Conservatives Plans News Tax on Trusts

[Higgly]

In fact, income trusts were an opportunity for junior oil and gas companies to attract investors by offering to share revenue when capital appreciation was unlikely.

The gov't already has made an exception for real estate trusts - if you argument has any merit then then the government could make an exception for energy trusts as well.

This is a specious argument. Real estate trusts are being left alone because the Yanks are allowing it, as are the Brits. The justifications are bafflegab. What difference does it make if you generate your revenue stream from real estate or from oil & gas revenues?

[jdobbin]

Was it the right decision in the long run?

It is interesting to read how some people would prefer that a campaign promise be kept even if it is detrimental to Canada and our economy. Nothing like a hatred of someone such that it blinds them to any sense of reason.

Maybe we should have a poll: do you think that a politician should keep his promise even if a situation changes, such that the present situation is harmful to the country and the economy.

The decision on the CF-18 proved that even a contract bid that was higher technically and lower in cost was not sufficient for a western company to win a bid. The Conservative decision was wrong and it cost the party western support and ultimately led to Liberal victory.

I think that Harper saying he didn't promise not to tax income taxes is a lie.

[Riverwind]

This is a specious argument. Real estate trusts are being left alone because the Yanks are allowing it, as are the Brits. The justifications are bafflegab. What difference does it make if you generate your revenue stream from real estate or from oil & gas revenues?

Anyone can buy a property and collect the rent income after deducting expenses. REITs allow people to share ownership in rental properties and receive a stream of income from the rents. It makes sense to have a tax system that does not favour the corporate or the personal model for owning investment properties.

You cannot use the same argument for businesses that do not have a 'personal' model to compete with.

[August1991]

Paul Desmarais meets Stephen Harper and discusses Income Trusts:

Paul Desmarais Jr., the well-connected chairman of Power Corp. of Canada, even railed against trusts in a conversation with Prime Minister Stephen Harper during a trip to Mexico, and told him he should act quickly to stop the raft of conversions, according to sources.

As to the announcement itself, it was worthy of Alan Greenspan himself:

A week after BCE announced its planned conversion, the Prime Minister was feted in the oak-panelled dining room of the Toronto Club by deal-maker Tony Fell of RBC Dominion Securities Inc.

As three dozen CEOs sipped their after-dinner coffee, Mr. Harper gave a brief speech on foreign policy. Then Ira Gluskin, a money manager who holds $802-million of trusts, stood up and pointedly asked what the government planned to do with the sector, considering BCE's decision.

“Harper hummed and hawed and basically avoided answering,” said one CEO in the room. “I took it as a sign that this was something the government was worried about.”

The market never caught on.

...

In the final hour before markets closed, a group of bureaucrats were glued to their computer screens, scanning stocks for any telltale signs that word had leaked out. They were prepared to take extraordinary steps and pull their announcement if trust units staged suspicious dives, but nothing happened; the markets never suspected a thing, something that was clearly evident when Mr. Flaherty announced the trust crackdown on live television about 5:30 p.m.

G & M

[hiti]

....let me "share" with you why this proposal (if enacted as proposed) will NOT serve the best interest of Canadians.

Understand that this proposal is really a panic move on the part of Revenue Canada (the Canadian tax bureau) over their insane laws that force high-cash-flow/low-growth operating companies with little capital to become what is known in Canada as an income trust.

If the company generates LOTS more cash than they can put to use and they decide to pay a dividend to their stockholders, the dividend is taxed at a 41% rate AND that tax rate is withheld from the dividend payment just like a payroll tax.

If the company converts to an income trust it pays its dividend -- and a part of that dividend is tax-free (return of capital) and the other part is taxed at a lower rate than normal corporate dividend.

Because this business structure puts more after-tax cash into the pockets of individuals (and tax-exempt pensions pay no withholding), it is the preferred way for investors to own these high-cash-flow, low-capex types of mature companies.

http://www.changewave.com/freecontent/2006...in20061102.html

This is the stupidest move an economist can make. But then Harpo is no economist. Watch our economy tank.

Just what happens every time the voters believe a conservative politicians lies.

IF this present bunch of inexperienced wanna-be financial whizzes would have allowed the merging of the corporate and income trust taxes to go through that Ralph Goodale had on the books, this crapola would not have happened and Canadians would still be $20 billion richer and our economy would not be in danger of heading south.

