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Income trust party is over

STEVEN CHASE

From Wednesday's Globe and Mail

Latest comment posted at 3:44 PM EST 05/01/08

Surprise move breaks major Conservative campaign promise to avoid taxing trusts; Finance Minister says he had no choice because trend threatened Ottawa's tax base ...Read the full article

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  1. James Webb from Canada writes: voted for the conservatives last time based on their policy about income trusts I know that things change but a five year excemption is not enough for a young senior
  2. joseph Cheng from Toronto, Canada writes: This Tory government is a done deal! They made such a stink in the last election about the Grits' proposed tax on income trusts but now they're doing the same. With the 'Clean Air Bill' which is now widely criticized and with this 'income trust' distrust, the Tories are committing a stroke by stroke slow hara-kiri on themselves. The Grits always call themselves the natural governing party of this country. They don't become the natural governing party on their own merit which is for certain. The Grits got themselves elected again and again by default thanks to those politically incompetent Tories who have been fumbling the ball time after time since the past thirty years.
  3. tony giacalone from Leamington, Canada writes: Liars and thiefs!!!!!!!!!!!!!!!!
  4. James Webb from Kelowna, Canada writes: Can you trust a conservative ?
  5. .. .. from Edmonton, Canada writes: I'd rather have them break a promise then put us into a deficit situation.
  6. David Boult from Whitehorse, Canada writes: What a bunch of rank amateurs. What is that I see in the distsance? The fading chances of a majority government. Let's see who they have ticked off with this latest stumble - maybe it would be easier to list those who won't be.
  7. marlene gregory from Canada writes: Flaherty is definitely the Wicked Witch of the North. Will the Block and NDP please call another election!
  8. fiona henderson from winnipeg, writes: If investors recently purchased Income Trust Funds based on the government stating they would not touch trusts, is there not credibility to legal redress??
  9. X. T. from Waterloo, ON, Canada writes: This is a very unpopular move, just like any tax hikes. However I believe this is the right thing to do. At least this is the responsible thing to do for the fiscal wellness of the government, as well as for the general direction for the businesses in Canada. The last thing I want to see is that one day the TSX index becomes a de-facto income trust index. All those public companies take short term cashflow as the single most important issue versus long term growth. Don't get me wrong. I vote Liberals all the time.
  10. T Whitfit from Toronto, Canada writes: Of course they had to do this. Untaxed income trusts (at the corporate level) are a tax distortion based on a loophole. Some will argue that they shouldn't do this because it makes the financial system less predictable, but going to an income trust should have only been done with the knowledge that it was likely a temporary tax shelter. If there is good policy reason to have low corporate taxes, let that be the policy, but a two tier structure cannot stand.
  11. Andrew MacGillivray from Victoria, B.C., writes: Fool me once shame on you. Fool me twice... Time for TAX REVOLT Canada.
    This is about a grossly bloated public sector worrying that it won't be able to perpetuate itself if the tax burden is lifted on we private sectorites who produce the real wealth here in the True North. Why does the trust sector exist ? To cure double taxation. Clearly an addiction the bolsheviks cannot rid themselves of, regardless of how ridiculous the concept.

    'Hey - think the time is right for vilest revolution. Cause where I live the game we play is compromise solution' - M. Jagger & K. Richards
  12. Benjamin Seligman from Canada writes: As a retiree now living overseas this is a double blow. Not only will I suffer a significant capital loss, but I receive no dividend tax credits while still paying non-resident tax. So perhaps what this government is really saying to people like me is: 'Don't invest in Canada. Move your money elsewhere.' That makes sound economic sense -- not!
  13. Michael H from Edmonton, Canada writes: I think that this was a good and bold decision. I list it as the third that I have seen from this government. Still overwhelmingly bad decisions but this was a positive one and showed some ability to make some decisions outside the confinements of ideology.
  14. Agent Smith from GTA, Canada writes: The federal surplus last year was 13 billion. To date, it's higher again this year. How much money do they need? It is really necessary to go back to the 4% GIC. The conservatives are a much better party in opposition.
  15. robin m hood from red deer, Canada writes: It makes you wonder who is running the country, the elected representitives or the federal bureaucrats.
  16. jason davidson from Victoria, Canada writes: The worse part is these slimy politicians broke their promise. Can you trust anything they say now? How will the business climate be now? How arrogant can you be? Can investors ever trust the Canadian Conservative government? I think it is high time we throw these arrogant bums out who don't understand that they only have a minority government. The CPC combines the worse of right wing policies (all that militaristic blood and iron mixed in with evangelical 'God Bless Canada' crap) with the worse of left wing NDP ideology - soak the rich and scare away investors. It is not a happy combination and the sooner we get rid of these dishonest people the better off we will be. Don't politicians get it? BTW I am certain Harper and Layton made a little deal here.
  17. Marc Sievers from Calgary, Canada writes: Complain here all you want but also your views known to your MP. This is a blatant reversal of policy that is not justified by the facts. Personal taxes account for the majority of government revenues. Revenues lost by not getting taxes from income trusts are more than made up in additional personal taxes paid on distributions received.

