any logic inherent to that sequence of events totally escapes me – as I am sure it also escapes any reasonable, intelligent person.

Based on an unproven assumptions the CRA then levied taxes on a further ASSUMED FMV per share which by tax time 2001 was well above the real value per share of the stocks held.

The end result being that thousands of conscientious, hard-working, Canadians were taxed on money they never received and many were left in severe financial distress.

Many victims had their retirement bank account(s) – built up over decades of savings – wiped out in an instant.

Others had to sell, or mortgage their homes, and still could not pay-off the taxes levied against them.

The government of the day recognized there was some kind of problem and offered a patch-up fix by way of allowing -- up to $100,000 dollars worth of shares purchased (per year) -- to have the outrageous tax levied -- deferred until the shares were sold, traded or the taxpayer moved out of Canada -- or better still -- died.

Just thinking about the kind, considerate, compassionate attitude of the authors/operators of this punitive, abusive tax operation just chokes me all up.

Those in a position to correct this monstrous miscarriage of justice successfully resisted doing the right and decent thing for the next six years.

No wonder there was a change of government in 2006.

Victims of this outrageous tax -- appealed, went to court, hired lawyers to represent them – all to no avail.

Individually they had no power and the government authorities knew that – so they did nothing to correct the problem.

It mattered not to those -- who could provide relief -- what distress this insidious tax imposed upon its victims. Apparently all that mattered to them was MONEY. They had conjured up a ridiculous rationale to bleed taxpayers dry and they were using it to its full capacity.

So what is different now? There has been a change of government and the new team has opened the door for possible correction of the previous administrations taxpayer abuse.

First – prior to the 2006 federal election -- the Conservative Party put forward an election platform that included a commitment to provide fair taxation.

Second – Shortly after winning a minority government position the new government provided -- a few victims in British Columbia – some improvement in their tax situation – by having a Tax Remission Order, (TRO) implemented.

The TRO gave some substance to the conservative’s pre-election commitment of fair taxation and other victims were given further encouragement by statements of Fair taxation for all Canadians contained in several different speeches made by high ranking conservative members.

Jamie Golombek -- a journalist for the National Post newspaper published an article on January 13 2007 with the title:- “What about the rest of us?” which brought this whole issue back to the public’s attention.

Victims and other interested people contacted Jamie to find out what the public reaction was to his article. One victim went so far as to leave his name, address, telephone number and E-mail address with Jamie and requested him to give out his contact information to everyone who inquired about the article.

Seeds of the present group:- “Canadians for Fair and Equal Taxes”, (CFET) were planted at that moment. First there was one person. Within a week there were three -- which quickly grew to six.

Then there was a long interval – possibly 6 months when the group had no new members.
Member’s they did have, however, became active in searching for additional victims and/or supporters.

One member found a reference to blogscanada.ca in an old issue of Readers Digest and began exploring this blog web page. He found a listing for a group titled:- “E-Group” Political Punditry and decided to contact the administrator – Jim Elve.

Jim was very accommodating and assisted with the posting of several articles on the E-group blog page under the pen-name Victor Drummond.

Victor’s articles had a singular focus – fix the defective taxable benefit legislation and compensate those already victimized.

Articles all having the same focus were not really a good fit with the E-group blog page so it shortly came to pass that Jim suggested Victor should open his own blog page.

Victor took Jim’s advice and opened a blog page under the title:-
Buyerbeware--caveatemptor.blogspot.com -- and proceeded to write and post a series of articles – all oriented toward informing readers of the insidious, unfair, unwarranted, punitive, abusive qualities of the current taxable benefit legislation.

Furthermore Victor’s articles implored readers to contact their friends and for everyone to contact their elected representatives in Canada’s Parliament and demand this outrageous legislation be amended and all victims to-date properly compensated.

Victor posted over 60 articles between the blog page start-up in April and December 31 2007. Articles are still being posted as of March 11 2008.

A new blog page with the title:- “letter-to-the-editor.blogspot.com” has also been created recently to store template:- “letters to the editor” articles – in preparation for a media blitz if there is no indication that anyone in government intends to take action on this tax issue by the time a federal election gets under way.

One of the organizations contacted -- in mid 2007 -- for advice and support in dealing with the government -- suggested our victims group hold a press conference in the Parliament Hill Press Theatre – to bring this issue to the public’s attention.

In January 2008 contact was made with the Ottawa Press Club to begin proceedings for such a conference. It turns out there are some requirements to be met before a group can book the Parliament Hill Press Theatre.

For one -- the group must have a recognized title. Second a maximum of seven members of a group may actually be present at the conference.

Another requirement being that the purpose of the meeting, agenda etc. must be submitted in advance in the form of a press information kit.

It took over a month to set up the place, date and time of the conference – but it finally took place at 11h00 – 11h45 on Thursday morning February 21 2008. At that moment the group:- “Canadians for Fair and Equal Taxes” (CFET) was born.

One of the very first questions asked of the CFET members at the press conference was:- How large is your organization? How many members do you have?

In terms of geographic size the CFET members attending this meeting come from places as far apart as Victoria British Columbia and Ottawa Ontario.

