The federal Liberals are being weighed down by a credibility problem, say pollsters and a former Liberal cabinet minister and their message of fighting for the middle class is getting undermined by a series of controversies tied to taxation and finance.
The New Democrats may already be picking up the slack, with the Liberals now polling with levels of support typical of a minority government, says one pollster.
Some Liberal MPs are fighting back, decrying opposition attacks on their finance minister and those linked to the Paradise Papers as “misinformation” and “parliamentary theatrics.” One Toronto Liberal MP is planning a public relations offensive to reassure constituents concerned that they could be dragged down by government tax changes, and urging the government to sharpen its communications on the tax file.
Reports from the so-called Paradise Papers linking a wealthy Liberal Party fundraiser and a former Liberal prime minister to tax avoidance schemes—allegations both men have flatly denied—have followed close on the heels of revelations that Finance Minister Bill Morneau (Toronto Centre, Ont.) entered Parliament and cabinet without putting his substantial business assets into a blind trust, or declaring an ownership stake in a French villa, as well as controversial proposals for reforms to Canada’s tax system fronted by both Mr. Morneau and Revenue Minister Diane Lebouthillier (Gaspésie-Les Îles-de-la-Madeleine, Que.).
Those headlines, and the attacks by the Liberals’ opponents in Parliament that have come with them, have piled up to create a “credibility gap” for a Liberal government that has styled itself as a champion of Canada’s middle class, said Shachi Kurl, the executive director of the Angus Reid Institute.
“Now, Canadians are once again reminded that the party’s connections and operators are steeped, not necessarily in wrongdoing, but in wealth,” she wrote in an emailed statement.
Those controversies, said Nanos Research chair Nik Nanos, “suggest that many of the main players, although they may personally advocate for the middle class, they are definitely not part of the middle class, and this makes them susceptible.”
“Politics is unfair, and the optics do not favour Morneau doing an effective job at advocating for the middle class, because it’s fairly clear that he is very comfortable in terms of his financial situation. In a way, it’s an un-winnable situation for him,” Mr. Nanos said.
Former Liberal cabinet minister Sheila Copps wrote in today’s The Hill Times that the details revealed in the Paradise Papers, following on Mr. Morneau’s tax reforms and personal finance controversies, made an already bad situation worse, undercutting their middle class credibility, and leading some Liberals to privately wonder if shuffling Mr. Morneau out of the finance role could be part of a solution.
A poll conducted by Forum Research Nov. 4-6 found that more Canadian respondents of voting age agreed that Mr. Morneau was very (22 per cent) or somewhat (22 per cent) ineffective as Canada’s finance minister than those who said they found him to be very (six per cent) or somewhat (24 per cent) effective, with another 26 per cent saying they didn’t know either way. The telephone poll of 1,281 Canadians was accurate to plus or minus three per cent, 19 times out of 20.
Whether the doom and gloom has reached the electorate is a matter of debate, however. Mr. Nanos said he believed the damage had “stabilized” with the Liberals polling at a level of popular support consistent with minority government status.
“The situation where the damage has occurred has stabilized. The Liberals are now still in minority territory,” said Mr. Nanos.
As of Nov. 3, Nanos Research had the Liberals polling at 36.6 per cent support, versus 29.6 per cent for the Conservatives and the NDP at 19 per cent. Weekly Nanos polling data shows the Liberals in a better position than on Oct. 13, before the Paradise Papers reports, where they stood at 34.6 per cent, but worse off than at any other point since the 2015 election. The margin of error for the weekly Nanos national ballot tracker—which uses a four week rolling average—is plus or minus 3.1 percentage points, 19 times out of 20.
Liberal support is down, but it’s primarily the NDP, not the Conservatives, who have benefitted, said Mr. Nanos.
“The Liberals have to watch out that the New Democrats do not become that parking spot for disaffected progressives. So they actually might be delivering a political opportunity to Jagmeet Singh. And a critical part of their majority-winning coalition are former New Democrats,” Mr. Nanos said.
Ekos Research President Frank Graves said in an emailed statement he hadn’t seen proof yet in the polls that the electorate was preoccupied with the Paradise Papers, or even the tax change controversies, in the same way as those within the Ottawa Bubble.
“We should know if this is also a real public concern in the coming weeks,” he wrote.
Party of the ‘grand bourgeoisie’
The opposition Conservatives and NDP have used every opportunity to hammer the government for the controversies tied to Mr. Morneau, the Paradise Papers, and the Canada Revenue Agency, the latter of which included a proposal from the Canada Revenue Agency—quickly snuffed out by Ms. Lebouthillier—to tax employee benefits, and another to disqualify Canadians with Type 1 diabetes from claiming a disability tax credit.