    Flaherty is talking out of both sides of his mouth here. Don't let him get away with it.
  18. Barney Biggs from Republic of Western Canada, Canada writes: This evening I e-mail the Conservative Party and told them to remove me from therir membership roles. It is not what they have done as much as the way they did it. As a senior on a pension this is a blow that I will not soon forget.

    Bring on the next election.
  19. Paul Renaud from Ottawa, Canada writes: Truly a weapon of mass destruction!! This sudden attack on an unsuspecting market will devestate many an honest Canadian's portfolio!

    To spring such a knee jerk reaction on an unsuspecting and unprepared market is completely irresponsible. The Minister should be impeached for incompetence and recklessness.

    Has the government forgotten that the so-called corporate tax free payments from an income trust are taxed at a higher rate in the hands of individuals? Or that Canada has been running a record fiscal surplus for over 5 years?

    We demand a vote of non-confidence NOW!!
  20. X. T. from Waterloo, ON, Canada writes: Let's face it, every party breaks promises. But hey， do you keep all your promises made when you are courting your wife? If not, why can't you understand this? :-) To be frank I'd love to see a broken promise on GST next time. That tax cut just makes no sense to us and it is downright expensive! Cut my income taxes instead please.
  21. Mohammad K from Oakville, Canada writes: Easy easy everyone, The Tories are looking to see if they can come to a compromise with the corporations. Probably a lower corp tax rate for Income Trusts. Lets not forget most of the big wigs in corporations are good friends with the Tories. They wil not allow this to go on without getting concessions.

    As for us, yeah we will all get screwed, so bend over here it comes again.!!!!!!
  22. g c from Canada writes: Another broken promise...
  23. Craig Lemon from Mississauga, Canada writes: Consider that with a stroke of a pen the investment dollars that will disappear in the next few days. Consider how retirement plans will be impaired and incomes will drop. I am not sure what irks me more; losing tens of thousands of capital and the future income streams or the betrayal by the Conservative Party!

    As a long-time supporter I am shocked by this knee-jerk reaction by a party that now governs like the Liberals they replaced. This was clearly a difficult issue for them and one that has been totaled mishandled. But, when you act in concert with the editoral demands of the Toronto Star its pretty clear you no longer represent my best interests or that of the business community.

    I can't help but wonder where this bone you threw us regarding income splitting came from. Surely that will cost billions of dollars in lost tax revenues. Isn't that the issue you were trying to fix by taxing trusts in the first place? Are you fixing one problem by creating another? I am sure someone did a study on that one too, right? What will stop a future government from reversing this decision because of excess tax losses as the boomers retire?

    Mr. Flaherrty I am not buying what you're selling. Go back to the drawing board and come up with another solution. For instance, by not grandfathering existing trusts the government is missing the chance to do the right thing for those businesses and their investors. No one likes unilateral action taken by government, such as expropriation, without fair and appropriate compensation. That's what separates Canada from a banana republic, isn't it?

    The clocks ticking and the sound you will be hearing in the days ahead are investor dollars being flushed along with the support for your minority government.
  24. j.r ewing from vancouver, Canada writes: Okay, so you want to double tax Canadian investors. You want to deter foreign investment. You want to cheat honest Canadians out of their savings. Well then, I don't want to see one person living on the street, I don't want to see one reservation without proper infrastructure and the cleanest water on the planet. And I don't want to see one person waiting in an emergency room in a Hospital. Schools should be state of the art, not one canadian in need of any educational resource. I bet it won't happen. This government will go down in history as delivering one of the worst blunders in Canadian political history.
  25. David Leskiw from Canada writes: A good move, enough of large corporations seeking to avoid paying tax. No more loopholes, if the large corporations don't pay their fair share than who will?
  26. Draracle * from Canada writes: Wow, we should dig up the posts when all the tax cuts were announced and see how many Conservative posters also do the flip flop. At least the Conservatives had their reality check while the economy was hot -- most neo-con ideas don't fail until the economy cools and everything falls apart. Kudos for swallowing pride and doing the right thing... not the neo-con thing.
  27. R D from Canada writes: It is amazing to see that the government is short sighted enough to look at what tax they can get today, rather than what tax they can get tomorrow! If they leave income trusts alone, they still reap the benefits of capital gains as the income trust rises. These things get bought and sold everyday, they get their tax this way right away. Even if people hold them in sheltered accounts, the government gets a defferred tax gain when the people withdraw these funds. It is far easier for investors to accumulate wealth with a 10-16% yield, which in turn promises the government even more tax dollars than they would have received initially, if they tax the trusts and give us a 4-8% yield.

    By taxing the trsuts there will be investor backlash which will mean appox. 10% drop, which then means Capital losses which will then offset any gains we may find which then hits the government for another loss of tax revenue for this year.