That space also includes members -- not in attendance – living in other places such as Toronto, Brampton Ontario, Calgary Alberta and Vancouver British Columbia.

Our membership is actually intangible. We are here today to speak on behalf of every Canadian that has been levied taxes on non-existent income.

We can name a dozen or two such victims who have come forward and allowed themselves to be publicly identified.

We are also in contact with another half-dozen victims that do not wish to be publicly identified for fear of possible government reprisal.

As to how many actual members do we have? We know of the members who have actually contacted us and we know they are just the tip of the iceberg.

It doesn’t make sense that any Canadian taxpayer is not in favour of “Fair, Just, Equal” taxes so we speak on behalf of those Canadians – both victimized – and not victimized – but who support our taxation policy.

Our membership iceberg is less than 1% visible – at the moment. There much more to the CFET than meets the eye.

Victor Drummond ©

Federal Election Game..

THE FEDERAL ELECTION GAME
How to avoid being another loser.
A commentary by Victor Drummond ©
March 2008

Within the next twelve months there is a high prospect a federal election will be called.

Even before that actually happens the newspapers, radio and television programs will be polluted with attack ads, political rhetoric and promises of social benefits too numerous and likely too ridiculous to mention.

Ordinary citizens like to believe promises made by their favourite candidate and will often decide to vote for that person – even if he or she is not running for their favourite party.

As most experienced voters know election promises are classed in the same category as pie crust. e.g. that being something that is made to be broken.

Unfortunately you can not eat a broken promise – and although not eaten -- a broken promise does leave voters with a bitter taste in their mouth.

Most issues chosen by politicians, (spin doctors), for the promise:- “I will fix this.”
are high profile items, such as:- Global Warming, Environmental Protection, Homeless Street People – Low Cost Housing, Child Poverty, High Taxes – and the list goes on and on.
Issues that for the most part no one person -- or political party --can do very much about.

Promises made by the Conservative Party – before – during – and after the last federal election focused on “Fair and Equal Taxation for All Canadians.”

And perhaps they tried to deliver.

The efforts of Gary Lunn -- MP for Saanich Gulf Islands – assisted by the Prime Minister and Governor General – merely helped improve a horrendous miscarriage of justice for some 30+ victims of the defective taxable benefit legislation – in that one riding.

But it made matters worse in the long run. Their efforts left thousands of similar victims with false hope but without relief from their own – personal -- financial disaster.

The current taxable benefit legislation is an insidious piece of legislation which conjures up an excuse for taxing thousands of Canadians on a potentially huge income that is purely imaginary.

Although ordinary common sense proclaims taxing phantom income is unreasonable, unfair, illogical, cruel, obscene, ridiculous, punitive, distressing, unwarranted, and DENIES all Canadians their RIGHT to fair and equal taxation – this issue is completely ignored by every political party and every candidate for federal office at the present time.

If you as a Canadian voter do not want to be a loser in this game of:- “Elect me and I will look after your interests.”-- then notify you favourite candidate -- in the coming federal election:-
“State your policy on correcting the taxable benefits disaster.”
Then I will decide if you will get my vote. No policy commitment = No Vote.

This is something your candidate – as a Member of Parliament -- can actually do something about – and it affects every Canadian.

See you at the Federal Election voting polls – O’Grady

Victor Drummond ©

Canada's Watchdogs W5

CANADA’S – WATCHDOGS -- W5
The Who, What, When, Where, Why
Of Canada’s Justice System
Commentary by Victor Drummond ©
March 2008

WHY
There are a large number of situations where vigilance and aggressive action are required if society is to be relatively free of oppression, exploitation, abuse, robbery, and a host of other undesirable situations.

WHO
At the home level there should be a male member who provides family income, and at least a minimum level of physical protection.

The home level may also have supplemental protection provided by a family pet.
A Doberman can be a great asset toward protecting a family from both external and internal danger.

At the street level we have municipal and provincial police.
Next there is the Royal Canadian Mounted Police and above them all is the Canadian Security Intelligence Service, (CSIS).

All of these protective organizations go into action immediately -- at the first indication of criminal activity.

WHERE
Unfortunately pets, police and/or CSIS can not be everywhere. Streets are patrolled day and night, the internet is monitored 24/7, and municipal high crime areas are under constant surveillance.

Still people are victimized by carjackers, muggers, identity thieves, and our own government.

What else can you call it but legalized robbery when Canadian taxpayers are levied huge taxes on a theoretical -- but non-existent income?

A person might think the people they elect -- to represent them in Canada’s Parliament would be self monitoring and – would automatically take action to protect their constituents from government abuse. Not So.

With the possible exception of The Honourable Gary Lunn that kind of elected representative action seldom happens.
Where does your MP stand on this outrageous situation?

Even the Federal Ethics Commissioner’s mandate does not extend to pulling the government up short for unethical conduct. That office is limited to commenting on the conduct of individual members of government.

If there is any form of watchdog monitoring taxpayer abuse -- by our own government -- it must be the kind of mutt that would sit there silently and watch the burglar ransack the house and take off with the loot.

WHAT
What justification can anyone conjure up for abusing innocent, honest, hard working, citizens in this way? There is no logical justification – but the crime continues unabated and unchallenged by any of the agencies dedicated to serving and protecting Canadians.