[normanchateau]

This is the stupidest move an economist can make. But then Harpo is no economist. Watch our economy tank.

No, economists can make far stupider moves. Certainly Harper has made stupider moves. For example, thanks to Stephen Harper, on July 1, 2006, the income tax rate went from 15% to 15.5% and this rate now applies for taxable incomes up to $36,378. Raising taxes on those who earn the least in order to help pay for the 1% GST cut is absurd.

An income tax cut would have benefitted the economy more, as numerous fiscally conservative economists pointed out in May when Harper loudly announced the GST cut and quietly imposed the income tax increase. Herb Grubel, now senior economist at the Fraser Institute was especially critical of Harper's stupid move in not lowering income taxes.

It is interesting that when both Harper and Grubel were Reform MPs, Preston Manning removed Harper from the senior finance critic position and gave that position to Grubel. Harper became unity critic because he could speak French. Manning presumably viewed Grubel as a more effective finance critic. I wonder how Manning viewed the Harper-imposed increase in personal income taxes on July 1st.

[Renegade]

No, economists can make far stupider moves. Certainly Harper has made stupider moves. For example, thanks to Stephen Harper, on July 1, 2006, the income tax rate went from 15% to 15.5% and this rate now applies for taxable incomes up to $36,378. Raising taxes on those who earn the least in order to help pay for the 1% GST cut is absurd.

How is that a bad economic move? You can argue that it is bad politically or "unfair", but I fail to see the logic that this is a bad move by an economist. What is the economic impact of this move?

[scribblet]

"We've eliminated corporate funding for political parties and we don't think corporations should get away without paying their share, and this is the problem," he said. I don't see what's wrong with that, heck it actually sounds very NDPish.

Maybe the Liberals are so ticked because some of themhave offshore investments that might be considered a Trust Fund - I believe something was said about "At least we don't have to explain our decision to the RCMP" Goodale could have changed this some time ago but caved in to Bay St. making some of them pretty rich in the while they were at it; we should hope Flaherty doesn't do the same, the Liberals are not ahppy with the loss of their favourite tax loophole.

IMO the CPC is looking good for cracking down on corporate welfare and offsetting some paper losses by giving goodies to seniors many of whom were extremely supportive of these changes, even those with income trust invefstments.

Politically speaking, I see the CPC and the dippers as winners in this, the Libs are beeing seen as catering to their corporate friends even while in opposition .

Time will tell

[jdobbin]

IMO the CPC is looking good for cracking down on corporate welfare and offsetting some paper losses by giving goodies to seniors many of whom were extremely supportive of these changes, even those with income trust invefstments.

Politically speaking, I see the CPC and the dippers as winners in this, the Libs are beeing seen as catering to their corporate friends even while in opposition .

Funny how Alberta still sees this as an attack on the oil industry. You are calling them corporate welfare?

[normanchateau]

No, economists can make far stupider moves. Certainly Harper has made stupider moves. For example, thanks to Stephen Harper, on July 1, 2006, the income tax rate went from 15% to 15.5% and this rate now applies for taxable incomes up to $36,378. Raising taxes on those who earn the least in order to help pay for the 1% GST cut is absurd.

How is that a bad economic move? You can argue that it is bad politically or "unfair", but I fail to see the logic that this is a bad move by an economist. What is the economic impact of this move?

So you think it's a good economic move that people give their hard-earned money to the government rather than spend it on goods and services?

[scribblet]

IMO the CPC is looking good for cracking down on corporate welfare and offsetting some paper losses by giving goodies to seniors many of whom were extremely supportive of these changes, even those with income trust invefstments.

Politically speaking, I see the CPC and the dippers as winners in this, the Libs are beeing seen as catering to their corporate friends even while in opposition .

Funny how Alberta still sees this as an attack on the oil industry. You are calling them corporate welfare?

Its in the eye of the beholder I guess, whatever's in it for me, who might lose and who might win. In the end, speaking for myself, I gained (income splitting which I think all couples should be able to do) and I feel he acted in the best interests of the country.

Not all the oilpatch is angry, in fact, I've read that many of them didn't convert and are pleased with this as it removes pressure from shareholders to convert and levels the playing field. Also read that Encana and Sunco were next to convert.