Conservative MP Pierre Poilievre (Carleton, Ont.), his party’s finance critic, summed up the Conservative line of attack neatly during the Nov. 6 Question Period, asking whether the CRA had “gone after” the Bronfman family—top Liberal fundraiser Stephen Bronfman was connected to a tax avoidance scheme through reporting on the Paradise Papers by The Toronto Star and CBC, though he has denied doing anything illegal or improper—instead of people suffering with diabetes, or “minimum wage-earning waitresses who enjoy a small chicken sandwich at the end of the shift, or after small businesses and farmers?”
NDP MP Alexandre Boulerice (Rosemont-La Petite-Patrie, Que.), his party’s finance critic, connected the latest controversies to previous headlines about Prime Minister Justin Trudeau (Papineau, Que.) taking a helicopter to the Aga Khan’s private island, and attending private party fundraisers with wealthy businessmen from China, calling the Liberals “super elites and the grand bourgeoisie of Canada, the big rich families.”
Liberals must correct the record: MP
Liberal MP Julie Dzerowicz, who represents Toronto’s Davenport riding, said “misinformation” spread by the opposition parties through the media had become a problem in her riding. She is planning a public relations campaign of sorts, she said, hitting doors in her riding to try to set the record straight on just what the government was and was not doing on the tax file.
When it comes to headlines about the Paradise Papers and their links to top Liberals, and Mr. Morneau’s personal finances, she said, “A lot of people just lump it all together: ‘Oh, all politicians are no good,’ you know?”, something that “weakens our democracy” if it isn’t grounded in fact.
“Do I think that all this negative press, or this ambiguity around whether there are very senior Liberals, or very senior people who have been associated with the Liberal Party, do I think that that actually could have some sort of negative play for us as a party? For sure, it does. That’s why for me, my ask is that—sometimes it’s boring to hear— sometimes you do need to give a certain amount of time for investigation to happen,” she said.
Ms. Dzerowicz said she took Mr. Bronfman and former prime minister Jean Chrétien “at their word”—each has denied any impropriety, after being named in reports on the Paradise Papers—but said it was important for the government to investigate nonetheless.
The Conservative attacks on the government’s tax change proposals from the summer hit home hard in Davenport, where Ms. Dzerowicz said she has had to reassure many constituents that they wouldn’t be negatively affected by plans to crack down on income sprinkling and other domestic tax reduction schemes.
“In my riding of Davenport, tax fairness, that principle, is very, very important to them,” she said.
Mixed messaging about whether and how the government would change the rules for passing on businesses to family members, or whether there would be a small business tax increase, created a “crescendo of anger” for some entrepreneurs in her riding, she said, one that subsided after she contacted them to discuss the matter.
“In the end, it became a public relations exercise for me to say to them, ‘This is not what we’re trying to do,’” she said.
Ms. Dzerowicz said she was told some accounting firms in her riding were also giving out inaccurate information to clients about the government’s planned tax changes.
“What happens is, in the absence of someone else responding at the same time, then it comes off as true in the media. So I don’t believe that we should be able to allow that to stand, because it gives the impression that it’s the truth,” she said.
“We have to make sure as a government that we get right away all the right information to accounting companies. We have to make sure that we redouble our efforts, that we’re not forgetting anyone, that we provide as many avenues as possible to get the right information to everyone. And if people have questions or there’s anything that doesn’t come across clearly, that we’re correcting it right away,” she said.
Finance Canada is currently advertising for a new senior strategist for its consultations and communications branch. The job pays between $94,121 to $107,619, and applications are being accepted until Nov. 14.
Other Liberal MPs also derided the opposition attacks as mudslinging. Vancy Badawey (Niagara Centre, Ont.) called them “Parliamentary theatrics,” and said his party would continue to focus on mental health, the economy, and other priorities for Canadians.
Rodger Cuzner (Cape Breton-Canso, N.S.) said the “fear-mongering” and “ridiculous statements” from the opposition wouldn’t add up to much, the Paradise Papers story would fade, and he would lean on his government’s record on the economy and social programs going into the next election.
“I’m here 17 years, and these things come and go,” he said, adding the Paradise Papers was not a “burning concern” among members of the Liberal caucus.
—With files from Marco Vigliotti and Shruti Shekar
The Paradise Papers controversy
The Toronto Star and CBC News released explosive reports on Nov. 5 about Canadians named in the Paradise Papers, a leak of documents from one of the world’s largest offshore tax havens that has been distributed to journalists around the world through the International Consortium of Investigative Journalists.