WHEN
When is someone in authority going to take up this issue and re-establish every Canadian’s RIGHT to fair and equal treatment under the laws of Canada?

When is the Supreme Court of Canada going to recognize this outrageous tax situation and strike down the taxable benefit legislation which contravenes every Canadian’s rights as guaranteed by the Canadian Charter of Rights and Freedoms?

A tax? That is founded upon defective taxable benefits legislation and the interpretation of that legislation which allows taxpayers to be fined huge amounts of money on the basis of guilt by assumption?

Innocent, hard working honest Canadians -- burdened with deferred taxes unto death.
Denied the right to move out of Canada penalty free. What other civilized country has such unfair and punitive tax legislation – co-existent with guaranteed Rights and Freedoms?
Name one if you can.

NOTHING
This unjust, unfair and punitive fine – under the guise of a tax – will likely continue until real pressure is brought to bear on our law makers, (Members of Parliament), and/or our Supreme Court Justices – who are apparently hobbled in some way – from initiating corrective action spontaneously.

NOTHING is likely to change unless Canadian voters become concerned enough to let their Members of Parliament know they will no longer tolerate this outrageous situation.


O’GRADY
Let you MP know there is one more level of protection for Canadians – We the Voters.

By making our vote conditional upon a commitment to restore every Canadians RIGHT to truly “Fair and Equal Taxes” we all, in effect, become O’Grady and members of Canadians for Fair and Equal Taxes. (CFET)

Remember --“What O’Grady sez goes. -- (See prior posting:- O’Grady Sez)

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

Victor Drummond © (CFET)

All for one and..

ALL FOR ONE AND ONE FOR ALL
A commentary on unity
By
Victor Drummond ©
March 2008

Canadians who are old enough to remember Nelson Eddy and Marie McDonald will also
remember these words to a song he made famous and very popular in that era.

As I recall the chorus went something like this.:-

Give ten thousand men who are stout hearted men who will fight for the RIGHT they adore – give me ten thousand men and Ill soon give you ten thousand more.

Back in those days that concept would have rang true. Today individual RIGHTS are guaranteed by the Canadian Charter of Rights and Freedoms so no one need fight for them any longer .. RIGHT?

If so you could fool me. I have read the Charter and I have seen it’s guarantee per article 15(1) violated thousands of times – and no one does a thing about it.

The government in power – having once recognized the insidious aspect of the flawed taxable benefit legislation – took token action to give a paltry few victims some relief by way of a tax remission order.

This same government now ignores the plight of thousands of Canadians who have been treated just as bad, or even worse, than those few who had their taxable benefit taxes and penalties dismissed.

In the past year there has been a growing number of Canadians – some victimized but also supported by others who will fight for the RIGHTS of all Canadians.

This group began with three or four victimized people – the group size doubled in the first six months and has doubled again in the last three months.

They have taken the name:- “Canadians for Fair and Equal Taxes, (CFET), and are becoming more visible day by day.

A press conference took place in Ottawa with CFET members, last month, and a web page:- cfet.ca is currently under development.

Journalists have been publishing articles -- for over a year -- berating this unfair tax legislation and the way that it is being applied. (see previous article titled:- MY GOVERNMENT WOULDN’T DO THAT)

Perhaps the theme of Nelson Eddy’s song is still valid – Three or four 12 months ago – eight 6 months ago – 16 last month – next month ???

Hopefully there are still a large number of Canadians who will fight for the RIGHT they adore.

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

Victor Drummond ©

My government wouldn't....

MY GOVERNMENT WOULDN’T DO THAT
A Revelation that most Canadians wouldn’t believe.
But -- Believe it or not it is true.
Brought to you
by Victor Drummond ©
February 2008

What would you say if your neighbour told you that the family was selling their house to pay Income Taxes on Income that never came in?

Not In my Canada you say? Yes in your Canada.

What would you say if your neighbour told you they had appealed this outrageous tax to their member of parliament and been told a tax remission order given to a dozen or so similar tax victims did not apply to them?

Not in my Canada you say? Yes in your Canada.

You say that situation can not be true. Why I have been hearing all year how the current government has been making a big thing of their policy of “Fair Taxation for all Canadians”.

“All Canadians” does not include thousands upon thousands of Canadians that have been taxed into financial ruin. Many are living under a cloud of unjustified deferred tax liability that will stay with them until they either pay the tax or die.

Not in my Canada you say? Yes in your Canada.

That is absolutely impossible – why the opposition party’s wouldn't crucify a government in power that stood by and allowed this travesty of justice to continue?

Think so? Well be informed the opposition party leaders and many of their members of parliament are well aware of this situation and have kept their mouths shut. They are just as callous and unfeeling for their fellow Canadians as the government that put this atrocity into operation.

Read the article below – borrowed from another author i.e. injusttax – blog – version 24 Feb.doc
Which I did not write – but with which I totally agree.

AND YES – MY GOVERNMENT DID DO THAT – AND CONTINUES TO DO THAT.