Harper represents all of Canada not just Alberta, and besides who will Albertans vote for federally - the NDP, not likely. As I said, time will tell.

cheers

[Argus]

This is the stupidest move an economist can make. But then Harpo is no economist.

Hmmm, actually he IS an economist.

Look, even I, who never paid a lot of attention to income trusts, who was not invested in income trusts, knew from cursury attention paid to the business news, that something had to be done. As soon as Telus and BCE announced their intention to become income trusts, and the big banks started stirring, I knew the government would have to do something. If not now, then very soon. It was pretty obvious. No matter what they said a year ago, Telus and BCE changed the rules of the game.

If people were heavily invested in income trusts that should have been a signal to diversify.

People can rail against the Tories, but it was their own fault. And there is no party which would have allowed this situation to continue. The Liberals might be squealing now, but they'd have done the same thing. Except, of course, that they'd have tipped off their buddies beforehand so they could get their profits and get out.

The market isn't for amateurs. And if you can't afford to lose it you shouldn't be putting it on the table.

[jdobbin]

Its in the eye of the beholder I guess, whatever's in it for me, who might lose and who might win. In the end, speaking for myself, I gained (income splitting which I think all couples should be able to do) and I feel he acted in the best interests of the country.

Not all the oilpatch is angry, in fact, I've read that many of them didn't convert and are pleased with this as it removes pressure from shareholders to convert and levels the playing field. Also read that Encana and Sunco were next to convert.

Harper represents all of Canada not just Alberta, and besides who will Albertans vote for federally - the NDP, not likely. As I said, time will tell.

I think it's the attitude they are getting from the east suggesting they are corporate welfare recipients and they they have no choice but to suck it up because the change comes from the Conservatives. I don't know that that will wash.

[Figleaf]

"We've eliminated corporate funding for political parties and we don't think corporations should get away without paying their share, and this is the problem," he said.

1. It was the Chretien gov. that changed the political funding rules.

2. Paying 'their share' may be appropriate, but then why did they promise otherwise, thereby inducing innocent investors to be put in a position to be damaged by their flipflop?

Maybe the Liberals are so ticked because some of themhave offshore investments that might be considered a Trust Fund -

I'm sorry, but that comment shows you have no idea what you're talking about. Income trusts are Cdn.-resident businesses, and are something different from "Trust Funds".

... offsetting some paper losses by giving goodies to seniors ...

The 'goodies' are too much of a mismatch both quantitatively and as to who is affected to redress the harm caused by the tories' lying.

[normanchateau]

I think it's the attitude they are getting from the east suggesting they are corporate welfare recipients and they they have no choice but to suck it up because the change comes from the Conservatives. I don't know that that will wash.

It'll wash as well as Mulroney's introduction of the GST. He assumed business would suck it up because it came from the Conservatives.

Same thing when Mulroney modified capital losses. This was not well-received by investors. It used to be that we could deduct capital losses from earned income. But Mulroney required that capital losses could only be taken against capital gains.

Mulroney, and now Harper, paradoxically show a pattern of antagonizing business.

[jdobbin]

It'll wash as well as Mulroney's introduction of the GST. He assumed business would suck it up because it came from the Conservatives.

Same thing when Mulroney modified capital losses. This was not well-received by investors. It used to be that we could deduct capital losses from earned income. But Mulroney required that capital losses could only be taken against capital gains.

Mulroney, and now Harper, paradoxically show a pattern of antagonizing business.

It eventually didn't wash. Westerners tabulated what they hated about the Progressive Conservatives and then they then went big with Reform.

[normanchateau]

It'll wash as well as Mulroney's introduction of the GST. He assumed business would suck it up because it came from the Conservatives.

Same thing when Mulroney modified capital losses. This was not well-received by investors. It used to be that we could deduct capital losses from earned income. But Mulroney required that capital losses could only be taken against capital gains.

Mulroney, and now Harper, paradoxically show a pattern of antagonizing business.

It eventually didn't wash.

That was my point.

[August1991]

Not all the oilpatch is angry, in fact, I've read that many of them didn't convert and are pleased with this as it removes pressure from shareholders to convert and levels the playing field. Also read that Encana and Sunco were next to convert.

Harper represents all of Canada not just Alberta, and besides who will Albertans vote for federally - the NDP, not likely. As I said, time will tell.

That's a very good point.