The Star and CBC stories said the leaked documents showed wealthy businessman Stephen Bronfman, who serves as the revenue chair of the Liberal Party of Canada’s fundraising board, had lent millions to an offshore trust run by family friend Jonathan Kolber, with the returns on the money not subject to Canadian tax. Two tax experts quoted by The Star questioned whether some of the activities of the trust outlined in the documents were against Canadian tax laws, including accepting that loan without a pre-defined interest rate.
Mr. Bronfman, who comes from one of Canada’s wealthiest families and heads the Montreal-based investment firm Claridge, denied any impropriety in a press release Monday, which said he had always followed all of Canada’s tax laws, that his loan to the trust had fully complied with the law, and that he had no other involvement with the Kolber trust.
William Brock, a lawyer representing Mr. Bronfman and Mr. Kolber, also denied any wrongdoing. “My clients have always acted properly and ethically, including fully complying with all applicable laws and requirements,” he told CBC News. He said any “suggestion of false documentation, fraud, ‘disguised’ conduct, tax evasion, or similar conduct is false.”
Another CBC report linked to the Paradise Papers said that former Liberal prime minister Jean Chrétien had lobbied in 2007 on behalf of a company, Madagascar Oil, that itself was linked to tax havens. Mr Chrétein told the CBC he believed the company was based in Houston, Texas, though it was actually incorporated in Bermuda. “When someone comes to see you, you don’t do an analysis of their corporate structure,” he told the CBC.
The CBC report also said one of the leaked documents showed that Mr. Chrétein was registered as having shares in Madagascar Oil, well before any shares of the company were publicly traded. Mr. Chrétein told The CBC he did not have and had never received any shares in the company, and had never heard of any plans to give him any. He said his law firm, Heenan Blaikie, had been paid for his work lobbying Madagascar’s government.
“Any news report that suggests I have or ever had or was associated in any way with any offshore account is false. While as a lawyer for Heenan Blaikie, I did some work for Madagascar Oil as a client of the law firm. All fees were billed by the law firm and went to the law firm. I never received any share options and I never had a bank account outside Canada,” said another statement from Mr. Chrétein to the CBC.
The CBC report said the Paradise Papers did not suggest Madagascar oil had done anything illegal.
The Liberal tax reform controversy
Finance Minister Bill Morneau was tasked with leading a consultation on reforms to Canada’s tax system that blew up into a nationwide debate towards the end of the summer and intensified when Parliament returned, with the opposition Conservatives and several advocacy groups from the business community pushing back hard on proposals to curtail tax benefits for self-employed individuals who incorporate to lower their tax bill. The blowback put pressure on the Liberal caucus, leading to public pushback from some MPs, and Liberal MP Wayne Long to vote with the opposition for extended consultation on the tax reforms. Mr. Morneau responded by announcing changes to the tax reform plan, dropping the prospect of restricting the conversion of income into capital gains in a private corporation, and establishing a $50,000 threshold for income on passive investments through private corporations. The government also promised to lower the tax rate for small businesses from 10.5 to nine per cent.
The Bill Morneau disclosure controversies
Mr. Morneau was caught up again when the CBC reported in October that he and his wife used a private corporation to control a villa in southern France, but didn’t disclose the existence of the company to federal ethics commissioner Mary Dawson until the CBC started asking questions about it. Things got worse for the finance minister that same month, after The Globe and Mail reported that he had not put all of his shares in his human resources consulting firm, Morneau Shepell, in a blind trust during his tenure as finance minister, after Ms. Dawson advised him that, by the letter of the law, he did not have to. The Globe later reported that Mr. Morneau had told officials at Morneau Shepell that he had planned to use a blind trust when he took public office. Mr. Morneau later announced that he would be putting his family assets in a blind trust, divesting himself of his shares in Morneau-Shepell, and donating to charity any profit that came from divesting those shares.
The Canada Revenue Agency controversies
Last month the Canada Revenue Agency released a folio, or document detailing tax changes for the upcoming year, that called on employers to keep track of discounts provided to employees for the purpose of calculating those savings as taxable income. That proposal was slammed by Conservative politicians, among others, as a tax grab on lower-income Canadians who receive small discounts from the businesses at which they work. Revenue Minister Diane Lebouthillier denied responsibility for or knowledge of the plan, and said the proposed tax change would be reworded.
Ms. Lebouthillier also came under fire in October over written comments reported by CTV News that Revenue Canada would no longer allow Canadians with Type 1 diabetes to claim a disability tax credit, because “advances in technology”—seen as a reference to portable insulin pumps—meant it was no longer necessary.
David Prowten, the president of the Juvenile Diabetes Research Foundation, told CTV that “more and more people are very concerned,” about losing the tax credit, adding “it’s a very expensive disease.”