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

Victor Drummond ©
==============================================
Protest Unfair Tax Treatment by the Government of Canada and the Tories’ Scandalous Favor to One Group of Canadians

Do you know that you could be assessed at an effective tax rate of over 1000% by the CRA? That is not a typo, you could indeed end up paying at an effective tax rate of well over one thousand per cent in some circumstances due to a bizarre provision in the Canadian tax code. Read the shocking story of how the Canadian government continues to victimize many Canadians by imposing an outrageous tax on money they never made – even as it cut a rare private deal with some politically well-connected Canadians to exempt them from that kind of irrational assessment of tax liability on fictitious paper gains.

“MOST UNDER-REPORTED STORY OF THE YEAR” – Don Martin, National Post, December 31 2007.
Issue
This issue potentially affects Canadians whose employer companies offered employee share purchase or stock option plans. If a person exercises their stock options by buying shares in their employee company at a pre-determined price, the CRA considers that as a taxable event and attributes a tax liability to them based upon the difference between the “Fair Market Value” of the shares and the exercise price (the price at which shares are purchased). This difference is called “Employment Benefit”, and considered similar to a perk such as company-paid parking. Subsequently, when the shares are disposed, the difference between the sale value and the initial amount of Employment Benefit is considered regular Capital Gains or Losses.

This overly complex system creates a number of problems without offering any benefits. Both Employment Benefit and Capital Gains are taxed at the same rate, only the labels under which they fall are different. However, they differ in one critical way: if you suffer loss on your investment due to decline in the value of asset, CRA lets you offset the loss against your Capital Gains and you pay taxes only on the net value. However, the law in its infinite wisdom forgot to extend the same principle to Employment Benefit! There is no provision to offset loss of Employment Benefit for tax purposes.

This has the absurd effect of creating tax liability based on fictitious paper profit that you may or may not realize in the end. In fact, you could even lose money on your investment but the tax liability still stands. Many Canadians are quietly suffering from the double whammy of having lost a lot of money when markets crashed, and being stuck with a huge tax bill assessed on money they never made!!
Example
For a number of such victims, the tech wreck of 2000 is a nightmare that continues to live on. Consider the plight of former employees of ACD Systems based in Victoria, BC. As the Financial Post reported in this story, an employee exercised stock options at 25 cents when their shares were trading at $12. This created a tax liability in the eyes of CRA based on a paper gain of $11.75 per share (the difference between $12 and $0.25) which was deferred until the employee sells the shares. Subsequently, the share price collapsed but the employees remained stuck with the tax liability. Eventually, the shareholders of the company decided to take the company private at 57 cents. This forced the employees to sell their shares at $0.57.

So, in effect, this is what happened: employees of ACD Systems made $0.57-$0.25 = $0.32 of real gains per share over more than 7 years. However, in the eyes of CRA, they are liable to pay tax as if they had gained $11.75 per share! Imagine if you had to pay almost $3 in tax for every $0.32 of gain – it does not take a rocket scientist to figure out that even small numbers of shares in such a situation could bankrupt you pretty quickly. That is an effective tax rate of over 1000%!

So what is happening now? Well, many Canadians are staring at potential financial ruin – all because of an absurd and unfair tax policy.
The Promised Reform That Turned Into a Private Deal
Hope came for all victims of this issue when the Victoria Times Colonist broke a story in December 2006 that the government had granted tax relief on this issue. It seemed that the government had finally seen sense and was going to fix this bizarre provision in the tax code.

“Stock fiasco victims to get tax refunds” – Victoria Times Colonist, December 20, 2006.
Here’s what Victoria MP Gary Lunn said at that time: “It took a change in government to get someone to listen, but the prime minister has come through and delivered tax relief. It's not in the interest of government to tax people on money they never saw."
Right there in Victoria BC lived another group of people in a similar situation whose lives were messed up by the very same unfair tax policy. They were the former employees of SDL Optics whose company was bought out by the Ottawa-based tech high-flyer, JDS Uniphase. Unlike the rest of us, however, this group of former JDS Uniphase employees had a powerful friend in Gary Lunn, the MP from Victoria BC who is the Minister of Natural Resources in the Harper government.

If you ever suspected that some politically connected Canadians are treated better than others, then your suspicions are absolutely right in this case. It turns out that the Harper government had actually just worked out a rare and unprecedented private deal that was applicable just to that group of individuals! With one stroke, the Federal government not only wrote off their tax liability, but ordered the CRA to return them past tax payments with interest. However, the change of law for the rest of us promised by Minister Lunn never happened.

When the Canadian government finally notified this deal in the Gazzette in November 2007, all other victims of this issue felt like they had just been kicked in the head. Tax experts were outraged too. Jamie Golombek (CA, CPA, CFP, CLU, TEP, Vice-President, taxation and estate planning, at AIM Trimark Investments in Toronto) wrote this in an article in the Victoria Times Colonist: "It's outrageous, the biggest outrage in tax policy I've seen".
“JDS deal dangerous precedent, Ottawa told” – Victoria Times Colonist, December 7, 2007.

