Wednesday, November 01, 2006

Slapping a tax on income trusts

Surprise! Income trusts will be taxed. Minister of Finance Jim Flaherty made the announcement yesterday of a phase-in over four years. The plan includes an attempt to soften the blow to seniors by offering a tax break. Details on the MoF web site.

The economic benefits of income trusts that I explored in a previous post aren't popular with many, but this announcement is a surprise all the same.

Some individuals felt that the trusts were a Trojan horse for corporate tax cuts. Well, in a small way they are. The Liberal government previously dropped taxes on corporate dividends to entice individuals away from income trusts and into stocks. Now the Conservative government is coupling its tax on income trusts with the announcement of a ½ per cent drop in corporate tax in 2011.
Obviously some poor suckers felt that income trusts had a future.
From Reuters:

One of the largest Canadian trusts, CI Financial Income Fund (CIX_u.TO: Quote, Profile, Research), savaged the surprise move.
"This is the most bizarre, Third-World policy that I could imagine," CEO Bill Holland told Reuters. "It doesn't even make sense to me -- how can they keep changing the rules?"

----
“I think this is a huge, huge surprise. Huge. I don't think they consulted with anyone," said Calgary lawyer John Brussa, considered the father of the income trust format.
"To do this seems quite troubling, and for a government that's supposed to be encouraging of business. This arbitrary action is not very conducive to business. This is going to cost a bunch of people a lot of money tomorrow."
I'm not going to try to predict what will happen at the bell, but I highly recommend that the loudspeakers play the beautiful 'Funerarius for Michael Wise Esquire' by Orlando Addleston, as can currently be heard on the NPR web site.

Some facts from Reuters:

- More than 220 income funds are now listed on the Toronto Stock Exchange and TSX Venture Exchange, with a total market capitalization of about C$200 billion ($180 billion).
- More than one million Canadians own units in income funds and several million more invest in income trusts through their mutual funds.
- Large institutional investors, such as the Canada Pension Plan and Ontario Teachers' Pension Plan Board, invest in income trusts on behalf of their clients.

2 comments:

Blueberry Pick'n said...

Where are our CIVIC minded Political Leaders? who care about the work-a-day Canadian.

Perhaps we should examine the living cost of business in Canada.

We are a resource-based country, tied to the US... with an emerging relationship to the East.

But we siphon the INCOME from those resources into Toronto. Through HeadOffice, through Investment Banking, Private Banking &... TRUST FUNDS.

I live in Toronto, but I grew up a military brat. I travelled to region after region MIRED in poverty, poor education, acidified lakes, dead mountains, sterile fields & -YES!- toxic dumps opened near trailer parks.

Take a look at the cancer hot-zones in Eastern Canada.
Look at what CORPORATIONS do to unprotected peoples.

The CANADIAN people own our resources. The industry spin-off income & benefit should REMAIN primarily IN THE REGION whose resources are used.

They are finite. Perhaps, we should investigate the 'externalities' borne by industry:
- worker injury
- ecological damage, both pollution & 'harvest'
- cultural impacts
- the WWF indicates that by the end of China's Rise (wasn't that a great Discovery Documentary?) with the demands of all EMERGING nations & current demand... we will require the equivalent of TWO GLOBES of resources.

Harper said it right: Canada is a resource & energy Super Power. We should remember resources are finite & start the DRIVE to sustainable economics.

Finance lives off the CREAM of transactions.

Canada will be a part of NASCO.

YET: we are ACTUALLY in discussions to OUTSOURCE our PORTS such as the 22 currently run in the US by a shell company.

Silk Route, Spice Trade, Petra: tell me that the Middle East was never a HUB of commerce & trade? nah, they've been at it for millennia.

but my point: if you're a TRADE & RESOURCE economy, is it WISE to let a FOREIGN country control your ports?

When THAT country's economy will be taking a post OilPeak dip?

what are OUR Ethics on the DOWNSIDE of the Oil Peak?

hum.

we're being had, luv. & the guys with their hands on the purse strings are making grotesque PROFIT by insulating themselves from Responsibility to their communities.

Maybe retired teachers shouldn't HAVE to scramble & dip their investments into dirty counter-civic puddles.

maybe we should just crop the PORK from the transactions & have a government who supports the individuals of the country in which they live?

what happens to countries in the HONOURLESS world economy & business model? Look at the US economy. Look at the CURRENT distress of the Gulf Coast.

my god: look at Cote d'Ivoire (I think the only reaons it doesn't get more press? few countries have BILINGUAL names... Ivory Coast got SCREWED.)

Spread Love...
...but wear the Glove!


BlueBerry Pick'n
can be found @
ThisCanadian
"Silent Freedom is Freedom Silenced"

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