    The reason people become politicians is because they cannot hack it in the business world. Therefore, they should keep their fingers and minds out of the business world and let real people make these decisions.

    Trusts are a great business model for certain industries (ie. those than don't need capital to continue operations, or those seeking capital for speculative purposes where they can't find capital unless they pay a portion of profit). Maybe the solution that was overlooked by everyone, was not to tax trusts but to limit what businesses were allowed to become trusts. Regulate the industry, don't tax the industry!!!!
  28. Doug Evans from Kitchener, writes: I think the harper goverment just cut its own throght
  29. A Marr from Toronto, Canada writes: Dammed if they do, dammed if they don't. If they don't change the economic structure, than any tax brakes planned for low and middle income brackets are put in jeopardy and the policy is viewed as supporting big business (which is traditionally along conservative ideology). If alternatively, they make the change (and kudos at that) they're called liars and cheats for a sound economic move the liberals only had the b_LLs to implement by half measures. That ladies and gents is the difference between libs and cons, libs will make moves based on the political climate, cons will do what’s necessary. This strikes as an economical progressive stance to me. Mr. Webb asks 'Can you trust a conservative?' Well, I ask, can you trust any politician? Obvious answer is no, we all vote for who we think is the lesser of all evils. At present, I'd have to say that would be Conservative.
  30. Kris Warren from Canada writes: Wow, am I ever getting sick of hearing how 'seinors' are losing out on this deal. Well, people, its the risk you play when you invest your retirement savings in the market - if your smart you didn't put all your money into income trusts as there is a higher risk due to the uncertainty of the business model vis a vis government policy.
  31. R L from Canada writes: Income trusts are a scam in the long-run, as any competent professional in corporate finance & accounting will tell you. The conversions are done to artificially boost the stock price; it is a one-time effect which fools the uneducated investors. This removal of the income trust loophole should have happened long before large companies converted to income trusts and people invested in it. Good thing I'm not one of those people.
  32. George Skinner from writes: It's about time that the federal government did something about this issue. Converting to an income trust is an out-and-out tax dodge, and somebody has to pick up the tab for the shortfall. I'm also concerned that converting to an income trust doesn't lead to good long-term management of these businesses: instead of investing in themselves and thinking strategically, the income trusts need to ensure that they can make regular payouts, promoting short-term tactical thinking. I'm glad that the Conservatives have shown some leadership and done something. Also, in case anybody has forgotten, the uproar regarding how the Liberals handled the income trust issue was that the minister mulled about it in public, depressing prices. The alleged subsequent leak that no action was forthcoming may have allowed insiders to benefit at the expense of small investors.
  33. j Mac from Canada writes: I think it's time we all just admitted that the harper Conservatives are professional politicians. Who did they think they were fooling.
  34. Paul who is from ancouver, Canada writes: It looks like the government was conservative with the truth.
  35. Ken Stevens from Toronto, Canada writes: The Liberals would never have had the balls to do this. Kudos to the Conservatives for doing the right thing. This should have happened ages ago--think of the tens of millions blown on consultants and accountants pockets because of this stupid loophole. Way to go Stephen for finally closing this loophole. P.S. I'm a die-hard NDPer, but I gotta give credit where credit's due.
  36. Vernon Reynolds-Braun from Calgary, Canada writes: Both in economic and social policy, I don't agree with the philosophy of the Federal Conservative Party. So...their October 31/06 surprise announcement on taxing Income Trusts may be a good thing for people like me who want to see the Tories back in the Opposition! Let's keep this story alive and top-of-mind folks and see that Mr. Harper and his Tories are turfed out of office, and ensure that those who defeat them do so largely on a promise to restore the Income Trust tax situation before the Tories below-the-belt Income Trust announcement of Hallowe'en 2006!!
  37. Douglas MacDONALD from edmontonedmonton, Canada writes: i do believe they said they would not touch the income trusts, what i am not quite sure about but wont this result in some double taxation in certain cases quite possibly this will take more money in the long term out of the average persons pocket . most of my income trusts are in the form of mutual funds in rrsps so even if the unit price drops temporarily i will still benifit so long as the distributions remain the same what concerns me here is that quite possibly the distributions may go down which will be a double whammy.
  38. Lewis Allen from Winnipeg, Canada writes: Maybe the tories aren't so bad afterall. The economic climate has been getting better and better for big corporations over the past several years and it's hurting Canada as a whole. It is about time Canada get's back to it's welfare-state roots. I like the move, and it will be better in the long run too. More money spread around for things like education will mean a better and more competitive workforce for the future. I can't believe I am saying this, but well done Conservatives!
  39. Habib Abdul from Canada writes: My RRSP and a good part of my monthly income will be greatly impacted.
    I trusted these liars when they said they would not change the policies regarding trusts while berating the liberals for their income trust debacle.
    I will never forget this.
    I have never voted before, as I was of the opinion that none of the existing political parties deserves my vote.
    From now on, to the end of my life, I will go to vote every single time and vote against this party of abominable liars.
    I will never forgive you Harper.
  40. Fiona McLean from Calgary, Canada writes: Just goes to show how Ol' Steve-Os conservatives are a bunch of liars and cheats. Taxing income trusts does almost nothing to the coffers of Revenue Canada, but it does break an election promise. Hopefully their political base of oil company tycoons finally see the light: that the conservative party is nothing but power grubbing, near sighted hacks. Fingers crossed the Liberal party can get their act together to beat this sorry sack of losers.
  41. Neville T from victoria, Canada writes: The Stephen Harper government continues to demonstrate its ability to commit political suicide.