Please ask Minister Lunn: why is it in the interest of the government to tax us on money we never saw? Please ask PM Harper: where is the delivery of the tax relief for the rest of us suffering from this irrational tax policy?
What Happens Now
Except for that privileged group of ex-employees of JDS Uniphase, thousands of Canadians face financial ruin due to this absurd tax policy due to the inaction of the Harper government in fixing it. All animals are equal, but some just happen to be more equal than others, don’t they?
Even the CRA seems to see the light now. The Times Colonist article mentions that “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.”
Will Minister Gordon O’Connor or Minister Jim Flaherty act to reform the tax code in time to prevent financial ruin for decent, law-abiding Canadian taxpayers whose only crime is that they are just not as politically connected as others? Will the Harper government keep the promise made by MP Lunn in 2006? Or, Mr Harper, is it going to take another change in government before the tax code is applied rationally and fairly to all Canadians?
What Can You Do To Help?
1. If you are a victim of this bizarre issue in the tax code, please come forward and join us. You don’t have to suffer in silence. Many of us are in the same unfortunate situation as you are. If you don’t speak up then nobody is going to help you. If you are concerned with your privacy, you can choose not to share your name or contact information with us – just send us an email with a non-personal address.
2. Please write, phone, fax or otherwise communicate with Ministers Gordon O’Connor and Jim Flaherty to protest against the unfair tax treatment and demand that the Harper government keep the promise made by Minister Lunn on behalf of PM Harper.
3. Please contact your local MP and remind them that you will consider this issue when you vote in the next election. There is a sample letter on our website that you can send to your MP.
4. If you are in the media, please help us get the word out. Talk to the victims, this is a real story of tragedy inflicted by an uncaring government and an obdurate bureaucracy. Hold ministers O’Connor and Flaherty accountable, because nobody else will. Hold PM Harper accountable for letting his subordinates fall asleep at the switch.
5. If you are a politician, please help fix this right away. Financial future of many Canadians is at stake. As Don Cayo of the Vancouver Sun said very well, “Change the law -- don't just mask the problem” (Don Cayo, The Vancouver Sun, January 18, 2008.)
6. Send your comments to let us know that Canadians are concerned about fairness in our society.
FAQ
1. Are you asking for a special treatment?
No! We would like the government to keep its promise and change the law for all Canadians.

2. You are just jealous of the ex-employees of JDS Uniphase. Those poor folks were in a unique situation and they suffered a lot, so they deserve special consideration by the government to fix this problem. Why should the government do anything more?
We are not jealous of the JDS Uniphase folks. In fact, we are very happy for them and their families. They did suffer a harrowing ordeal. Nobody in a fair and compassionate society like ours deserves to suffer from an irrational tax code the way they did. We as Canadians are justifiably proud of our tradition of equality and justice for all, but it is clear that our government and institutions did not treat these folks in a particularly fair or just fashion. What we are pointing out is that their situation is neither unique nor rare, and many Canadian families are undergoing the same ordeal based on the same irrational provision in the tax code that assesses tax liability on fictitious paper gains.

Unfortunately, the government has not solved the root cause of this problem even as it worked out a temporary relief for this group of people. As a result, many other Canadians and their families hae lived or will live through the same nightmare as the JDS Uniphase families did. Just as happened to them, many of us lost our jobs in the tech wreck too. Just as they were stuck with tax bills on money they never made, we are stuck with the same high tax bills on gains we never made. Many of us are staring at complete financial ruin – losing our savings of lifetimes and our houses – just as they did before the government wrote off their tax bills. We have no issue with the fact that their tax bills were written off, in fact that was the right and just thing to do. We only take issue with the manner in which the government chose to do it. Instead of fixing the bizarre technicality in the tax code that caused the problem and provide long overdue relief to all Canadians, the government just chose to deal with this as a one-off special deal for those people. That is outrageous and unfair.

We believe that the JDS Uniphase folks are decent, law-abiding taxpayers just as we are. In fact, it is very much possible that when they were struggling against the CRA bureaucracy and making their case, they perhaps wanted a remedy that was applied to all Canadians, not just to themselves. Minister Lunn said as much when he announced the “resolution” of the issue in 2006. Then why has the government still not acted to fix this irrational policy that will cause many other decent, law-abiding taxpayers the same kind of suffering? Does it really make sense to bankrupt people just so that the CRA can collect tax on a fictitious accounting profit that many of them never realized in the end? Must we continue to destroy the lives of many Canadians for such an irrational technicality? Bob Dylan was right when he sang “How many deaths will it take till we know, too many people have died?”

It is utterly tragic that the only lesson the government learnt from the 6 years of living nightmare that the JDS Uniphase families went through is that this a one-off problem only for that small group of Canadians. How many broken families and ruined futures will it take before the government acts on its promise to fix this mess? The horrific experience of the JDS Uniphase families is a stark example of how terrible the consequences of persisting with this policy are. The government must act immediately to keep its promise and stop this irrational tax liability on money never made from destroying the financial future of many other Canadian families.

3. If you don’t sell your shares, aren’t you just taking market risk? Why should the government give you a break for speculation?
Anyone who holds any non-cash asset is effectively speculating and they can make or lose money. Governments all around the world recognize this, and that is why Capital Gains tax is different from income tax. Fundamental principle of Capital Gains tax is that it must be on the net basis, not on an imputed paper-profit. Capital Gains tax law around the world recognizes that investment in risky assets such as securities or real estate does not always work out and investments could lose money just as well as they could make gains.

