The Province, Page A30, 22-Feb-2007

Surplus of $51b sitting in EI fund

OTTAWA -- The employment-insurance surplus has hit a whopping $51 billion, according to briefing notes released under Access to Information.

Opposition critics and the Canadian Taxpayers Federation say workers have for too long overpaid into what the Conservatives once called a "partisan piggy bank."

"The EI rate-setting process and the continued growth of the surplus in the EI account are areas of current controversy," say the notes.

But the Conservatives have offered no hint of plans to revamp a program they once derided as a raid on workers' wallets.

The cumulative $51-billion surplus, up from $44 billion in 2004, represents how premiums paid by workers and employers have outstripped benefits paid out over more than 12 years, says the federation.

Excess cash has flowed into Ottawa's general coffers to be used as the federal government sees fit -- on new spending or tax cuts, for example.

It's a bit like robbing Peter to pay Paul, says federation president John Williamson.

"The EI system is being used as a tax grab by the federal government to spend money elsewhere. It should operate more as an insurance program, and not be used as a revenue generator by the government."

Human Resources spokesman Dan Charrette confirmed that the EI surplus grew by another $2.2 billion in 2005-06. Of that, $800 million was the extent to which premiums paid by workers and employers exceeded what was needed to pay a range of benefits. Another $1.4 billion was interest earned on the previous surplus.

Critics have long demanded that Ottawa slash EI premiums to better reflect the cost of benefits. They also point out that almost 17 per cent of workers who pay into the program never qualify for support.

It's especially hard for part-time employees, many of them women, to collect on their EI contributions because requirements were toughened in 1996. Those who have re-entered or are new to the labour force must have worked 910 hours to qualify.

For the most part, requirements range from 420 to 700 hours depending on unemployment rates.

Auditor-General Sheila Fraser has repeatedly called on Ottawa to account separately for the EI surplus instead of plowing it into general coffers.

Times Colonist (Victoria), Page A05, 09-Mar-2007
Union lays complaint against Harper and cabinet

REGINA - A criminal complaint against Prime Minister Stephen Harper and his cabinet questioning how his government is spending employment insurance funds is now in the hands of the RCMP in Regina.

Larry Kowalchuk, lawyer for the Retail, Wholesale and Department Store Union Saskatchewan joint board, said the complaint was filed in response to long-standing concerns by union members that the surplus funds in the Employment Insurance fund may be converted and used for purposes other than providing unemployment insurance.

"The recent flurry of media coverage combined with the auditor general's report and the fact the surplus in the EI fund has jumped by $7 billion in one year was the impetus to act. It was time," Kowalchuk said.

the surplus happened because the majority of people can never qualify to get it.

I say we should look after ourselves when it comes to UI and CPP

New Labour: the tax dodgers' friend

from Tribune magazine.
"'New' Labour: the tax dodgers' friend
Under the present Government, Britain has become the world's first onshore tax haven, writes Prem Sikka

AS A result of organised tax avoidance, Britain is losing between £97 billion and £150 billion of tax revenues every year - sums large enough to make a huge difference to spending on education, healthcare, pensions, public transport and a significant reduction in poverty. The poorest fifth of British households pay nearly 10 per cent of their income in direct taxes and another 28 per cent in indirect taxes. But elsewhere the story is very different.

Companies have developed strategies that result in higher accounting profits, but lower taxable profits. Reneging on pension commitments and tax avoidance are all part of the same strategy. Between 2003 and 2006, the FTSE100 companies doubled their profits. Their senior executives enjoy bumper profit-related remuneration. Yet there is little inquiry about the quality of such profits.

FTSE100 companies have more than 15,000 subsidiaries, many of which rarely trade but enable companies to book profits in tax havens and avoid taxes in this country. Many companies employ ingenious intrafirm pricing schemes to shift profits out of Britain and reduce tax bills. Rupert Murdoch's NewsCorp generates vast revenues through Sky television and its newspapers, but most of the profits are booked in tax havens. Since the late 1980s, it has paid little or no corporation tax in Britain. Richard Branson's Virgin empire is controlled from tax havens and pays little in British corporate taxes.

An Early Day Motion in the House of Commons pointed the tax avoidance finger at Alliance and Leicester, Allied Domecq, Amersham, Arcadia, Barclays, BAT, BOC Group, Compass Group, Dixons, GlaxoSmithKline, Honda, Kelda Group, Lloyds TSB, Merrill Lynch, NewsCorp, Nissan, Northern and Shell, Portland Enterprises, Prudential, Rolls Royce, Sage Group, Severn Trent, Shell, Tesco, Toyota, Virgin Atlantic, Virgin Trains, Vodafone and WPP. However, the Government has shown little interest in plugging the leakage of tax revenues to tax havens.