    Harper’s arrogance, inability to lead, inexperience and lack of vision for Canada is becoming obvious with every passing day.

    Most people have concluded that the Clean Air Act is a bust; just a poor excuse to do nothing. More importantly it demonstrates Harpers lack of vision for tackling a serious and major global issue that will affect not only our health and well being but the economy of Canada. Obviously Harper and Bush are the two only people in the world that believe that global warming is not caused by humans

    This latest income trust announcement just demonstrates Harper’s arrogance. Most seniors will quickly realize that the so called tax savings offered by this government will be more than lost against the significant reductions in dividend income that they are currently earning from income trusts.

    The Harper government continues to further alienate the same minority that voted the Conservatives into power. This latest action will lead to their political demise.

    The only other government that demonstrated such stupidity was the Joe Clark government.

    Enough said

  42. Shocked Conservative from Toronto, Canada writes: Flaherty is an amateur hack. Certainty around government policies and tax rules are the foundation that strong developed economies are based on. Conducting a 180 degree switch on fundamental economic policies with no consultation can normally only be expected from third world governments. After the entire capital market has adjusted to a system, long term corporate strategies have been implemented and literally hundreds of billions of dollars of average citizen's dollars have been invested based on a set of assumptions, the government is changing the rules of the game. The rule changes will increase the cost of capital for large numbers of Canadian companies which will in turn increase the potential for foreign take-overs (especially in commodities) and take away a key competitive advantage that Canadian companies were starting to gain in the world capital markets. This is all in order to stop a 'tax leakage' problem that is heavily over-estimated. The aftermath in the markets will not be forgotten by economic conservatives and average investors. Can we have an election now?
  43. don koreen from Winnipeg, Canada writes: Since the government felt the number of income trusts was sufficient ....... why didn't they simply disallow any new income trusts ??
    This would have allowed the government to keep its' election promises to the public regarding existing income trusts.
    Harper's government was elected with the promise and hope of a new era of honesty and accountability. Right.
    'It's for the greater good' doesn't justify any government lying to the people who elected them.
  44. Marc D from Canada writes: So after being told again and again that to NOT tax income trusts would be financial suicide, they promised and promised that they would not, being good pro-business capitalists and all, and of course their gullible followers bought their story line hook, line and copy of the Angling Times. At least they now have the balls to do the right thing and tax the damn things, but they really come across as a bunch of rank amateurs without a clue. Oh, wait, they ARE a bunch of rank amateurs without a clue. As you were then.
  45. Elizabeth From Vancouver from Canada writes: Well, here's a prime example of Harper punching above his weight. He's tough. He's out there. He's standing up for Canada. Now why are people whining he's cut them off at the knees? This is what Harper means when he says that he's delivering (dishing out) what Canadians voted for. Give the guy a break, eh.
  46. Adrian Howell from Toronto, Canada writes: Wow. There are a LOT of bitter people here. Do what I do. Don't trust politicians to fulfil any of their promises. Then one can be pleasantly surprised when the gov't carries out some of them, and smug and correct when they ignore the rest of the promises.
  47. salty sam from Victoria, Canada writes: Bravo. I can't find much wrong with the way the Cons have run the economy, and closing this loophole is a job well done. You have to understand that this loophole was creating an uneven playing field that favoured established companies at the cost of innovators. We need innovative companies that seek capital and growth because too many of our coporate entities are going South, stripping our value-added brands. Now if only the Cons can throw their mean-spirited socially conservative agenda into the toilet they might even get my vote!
  48. Mr Fijne from Calgary, Canada writes: Here is my personal commitment to Ottawa:

    1) lowered income as I shall minimize the distributions I take out of my RSPs THEREFORE less taxes for you all from me (about 4 times less next year)!
    2) lower capital gains taxes as the unit price will drop and when I shall sell shares at less than before THEREFORE less taxes for you all from me!
    3) NO MORE CONTRIBUTIONS TO ANY POLITICAL PARTY
    4) NO MORE VOTING IN FEDERAL ELECTIONS: I shall spoil my ballot to show my disgust to both Liberals and Conservatives

    It is time for the west to separate from Canada.
  49. X L from toronto, ontario, Canada writes: I have never been lied to or cheated by anyone more than my own government... but these turkeys take the cake.
  50. Doug Figgins from Hanmer, Canada writes: As others have said here, these trusts are a calculated 'ruse' to AVOID TAXATION. That 'some' may benefit from the avoidance is of course of interest to those 'some, but for the rest of us, no corporation should be able to dodge its responsibilities to the whole merely by employing an elaborate accounting charade.