We are asking that the same principle be applied to Employment Benefit. If market risk reduces the value of the security, it is only fair that the loss in market value be offset against the gain. Otherwise you end up in an absurd situation where you may be liable to pay almost $3 tax on almost $0.30 of gain, as happened to the ACD Systems folks.

4. Still, why didn’t you sell your shares? Why should the government give you a break now?
Shares obtained from exercising stock options can be subject to many restrictions. In many cases, people did not have full control over the shares. For example, many employees were subject to insider-trading restrictions which prevented them from selling shares for months at a time. In other cases, there were restrictions on when the employees would get access to their shares. For example, some stock option plans gave ownership of shares to employees only over a long period of time of up to four or five years after the exercising of options. If those people did not have ownership of the shares, how could they sell? There are also other restrictions against hedging and short-selling by employees that prevented people from selling their shares or locking in their gains. Some people made investment decisions that seemed reasonable at that time, but did not work out. Many others just could not judge the all the risks in complex situations because they did not know better, had no experience with financial markets, received bad advice or were not market savvy.

We are not asking the government to give us a break. We are merely asking the government that we be taxed only on the actual gains we may have actually made, not on fictitious paper-profits.

5. You sound like a spoilt dot-com millionaire, don’t you deserve what’s happening to you?
Actually, many of us are regular middle class Canadians with families to support and mortgages to pay. Many of us are staring at complete financial ruin. If we had the money, we would not have any trouble paying our taxes, would we? Far from being dot com millionaires, in fact, many of us are losing our savings of lifetime in our middle ages. We were caught in the perfect storm of living through once-in-a-lifetime behavior of stock markets combined with a bizarre and irrational provision in the Canadian tax code that was not suitable for the kind of volatile market we saw in late nineties. Many of us did not have the capability, experience or even good advice to deal with this unique set of circumstances. Do we really deserve the destruction of our financial futures to pay tax on the money we never made?

6. Isn’t this a violation of the Taxpayer’s Bill of Rights?
Yes, we believe that it is. The following two rights articulated in the Taxpayers’ Bill of Rights are violated in this situation:
5. You have the right to be treated professionally, courteously, and fairly.
You can expect we will treat you courteously and with consideration at all times, including when we request information or arrange interviews and audits. Integrity, professionalism, respect and co-operation are our core values and reflect our commitment to giving you the best possible service. You can also expect us to listen to you, take your circumstances into account, and treat you fairly to make fair and impartial decisions in accordance with the law. We will explain our decision and inform you about your rights and obligations with respect to that decision.
8. You have the right to have the law applied consistently.
You can expect us to apply the law consistently so everyone gets their entitlements and pays the right amount. We will take your particular circumstances into account to the extent that the legislation we administer allows us to do so.
Clearly, we are neither treated fairly nor is the law being applied consistently.
7. If your rights under the Taxpayers’ Bill of Rights are violated, why don’t you appeal to the Ombudsman?
We welcome the appointment of the Ombudsman, and are cautiously optimistic about the effectiveness of this office. However, we have serious concerns about how much real authority the Ombudsman’s office has been vested with in dealing with cases such as ours. There are significant questions about the real ability of oversight this office may or may not have over CRA.
First of all, the mandate of the Ombudsman’s office as described on the CRA’s website here indicates that the Ombudsman is responsible to enforce only a subsection of the provisions outlined in the Taxpayers’ Bill of Rights. One critical right that is very conspicuous by its absence from this list is #8 on the Taxpayers’ Bill of Rights, “You have the right to have the law applied consistently”. Who will enforce this right?
Secondly, the authority of the Ombudsman’s office is further restricted due to significant limitations imposed on it. For example, the Ombudsman cannot direct the CRA to take action nor can the Ombudsman discipline any person for their actions of behavior. How, then, can the taxpayer reasonably expect the Ombudsman to enforce the right of expecting the CRA to be accountable?
Thirdly, it is not clear that the Ombudsman can stop the CRA from enforcing a provision in the tax code that is irrational or unfair. In fact, considering that the Ombudsman is not even allowed to direct the CRA to do anything, it is not obvious to us if there is any value at all in going through the Ombudsman’s office regardless of the outcome of that process.
This lack of authority is a serious issue that should be of concern to all taxpayers. The tagline for the Ombudsman’s office is “Upholding your service rights”. A careful reading of the Ombudsman’s mandate shows that its primary role has been reduced to reviewing service complaints that have gone through CRA’s existing appeals processes. This falls very short of the original promise of the new office as an external oversight authority empowered to enforce the entire Taxpayers’ Bill of Rights.
It seems that all that the Harper government wanted to do was get good PR from proclaiming the Taxpayers’ Bill of Rights and establishment of the Ombudsman’s office without having either of them become truly effective. Even after the establishment of the Ombudsman’s office, the CRA remains the police, prosecutor, judge and jury in all tax matters without any effective external oversight of potential abuse of its powers that may violate the Taxpayers’ Bill of Rights. What is the value in having the Taxpayers’ Bill of Rights if these rights are not backed by an agency external to the CRA being empowered to enforce them?
As Jonathan Chevreau of the National Post says in his commentary on the Taxpayers’ Bill of Rights (“So much for tax fairness”, May 29, 2007) “Other measures seem similarly designed to make the CRA's life easier as opposed to the lives of those who contribute to its coffers.”
8. Can you not fight this in the courts?
Surprisingly enough, the courts in the past have upheld special private tax deals done by the government and refused to extend the fairness principle to all taxpayers. Here’s an article on this issue from the website of a law firm, Gowlings:
The Tax Man Giveth? CRA Allows Substantial Stock Option Tax Break
The article says: “Most taxpayers would consider the CRA's stance on this issue to be patently unfair. However, absent further political pressure, or legislative amendment, taxpayers would probably be surprised to learn that Canadian courts have generally refused to recognize a duty of consistency on the part of the CRA in the course of administering and enforcing the Income Tax Act, and have expressly held that the CRA has no positive legal obligation to treat similarly situated taxpayers consistently.”
9. What changes need to be made to avoid creating tax liability on fictitious paper profits?
The government has a number of easy options to fix this.
1. The gain on exercising stock options could be treated as a capital gain instead of employment benefit. Tax payment on the gain can be deferred until the shares are finally disposed at which time tax would be payable on the net capital gain or loss based on the price of disposition.
2. The government could allow capital loss to be offset against employment benefit out of stock option exercise. This will ensure that the fictitious paper gain counted under employment benefit can be adjusted by the subsequent losses due to reduction in the value of shares.
10. Wouldn’t these changes allow people to get away with not paying their fair share of taxes?
No, everyone will still continue to pay full taxes on any gains they make on stock options at the rate of capital gains inclusion under the proposed reforms as well. All the reform will do is prevent taxing people on fictitious paper profits even after the source of that profit has drastically declined in value or when the person does not end up realizing those gains. This is the fundamental unjustness of the current system: taxing people on money they may never have made.

