Rebutting the rebuttals and smacking the Martinis
Babble on.
Now that the "I Support Joe Wood" campaign seems to have taken off - or at least started lumbering down the runway - Steve Maich has posted a reply to his detractors (Sean, Ginna, and Shannon (in comments) - I'm looking at you!).
I've received a lot of feedback on my recent column on this issue. The same thing happened when I wrote about this same issue for the Financial Post, about a year ago. There were many sympathetic letters. But there were also many people DEAD SET against providing any sort of relief to the JDS workers.
Since I don't have time to get into email debates with dozens of writers, here are the main arguments against the JDS workers, and my responses...
Quite frankly, some of Steve's points are better than others. The differences between how income and capital gains are treated from a tax perspective is quite frankly beyond my expertise - hell, some days it seems balancing a chequebook is beyond my expertise - but should be discussed in more detail before advocating changes to tax law.
But the one argument he doesn't make here - the one I think the Conservatives and the press should both make a big stink over - is the fact that Paul Martin promised during the election campaign that he'd take care of this.
Kind of makes his convention speech ring a little hollow, doesn't it. Especially since trustworthiness isn't too high on the list of qualities Canadians associate with the Libranos right now.
“Paul Martin is a man who, when he says he will accomplish something, he does and his government reflects that. As he told us in his speech, when he makes a promise he keeps it,” said Steve MacKinnon, national director of the Liberal Party.
Really?
Babble off.
posted by Babbling Brooks @ 10:54 a.m.
3 comments
3 Comments:
RJ: what are your specific qualifications as either a securities expert, or a taxation specialist? I am neither, but your argument is full of errors.
These were not options. Repeat that a few times.
If they were options, then the rules regarding the exercise of options would have come into play. When I exercised my Nortel options, I was given the choice of: (1) converting to shares, redeeming the entire value for cash, and having the taxes payable withheld by the broker; (2) converting to shares and redeeming enough shares to cover the taxes owing; (3) converting to shares and providing a cheque (immediately) to cover the taxes owing.
I have no recollection of being allowed to choose to defer the taxes payable as of the exercise of options. The exercise of options occurs on a date chosen by the holder, within the limits of insider trading rules, and required the use of a broker.
An ESPP does not operate this way. Its administrator operates under contract from the employer, and the transactions (once participants sign up) are automatic. In the case of the JDU ESPP, it appears, as you suggest, that a significant part of the purchase was accounted as income (taxable benefit).
But treating it as income triggers a legal requirement for JDU to perform the tax withholding as on other income and benefits. Clearly, they failed to do so.
The fair solution would seem to be for the employees to return the appropriate number of shares which should have been withheld in the first place, and for JDU to make the correct income tax remittance to the government on their behalf. That JDU would need to make up the difference out of their own pocket would be just, as it was their error in not remitting the tax withholding which created the inequity.
Damian, I appreciate your acknowedging that the policy issues around this need to be examined in more detail before advocating changes to our tax laws.
That said, it seems to me when you say that since Paul Martin made a promise he has to do something to fix this, without some suggestion as to how he should fix it, you're kind of putting the cart before the horse.
Should the government just forgive the taxes owed by anyone who loses a lot of money and has difficulty paying? Or just in this case, because Martin made a promise?
I've got some more comments on Steve's rebuttal here, but I'll make two points.
1) I was actually offended by Steve's assertion that poor dumb engineers and assemblers can't possibly be expected to understand the magical and mysterious world of high finance.
2) Pop quiz: did you think the Bre-X investors should have received government assistance? How is this case different?
Both involved investors risking more than they had to lose, without understanding the implications of their decisions. So why should Joe Wood get relief from the government, and not the penniless investors in a worthless gold mining scam?
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