    If you want to blame someone, blame the directors of Bell who were DIRECTLY respsonsible for the straw that broke this particular camels back. EVERYONE knew the Bell situation was a bridge too far when it happened, and it was only a matter of time before the hammer came down on this corporate self-serving game.

    This decision is LONG OVERDUE.
  51. Jake friesen from Edmonton, Canada writes: Face it folks. This will have no political repercussions for the the Tories. No matter how mad you may be it will have no traction at election time because the NDP or the Liberals won't oppose it so it won't be a large public issue.
  52. A Marr from Toronto, Canada writes: This very necessary move may have been political suicide (Assuming the next federal budget is not full of tax cuts for middle and low income tax payers). The liberals may very well start screaming at the top of their lungs and call conservative hypocrites. But if you think that should the liberals be elected after next election that they will overturn this policy change, think again. Lets not fool ourselves here people, regardless of who's in power, this move was necessary to close a major tax loophole that benefited the wealthiest Canadians. To think the Liberals would do different is simply foolhardy. As an accountant by profession I cannot commend the conservative government enough for this. At least they didn't leak it to their friends on Bay street before hand.

    Corporations in Canada pay only 28% of all taxes collected in this country. If they were allowed to profit from these loopholes, who do you think would have to pick up the tab? Hopefully, this is a move designed to prevent corporations from paying lower taxes so that the government can start to lower the tax burden for ordinary citizens from 48% of all receipts.
  53. Shocked Conservative from Toronto, Canada writes: What are the Liberal leadership candidates' views? It is a great time to win votes from economic conservatives and average investors. I wish the Liberals had a leader so they could cause an election with Jack's non-confidence motion on Thursday. Despite all the problems, at least the Liberals understood the concept of letting a powerful market economy run so everybody can benefit through increased economic growth.

    I am shocked that the Tories are doing this after promising investors, seniors, Bay St., corporate Canada and foreign equity markets that they would not. Not only will the market be in shambles and many investors will be looking for blood but Canada's reputation of a consistent market with sound government will be heavily damaged. Flaherty is an amateur hack.
  54. Dwight Fulmore from Courtenay, Canada writes: What is it that sets the Tories apart from the Grits? Honesty? How now can you claim to be any different than the Liberals who preceeded you? Voters want a government that does what they say they are going to do, if you want to change your position on something you promised mid term, then call an election and tell everyone that you have changed your mind. Don't give any excuse of it being the right choice for the nation as the principles behind trusts and the strikes against them were there before the election. You are lying to the public plain and simple and going back on a promise that was made. Say goodbye to the vote from the right. I predict we will have a pile more splinter right wing parties for the next election, and I wouldn't be surprised if the liberals capitalize on the outrage from this and try to force an election while people, especially those who own shares in income trusts, are still mad.
  55. armando martone from oshawa, Canada writes: The timing of the announcement could not have been more appropriate.
    Was the finance minister wearing a disguise while he changed the rules of the game? Were we tricked or treated?
  56. john boddy from Hamilton, Canada writes: Flaherty was the Finance Minister of Ontario - after he was done we ended up with a 5 or 6 billion dollar annual deficit, the sale of public assets such as highway 407 for dirt cheap prices, tax cuts that went too far and crippled the ability of Ontario to maintain it's public infrastructure.

    I could go on - but the point is he was a disaster as Finance Minister in Ontario, why would he be any different in Ottawa ?

    Taxing trusts in the way he proposes is just stupid, the government would get the income tax revenue eventually when people sell theirs shares in the trusts.

    So what he is proposing is double taxation - a 34 % tax on the distributions, and a second tax when you sell your shares if you have a DRIP.

    Maybe Flaherty wants Harper to lose the next election so he can become leader of the Conservatives !!!

    This will make the Liberals happy !