11. What are the long-term effects of this issue on the Canadian economy?
An average Canadian family paid approximately $27,000 in all taxes in 2003 according to this research. Assuming the family pays at this rate for 40 years on average, that represents over $1 million in taxes. Clearly, those families where wage earners joined the work force earlier than others are likely to be paying more than the average. So assuming that bulk of these taxes – say 70% - are paid in prime earning years – say the latter half of working life, or 20 years – an average Canadian family could contribute almost $700,000 in taxes in their prime productive years.

Now consider what happens if those families go through harrowing ordeal due to this irrational policy in their prime earning years. It’s likely that the wage earners would be unable to earn according to their productive capacity. Their economic and emotional well-being would be destroyed and they could succumb to physical and mental health issues. Their families would suffer terribly and impose high social costs to consume more tax dollars in support services such as welfare and child benefits. A family that would have been a net contributor to the tax base would instead likely turn into a net consumer if they suffer the loss of their lifetime savings and assets just to pay taxes on money they may never have made.

The pernicious effect of this tax code is to effectively jeopardize almost $700,000 of tax revenue the economy could be gaining from every victim’s family. It could take an otherwise productive, tax paying family, and turn them into perhaps a net cost to the society. Even if only 1000 families suffered this fate, the economy could lose as much as $700 million in lost taxes! This is a lose-lose situation for all Canadians.

Solving this problem for current and future victims will enable them to focus on applying their productive energy to contribute to the growth of the Canadian economy and the tax base. Many current victims are mid-career professionals who are reaching a highly productive phase in their lives and will likely contribute significantly to the tax revenues over the next few decades. We are happy and proud as Canadian tax payers with the prospect of doing so. However, we cannot do that if out personal and professional lives are destroyed by this bizarre technicality in the tax code.
References

1. “MOST UNDER-REPORTED STORY OF THE YEAR” – Don Martin, National Post, December 31 2007. (http://www.nationalpost.com/news/canada/story.html?id=207245&p=2)

2. “Stock fiasco victims to get tax refunds” – Victoria Times Colonist, December 20, 2006. (http://www.canada.com/victoriatimescolonist/news/story.html?id=c6fe3f06-faf6-4d4d-b6f2-d3629a8b7f72&k=43295)

3. “Relief for workers in stocks collapse” – Financial Post, November 24, 2007.( http://www.nationalpost.com/news/world/Story.html?id=119701)

4. “JDS deal dangerous precedent, Ottawa told” – Victoria Times Colonist, December 7, 2007 (http://www.canada.com/victoriatimescolonist/news/story.html?id=e95cf9f1-b71d-4e4f-8c99-6fef36a67bad)

5. “Change the law -- don't just mask the problem” – Don Cayo, The Vancouver Sun, January 18, 2008. (http://www.canada.com/vancouversun/news/business/story.html?id=0b21dcfe-4cc8-43c1-8171-9ef84600dee1&k=42735)

6. Canadian Taxpayers’ Bill of Rights (http://www.cra-arc.gc.ca/agency/fairness/tbrbill-e.html)

7. “So much for tax fairness” – Jonathan Chevreau, The National Post, May 29, 2007 (http://www.financialpost.com/scripts/story.html?id=e841c5dd-600b-42df-a3c0-89a2a7675d1e&k=66276)

8. The Tax Man Giveth? CRA Allows Substantial Stock Option Tax Break (http://www.gowlings.com/resources/enewsletters/taxationlaw/HtmFiles/V1N97_20070208.en.pf.html)