Under the private finance initiative (PFI), taxpayers are already committed to paying at least £150 billion to companies. The same corporations are shrinking the tax base by not paying taxes. For instance, Innisfree is one of the largest providers of funds for hospitals and schools. Its directors have been enjoying bumper rewards of £10 million. However, the company's audited accounts for the financial years 2004 and 2005 show that it did not pay any corporation tax in this country. Nearly one-third of the company's shares are held in Jersey by Coutts Bank for some faceless beneficiary. This party receives dividends, effectively paid by British taxpayers, but pays no taxes.

In 2005, retail entrepreneur Philip Green's Arcadia Group, which owns Burtons, Topshop and Dorothy Perkins, declared a dividend of several billion. A staggering £1.2 billion went to Mrs Green, but she did not have to pay income tax of nearly £300 million because she is resident in Monaco. Philip Green was knighted in 2006.

Britain is now the world's first onshore tax haven. Millionaires can live here in style, enjoy all the benefits of our social infrastructure, but pay little or no personal tax. Last year, Britain's 54 billionaires had an estimated income of £126 billion. At the normal rates of income tax, they should have paid nearly £50 billion in tax, but are estimated to have paid only £14.7 million - an effective tax rate of only 0.14 per cent.

The Government's insistence on light-touch regulation has created opportunities for private equity firms. These firms enjoy capital gains tax concessions and also siphon-off profits through interest payments, often to tax havens. The siphoned-off profits return to Britain as borrowings and the interest paid then qualifies for even more tax relief with the inevitable outcomes. Despite combined sales of more than £12 billion and operating profits of more than £400 million, five of the largest 10 private equity firms paid no corporation tax during 2005/2006. Most reduced their tax bills and four of the top 10 firms received tax credits.

The Finance Act 2006 has created new tax avoidance opportunities. In January 2007, the British Government launched real-estate investment trusts (REITs). In essence, an REIT is a company that owns and manages income-generating property. However, it comes with a huge tax perk. If most of its income is paid out as dividends to shareholders, then the company is exempt from corporation tax. Yet little attention has been paid to the use of REITs for tax avoidance.

In the United States, following advice from Ernst & Young, Wal-Mart has used REITs to avoid paying taxes. Brief details of the schemes are that one or more Wal-Mart subsidiaries pay rent for occupying properties to an REIT. This REIT is either wholly or substantially owned by another Wal-Mart subsidiary and it can pay out its dividends without paying any corporation tax. Wal-Mart is effectively paying rent to itself and all payments stay within the same group of companies. The scheme enables Wal-Mart to claim tax relief on its rental cost and avoid corporate taxes on the income. In one four-year period, the REITs strategy enabled Wal-Mart to avoid paying $350 million in taxes.

In the British setting, investors receiving the dividends are also exempt from higher rate income tax (40 per cent) on their dividend income. Even worse, these investors could be located in tax havens and would pay no income tax on their dividends.

In the US, Senate committees led by Senator Carl Levin have targeted the tax evasion industry. Its hearings looked at major accountancy firms and led to KPMG being charged with the largest-ever criminal tax case. The firm was fined $456 million and a number of its partners are facing prosecutions. One of its partners subsequently told a US court: "I wilfully aided and abetted the evasion of taxes." Here, KPMG's global chairman Michael Rake received a knighthood and his firm has close links with the Treasury. The Treasury Select Committee has shown no interest in investigating the tax avoidance industry.

Under "new" Labour, the poor are subsidising the rich. The tax system discriminates against British citizens by giving privileges to non-citizens. The tax base in this country is being eroded and will not enable any government to make the required investment in social infrastructure or redistribute wealth. The present Government has shown little imagination or determination in checking the tax avoidance industry.
Prem Sikka is professor of accounting at the University of Essex"

The system was put in place by a Liberal Majority Government and would take an act of Parliament to change it. So lets say that Prime Minister harper was to go back to the old and much fairer system, and proposed the change to the house. It would then require a majority of the opposition members to change it. Now we know the Liberals would not go for it. The PQ want the surplus for other things, and the NDP had ideas for a national childcare program to be funded out of it. So to impliment change, the citizens would have to harass and badger their MP's into voting for them, instead of the party line.

I'm a seasonal worker in heavy construction in Manitoba. I work roughly from May to October or late November,and due to a lot of overtime I pay some pretty high EI premiums. Then when I file I'm generally told I'm eligible for about 17 to 20 weeks of benefits. This is not enough to see me over to when work starts again in the spring,and there is not enough work for all the laid-off construction workers in the winter. In the past few years I've been leaving the province in the winter to find work to keep me going. With this big surplus it would be nice to have enough weeks of benefits to tide me over.

That's why successful Canadians flee to the USA, or at least their money does!