    John Boddy
  57. Sean N. MacDonald from Toronto, Canada writes: Well I finally hope all of you who expected the conservatives (aka the PC, the Reform, the Canadian Alliance or whatever other guise they could come up with) to change the face of Canadian politics, have had your drunken buzz wear off! The fact is that once a party becomes the party in power, the things they fought tooth and nail to prevent, are only the outcomes they believed in, but just wanted to be the party to impliment them. I trust that all of you 'Tory Blue buzzed' voters will wake up and realize that you have elected a bunch of inexperienced, uneducated chumps, not unlike Ontario's terrible experiment with the NDP in the 90's. I truly hope that this will get enough of you to realize your mistake and push for another election to get this band of western chumps kicked to the curb, put Quebec back to a 'One of Ten Provinces' status, and make Steven Harper line up in history beside the other infamous conservative Prime Minister 'Joe Who'?
  58. Jimmy K from Toronto, Canada writes: I think the comments on this board just illustrate how difficult this must have been for the government. Obviously, the focus groups and polling must have shown them that this won't go over well. Unfortunately, this had to be done. Do any of you think it would be a good thing if you were to bank at Income Trust Royal Bank, buy your food from Income Trust Loblaws, use an Income Trust Research in Motion Blackberry, on an Income Trust Bell Canada network???? Let's put this into perspective. Income trusts are nothing more than a tax loophole which investment bankers have pushed for easy rewards, and which companies have subsequently followed to achieve instant returns for investors. It was a TAX LOOPHOLE that was hurting our long term productivity. Hopefully after a month or so, cooler heads will prevail. This had to be done. Goodale and Martin knew it, but when they were in charge things weren't as bad as they are now. Now that BCE and Telus started to convert, that was the final straw. Imagine if one of the banks decided to convert. We couldn't allow this to go on forever, we knew this was going to end, the question was which government would have the courage to do it. I commend the Conservatives for doing it, although it is obvious they are about to get cruxified for doing the right thing for our long term economic health.
  59. jason davidson from Victoria, Canada writes: I have to reply to the Accountant above who said this was a necessary loophole to close. The problem is double taxation of corporations. Income trust income is not tax free . . .it is taxed at the taxpayer's marginal income - singly taxed. What Harper's crew is doing is restoring double taxation. What should have happened is that non income trusts corporations should be only taxed once - not twice . . that would have eliminated any differences between trusts and companies. Instead, these clowns decided to assert the policy of double taxation and start double taxation on income trusts. I should say that most holders of trusts I know of are quite middle class not rich. They were forced into buying income trusts because the banks of government pay less than 3% per year on bonds and deposits when inflation runs at about 2.5%. I knew Harper was arrogant and insensitive but I was shocked they would do something which completely shatters their credibility. Gomery was nothing compared to this fiasco. This is of an entirely different scale and will send shockwaves through the economy.
  60. Eric Arthur Blair from Calgary, Canada writes: Not taxing trusts would hurt Canada's tax base??? Wow, no kidding. Glad it took them this long to find out.
  61. Flushstraighted - from Canada writes: The questions is, why didn't the Conservative Party financial professionals foresee this as an issue before making the promise? I don't understand that, however, Parties always break some promises (frustrating but true). Is that news to anybody? The Liberals also lied and broke promises...and stole money etc etc. The Conservatives have made some great financial decisions for Canada and this is another one. Leaving the Trust Funds untaxed would be a disaster for Canada. Wake up. It had to be done. Ya...I can see the Boomers squirming. Good...now you know how it feels. The Conservatives have demonstrated that even though they will be critisized for this decision...and slapped with breaking a promise...they still did what had to be done. Alas, if our healthcare, educational and other such institutions didn't spend money like druken sailors...we wouldn't need such a huge tax base. Anyone want to challenge me on that? Well done Harper et al.
  62. Gralee Parr from Lubbock, TX, writes: What does one do after the horses have escaped the barn? Why, shoot them all, of course!

    The bulk of politicians are the same everywhere – dissemblers who are not to be trusted. In the U. S. the first George Bush said, “Read my lips – no new taxes” and of course broke his word. Bill Clinton reminded voters of this, claimed he wouldn’t raise taxes, and won the election in 1992. Yet what was the first thing Clinton did after taking office – why, raise taxes, of course!

    I’m afraid that Steven Harper is a politician just like all the rest. It’s a shame that the investors who believed in him are now getting whacked.
  63. Scot Loucks from Pickering, Canada writes: Not going to change my vote..... but I need a seriously better explanation than this. The concept of an Income Trust .... vis a vis spinning off a zero growth portion of your business... is a good one............. it has been abused. I expect better from this government.
  64. Phil Courterelle from New Westminster, Canada writes: For all those bemoaning this move, at what point did you start to think that corporations earning billions of dollars should not pay tax? Income trusts allow corporations to become essentially free-riders in Canada, a country devoted to publically run programs.

    If the Tories were going to break this promise they should have waited until after the next election when they could legitimately claim that times had changed. And to announce this change only a few days after declaring that the federal government is awash in surplus monies from personal income tax demonstrates poor judgement. A better alternative for the federal government would be to tighten the rules on when and how a business can convert to an income trust.

    pc
  65. R L from Blood Sucking Government Land, Canada writes: I don't know why Income Trusts should get treated any differently from other businesses. There should be no tax on corporate income period. The point is to take the money from the government and let the individual make his own decisions as to how he allocates his money.
  66. Phil Courterelle from New Westminster, Canada writes: jason davidson's point about double taxation is not entirely correct...much of the sting from so-called double taxation of corporate profit and dividend income is taken out by dividend credits to individuals. Ralph Goodale had proposed in November 2005 an increase to the DTC to help level the playing field between corps and trusts.