9. “Taxpayers rights don’t apply equally” – Jamie Golombek, Financial Post, June 09, 2007 (http://www.financialpost.com/story.html?id=2762156c-487c-4aea-8701-292d0f28260b&p=1)

10. “Taxpayers’ Ombudsman - Mandate” – website of the Office of the Ombudsman, CRA. It also includes a list of limitations. (http://www.taxpayersrights.gc.ca/mandate-e.html)

11. “The Tax You Really Pay” – The Fraser Institute. See Table 1: Tax Bill of the Average Canadian Family, 2003 (http://www.fraserinstitute.org/Commerce.Web/product_files/The%20Tax%20You%20Really%20Pay-Mar04fftaxfacts.pdf)

Canadians for Fair...

CANADIANS FOR FAIR AND EQUAL TAXES
[CFET]
A commentary on who belongs to CFET and who does not.
By Victor Drummond ©
February 2008


Seven people calling themselves “Canadians for Fair and Equal Taxes” (CFET)
had a meeting with members of the Canadian Press Club in Ottawa this week.

During the CFET address -- to the media members present – five of the six men in the CFET group each took a turn at the podium microphone to say their piece.

The only woman in the CFET group – a petite shy person -- remained quiet and although brave enough to stand on the platform with the other members of the group she definitely did not want to be called upon to speak.

After the speeches had all been made, and the Press Kits handed out, there was an extended media scrum – during which a media crew with a video cameraman singled out this shy woman and asked her to tell her experience with the taxable benefit rip-off.

How large was the taxes levied on her for ‘INCOME” that never was?
What did she do when notified by the CRA of the taxes they said she owed?
What happened when she hired a lawyer to advise her and fight her case with the government?

When her futile efforts failed to get tax relief how was she going to deal with this situation?
The young woman stood up to this barrage of questions – to the very last one – to which she replied:- “I do not know.” “Will I have to sell my home?” “Will my retirement savings be seized?” “I really do not know?”

It was obvious to everyone present that there is genuine stress and anxiety imposed on all victims of this insidious tax on non-existent “Income”.

If and when this video clip is broadcast every viewer – with an ounce of common sense – will see just how much mental harm is being done to innocent victims of this outrageous tax situation.

During their address to the media presentation it was made clear – CFET victims are not tax evaders. They are more than willing to pay as much tax as anyone else – ON REAL INCOME.

They are not willing to see themselves legally robbed on the excuse they might have avoided this problem IF they had sold their shares at the moment they took control of them.

They are not willing to remain silent when they see others in their same situation given tax remission while they are denied same consideration.

So what is the government -- in power -- offering to do for these Honest, Hard Working, conscientious Canadians – who have been promised “Fair Taxation” on several occasions.

Well on the same day of the CFET members meeting with the media the Honourable Gordon O’Connor was making the announcement that the promised Taxpayers Ombudsman has finally been appointed. This is great news.

Now when the governments collection agency freezes your bank account, puts a garnishee on your wages, or forecloses on your property and/or other valuable assets – they will have to treat you with polite respect. Otherwise they will have the taxpayers Ombudsman to deal with.

You may even get an apology while they tow away and impound your car.

Well after all what are a paltry seven CFET members going to do about it?

Who said the seven people attending the Press Meeting were the sum total of “Canadians for Fair and Equal Taxes.” (CFET) Members.

As a reader of this article are you not in favour of fair tax laws equally applied?

If YES – then you are a member of CFET.

Do you suppose even a million or two Canadian citizens are not in favour of Fair tax laws equally applied? I do not – and therefore the remaining -- 30 or so -- millions of Canadians are ipso facto members of the CFET.

They all, however, can be totally ignored if they do not say anything, or do anything, to demand their elected representatives defend their rights.

Make no mistake – the avenues of tax remission – provided to date do not change a thing.

As long as the defective taxable benefit legislation remains as currently written then appeals -- to the Taxpayers Ombudsman, and/or the Tax Court of Canada, and/or the Revenue Canada appeals officers – are an absolute waste of time and money.

The young woman – nearly brought to tears – during the CFET meeting with the media – will still have to sell or mortgage her home unless the defective legislation is either struck down or changed.

If you want your RIGHT to fair and equal taxation restored – then tell your MP – and anyone else that courts you for your vote in the coming federal election – commit to representing me on this issue – OR NO VOTE.

See you at the voting polls – O’Grady.

Victor Drummond ©

Updated Copyright Notice

Updated Copyright Notice
COPYRIGHT NOTICE
Issued September 7, 2007
Updated February 3 2008
By Victor Drummond ©

Be advised hereby that as of this date --all bloggers, publishers of news media and/or business papers and/or magazines, including Readers Digest, are granted free copyright privileges to any article I post to this blog page, (buyerbeware—caveatemptor), both past and future.

As I am the only person with administrative access to this blog page a copy of this notice is the equivalent of a signed authorization.

While those who utilize this material may either support the intent of these articles – or voice opposing views I -- and those who have been victimized by our defective “Taxable Benefits” laws would greatly appreciate your support.

Victor Drummond ©