The only criticism now of the Income Trust decsions seems to be coming from Calgary oil types. (Bay Street lawyers are too sophisticated to complain in public.) The political optics for Harper in the rest of the country are tremendous. He's not Alberta's man in Ottawa.

The more I think about this, the better it looks. Harper had a reputation for being dogmatic but it's obvious that he's flexible if conditions require it. He's willing to break a promise rather than cause harm to the country.

It also shows that he's also willing to take hard decisions. I'm sure he would have preferred to avoid this issue entirely. Yet, he took it on. The Liberals would have dithered, hoping that an easy out would come along.

It'll wash as well as Mulroney's introduction of the GST. He assumed business would suck it up because it came from the Conservatives.

There is no comparison between the GST - tax people see at every purchase - and Income Trusts which most people know at best from newspaper headlines.

[margrace]

According to the news this morning this is not affecting Harper's popularity ratings at all. Jus goes to show how much clout the rich have.

[Figleaf]

The only criticism now of the Income Trust decsions seems to be coming from Calgary oil types.

!!!! You've somehow missed the thousands of individual investors shouting their anger from the rooftops?

The political optics for Harper in the rest of the country are tremendous.

Tremendously bad. His political dishonesty has been exposed at the cost of $30billion of innocent investors money, including retirees and pension funds. Plus, they've done tremendous harm to the level of trust in our capital markets. We look like Mongolia where the rules change every week.

He's willing to break a promise rather than cause harm to the country.

He's willing to promise anything for short term electoral gain, and doesn't care if that damages people.

[cybercoma]

Plus, they've done tremendous harm to the level of trust in our capital markets. We look like Mongolia where the rules change every week.

Every week?

[August1991]

His political dishonesty has been exposed at the cost of $30billion of innocent investors money, including retirees and pension funds.

I hear numbers of between $20-30 billion being knocked off the market capitalization because of this decision. People seem to think Harper took billions from people. That's not true.

Here's the chart of the TSX Income Trust (Capped) index. The index is roughly back to where it was before the Tories were elected. That's not a devastating loss and I suspect that alot of that growth was speculative anyway. It was certainly risky.

Let's be plain. If you buy a house at $200,000 and then over time, you watch as prices on your street rise to $300,000 only to fall back to $290,000, did you lose 10,000?

It matters if you were the one selling at $290,000 but for everyone else on the street, they still get up in the morning in their house. And of course, someone elsebought one house for $10,000 less.

[Ricki Bobbi]

No, economists can make far stupider moves. Certainly Harper has made stupider moves. For example, thanks to Stephen Harper, on July 1, 2006, the income tax rate went from 15% to 15.5% and this rate now applies for taxable incomes up to $36,378. Raising taxes on those who earn the least in order to help pay for the 1% GST cut is absurd.

Let's be clear on one thing. On July 1st, 2006 the tax rate went from 16% to 15.5%.

The Liberals had *proposed* cutting it to 15% on July 1st. But they didn't win so it was just a proposal. Liberal propaganda that Harper *raised* taxes is flatly incorrect.

[normanchateau]

No, economists can make far stupider moves. Certainly Harper has made stupider moves. For example, thanks to Stephen Harper, on July 1, 2006, the income tax rate went from 15% to 15.5% and this rate now applies for taxable incomes up to $36,378. Raising taxes on those who earn the least in order to help pay for the 1% GST cut is absurd.

Let's be clear on one thing. On July 1st, 2006 the tax rate went from 16% to 15.5%.

The Liberals had *proposed* cutting it to 15% on July 1st. But they didn't win so it was just a proposal. Liberal propaganda that Harper *raised* taxes is flatly incorrect.

Misleading drivel! The lowest personal tax rate was 15% in ALL of 2005 and the first six months of 2006. It went to 15.5% in July, 2006. The 15% proposed rate was already in effect when the Conservatives stupidly raised it to 15.5%.

How absurd to raise the only income tax rate which most affects the poor and least affects the rich.

[gc1765]

Misleading drivel! The lowest personal tax rate was 15% in ALL of 2005 and the first six months of 2006. It went to 15.5% in July, 2006. The 15% proposed rate was already in effect when the Conservatives stupidly raised it to 15.5%.

How absurd to raise the only income tax rate which most affects the poor and least affects the rich.

Yes, you are correct.