    Another key point is that the original rules for income trusts were meant to help stimulate investment in high-risk areas, not as a corproate tax dodge. Income trusts can be a great vehicle for investors because most or all net income is passed on. However re-investment in the company and R&D can take a serious hit if it competes with unit distributions. As one critic has written, by encouraging corporations to 'lock up cash-rich assets inside no-growth trusts, Canadain tax law maybe causing companies to unduly sacrafice long-term grown for short-term palliatives.'
  67. L W from United States writes: And who else are you going to vote for?

    Politics in Canada LOL!
  68. The Duffster from Yellowknife, Canada writes: Neville T from victoria, Canada writes: 'The only other government that demonstrated such stupidity was the Joe Clark government.' You are right sir! Joe Clark paid the price at the polls. Then you all got fleeced by Trudeau. It happens, get over it!!!
  69. K. O'Brien from kingston, Canada writes: One person says trusts leak tax dollars away from Ottawa while another says they shift the burden from corporations to individuals and though there may be a delay because of RRSPs the tax is still paid. All this decision did was line the pockets of the corporate bankers and lawyers who will be burning up the phone lines with advice that has a life span of the current government. We the general public trying to get a strategy in place to live out our lifestyle in comfort just ket the knife twisted as it goes deeper in the back. Harks back to Joe's time and the tax break on mortgages that I bet on to buy my first house. I survived but where is he now. Tory? Grit? Who cares, just give us clear rules that may be in place for longer then a bathroom break. I think all this desicion did was make Law Firms a good investment as they again are a growth industry.
  70. A R from Western Interior Seaway, Canada writes: I feel like laughing out loud at the vehement expressions of betrayal and moral outrage in this discussion. Imagine, a politician actually LYING!
  71. Jason Roy from Nova Scotia, Canada writes: While my knowledge of this matter is limited; I'm just wondering; do any of the individuals here who are calling for the government's 'head' on this matter honestly think that if this government goes down, and this move is passed into legislation; that the next government will do anything to repeal or override it? I DOUBT IT; no matter what promises will be made.
  72. jack doober from brantford, Canada writes: I am a senior widower so I cant split my income and I havent enough money to ship it offshore so I guess I am carrying the whole tax load since I have nowhere to split or hide my income...
  73. Belfast Boy from Brampton, Canada writes: For all the whiners who are stating 'they've lied how can we trust them now'...how many lies, scams and tax hikes did the Libs do and yet you voted them in time and time again.
  74. John Tan from Mississauga, Canada writes: Governmental policy decisions are now made under the influence of political expediency and/or the invidious power of Bay Street a la the North American Competitiveness Council and their likes. It is no more a government by the people and for the people. It is important for retail investors not to panic by jumping ship. Collectively we also have the power to overcome. The grace period of four years will allow Income Trusts to come up with solutions to meet the Feds step for step. The Conservatives have been short-sighted by not getting all parties (Income Trusts, shareholders, fiscal and legal experts, Pensions, labour, ) into a consultative process before making their announced changes. It is a hit below the belt. So now is the time for Income Trusts and their shareholders to come together to act in concert and show their strength as well as to protect their own interests. We cannot be lame ducks. There is a time for war and a time for peace. The clarion-call for war is unmistakable. We must act.
  75. Orest Zarowsky from Toronto, Canada writes: Tax, don't tax, that is the question. And how much is too much? And what should the split be between corporate vs personal? A few trivial details have largely been ignored here. Feds have surpluses. Alberta and Newfoundland are enjoying a windfall profit from oil. A few provinces have ballanced budgets (pure luck), the rest (most) are in defecit. Feds have surplus and provinces are running defecit for same reason - Feds downloaded programmes onto provinces, while cutting funding. Same thing happened here in Ontario under Harris. Provincial stuff downloaded to municipalities without concurrent funding. Oh yeah, both levels introduced relatively small personal tax cuts and significant corporate tax cuts. But the municipal tax increases, along with new (and high) service fees for government services mean that us individual taxpayers are now paying a higher total tax rate than before. And getting a lot less for the price. Now there's a great deal for the taxpayer. Taxes are necessary. And a number of socially and nationally critical issues are best handled by government. One of the most important functions of government is to balance the interests of various groups; business vs labour, medical and public health issues, environment, public and national security, etc. How are right wingers proposing to pay for all the military stuff and excursions they like so much. How are left-wingers proposing to pay for their projects. I do remeber that Harris gutted the MOE in Ontario and broke the public health chain to help pay for his tax cuts. We got Walkerton. Klein shut the provincial vet labs that teseted for things like BSE. What happened? And who funded the emergency relief fund for cattle farmers? 'There Ain't No Such Thing As A Free Lunch' - believe it.
  76. Roger Freel from Toronto, Canada writes: I'm not certain why people are up in arms about this move: the problem with income trusts is that foreign unit-holders do not pay much in tax, which is why the tax leakage is so pronounced. for individuals, this policy should result in a less onerous tax burden since revenue that would otherwise not be taxed no longer escapes taxation. The greatest flaw in the policy is the lapse of 5 years, presumably introduced so as to mitigate the stock-shock that's bound to occur today. For the first time in 9 months, the federal government has introduced a policy that we can all applaud. Bravo neo-anderthals, you've begun to emerge from the cave!!!
  77. Tomcat Alba from south of no north, Canada writes: This is a financial 9/11. Flaherty might as well have hired Al Qaeda to crash a plane into my house.
  78. Pete Kauchak from Cascadia, Canada writes: John McCallum should really retire. His antics are really getting tiresome. He started out as a respectible economist but now he is just a partisan boob.
  79. Give Your Head A Shake from Southern Ontario, Canada writes: I am a Conservative, and I approve of this move. Before the rest of you jump all over this one - THINK ABOUT IT! Where is the revenue going to come from to replace those monies already foregone - thin air?? C'mon people!! I don't object to paying my fair share of the load, but I do object to paying everyone else's. So, suck it up, it was something that was too good to be true, and you know what they say about that! Good move Jim, at least you have the stones to put it on the table. And if for some reason the Flibbies topple you, I hope you are able to offer a big fat I told you so, when they introduce the popular legislation again. But then again, maybe not, we know what the Flibbies said about getting rid of the GST...................
  80. The Guinea from mississauga, Canada writes: Enough already about the broken promises of the Conservatives!!!! All governments break election promises. Do you not think that corporations should pay thier fair share? Obviously, most of the posters are supporters of big business, and care little for the average Canadian who is overtaxed already.
  81. Gerry Dunnhaupt from Toronto, Canada writes: Australia gave its income trusts three years to reconvert or be taxed. Canada does it in five. Ah well, we have always been a bit slower.
  82. F E from Ottawa, Canada writes: What was the need for this move now? The timing on this action this confuses me, this will hurt our dollar, and Canadian investors. I just don't know what to think of this government, they say one thing and do another and we let them get away with it ???
  83. A Fraser from Canada writes: Another broken promise from the Harper Conservative government. harper promised during the 2006 ELECTION CAMPAIGN that he would NOT introduce a new tax on income trusts. Now he introduces it!! And where is our health care guarantee Mr. harper? And where is the AIDS funding your government PROMISED. You can't trust these Harper Conservatives for anything!
  84. ali mansur from Etobicoke, Canada writes: Look. When you tax individuals, you get to tax them at their income tax bracket. When you tax corporations, everyone pays the same. Plus, RRSP's and pensions shelter individuals. Since shelters limit the amount of money you can put in them, the very wealthy can't shove all their money there. Let's face it, income trusts are a fairer way to tax the average Canadian. This favours the rich by making average Canadians pay more.
  85. fff fff from nowhere usa, United States writes: Ive been humbled. Here Ive been singing the praises of your country and feeling a pride of ownership is some truly great businesses. How Im being penalized for my enthusiasm. Great, maybe I'll take my money 'oot' of Canada and not return. I thought I could get an honest deal in your country. Now it looks like Canada is on par with the States. Congratulations Nords, you look just like your Big Brother. That should please you.
  86. Alistair McLaughlin from Ottawa, Canada writes: Wow. I never thought I'd see so many complaints about the government closing a massive tax loophole for big business.
  87. Harold Uhlman from Lunenburg, NS, writes: What's new? I really don't know much about income trusts so can't speak to them. However, I do know about broken promises and politicians being self righteous. This Conservative/Alliance government is doing a 'mighty fine ' job of breaking commitments, promises, their word. That in itself doesn't upset me very much as two things have happened. First, circumstances do change prompting governments to reverse decisions. I can accept that. Secondly, to get elected the party says many things that have not been researched properly. They seem like a good idea at the time. That I can't accept. That is incompetence. Unfortunately, that is the case with this issue. Lastly, it is time for this government to get off its self righteous, holier than thou, soap box and accept they are no different than any other party. Do or say what we have to , to get elected, then do or say what should have been said or done in the first place, if they were being honest.
  88. Mary Jane Gallow from Kitchener, writes: Here we go again. Another dishonest politician. 'Read my lips. I will never touch or change the taxation of income trusts'. The government just announced record collection of income taxes, yet they have to destroy one of the better methods of distributing income to the small ordinary investors. And these small investors pay a higher tax rate than corporations as evidenced by the current collection of income taxes.
    Just watch the fallout that this disasterous move will cause to both the loss of income to 'we, the people', and the end of the Conservative party for its dishonesty. Please cancel my membership, Mr Conservative Party
  89. L M from Toronto, Canada writes: I reluctantly agree, as a Canadian and as a taxpayer, that the trust loophole should have been closed. I agree that the income is instead taxed in the hands of Canadians, but non-taxpayers (US residents) are increasingly subscribing to these trusts and all it does is take income out of Canada tax free. Ideally the government should have recouped any taxes lost at the corporate level from the individual Canadian taxpayers, but that was just not playing out in practice. So I don't agree with giving American investors a break at the expense of Canadian taxpayers, especially if the effect is to drain all our corporate profits with no re-investment into America.
    • Posted 01/11/06 at 7:20 AM EST |