Income Trusts

[madmax]

You don't know her but you are willing to take her word at face value only when it supports your viewpoint?

Actually now that I reread your comments.

CPC says they support income trusts before election. CPC eliminates them after election

Women says she lost $70,000.

People can decide who has more credibility. The Government or the women.

[madmax]

Yeah, whatever Ralph...

Your going to tell me you never voted for him?

[madmax]

His big screw up with Income Trusts was making the promise in the first place.

Guaranteed, nobody will campaign on reversing the issue.

Real, Canadians who *aren't* blind partisans will give him a pass.

There truly was too much revenue being lost by conversions. Hard to argue with someboy who breaks a promise because keeping the promise isn't in the best interest of the electorate as a whole.

The NDP were correct?

or

Someone isn't completely informed on the tax revenues lost To income trust conversions?

Has Flaherty proven that breaking the promise is in the mass electorates benefit?

[hiti]

So Jimmie is using the monies paid to RRSPs and RIFs as justification for taxes lost from Income Trusts.

Just like he is using the Canada Pension Fund as part of his government assets to offset the net debt.

What an amateur we have as Finance Minister. Flaherty may be a lawyer but he knows absolutely nothing about finances. He f***ed up Ontario and now he is doing the same to Canada.

[Ricki Bobbi]

Has Flaherty proven that breaking the promise is in the mass electorates benefit?

Bay Street and the financial media agree with the wisdom of the reversal.

Is that proof enough for you?

Probably not, but then again how could he prove it to you?

John Ibbitson said it best about why the income trust story will peter out very quickly.

The coalition lobbying against income-trust taxation consists mostly of energy companies and income funds, and those most affected are relatively affluent investors who were playing the market. These are not the most sympathetic campaign allies.

Where do you fall within that group?

[geoffrey]

Ricki, that's ridiculous. Any independant report shows that taxing trusts hurts the Canadian economy and there has NEVER been published info on any tax leakage.

I've got my side of the argument backed up with independant expert evidence. Where's your evidence of all this leakage and economic damage and Bay Street wholeheartedly agreeing?

Flaherty is taking you for a ride and your willingly paying the toll.

[hiti]

So now we know that Jimmie lied or is just incompetent.

Flaherty contradicted by his own department on trust tax-leakage methodology

Quote; The confusion arose after Dennis Bruce, vice president of economics consulting firm HDR/HLB Decision Economics, testified to the house of Commons Standing Committee on Finance that the department's tax-leakage estimates were “sharply overstated.” His company's analysis, which he said used the same basic methodology as the finance department, found that 2006 federal tax leakage from trusts was about $164-million, not $500-million. Further, as a result of other legislated taxation changes for future years, the leakage in the future would be only $32-million annually. -end quote

Wonder if Jimmie figured in the taxes that Telus would not be paying if they became an IT? Especially since Telus hasn't paid taxes for the past six years and is now restructuring so they don't have to pay any taxes now or in the future.

Jimmie was incompetent in Ontario and he is still incompetent.

[Ricki Bobbi]

I've got my side of the argument backed up with independant expert evidence. Where's your evidence of all this leakage and economic damage and Bay Street wholeheartedly agreeing?

Yaaaaaaawn.....

David Dodge (Governor of the Bank of Canada - as independent as you get) spoke on the Income Trust issue today.

Link

Supportive of the Government move.

Seems to me like the Governor of the Bank of Canada is a little more independent than an accounting/consulting firm looking to make money helping companies conver to trusts. Or am I missing something.

Geoff re-focus the anger. Trusts are gone. Ain't comin' back.....

[Saturn]

Whatever the case, income trusts were causing the government to lose tax dollars and the problem was going to get worse as more companies decided to convert to income trusts. On top of that, the Conservatives need the money for income-splitting, the UCCB and other beer and popcorn initiatives.

Closing the income trust loophole was the right thing to do and should have been done years ago. I fully support Flaherty on this one but the fact that the Conservatives did it in the most damaging idiotic way possible is - well, that's a whole other story. Now the damage is done and there is no way to reverse it, so it's time to put this issue to bed. The two good lessons that can be learned from this are that 1) you shouldn't put all your apples in a tax loophole and 2) never, never trust a politician even if you worship him - the CPC are politicians too.

[Ricki Bobbi]

The two good lessons that can be learned from this are that 1) you shouldn't put all your apples in a tax loophole and 2) never, never trust a politician even if you worship him - the CPC are politicians too.

I can't think of a poltician I have worshipped, ever....

[jdobbin]

Flaherty has been receiving death threats since making the income trust change.

http://ca.news.yahoo.com/s/reuters/canada_...rty_threats_col

[Who's Doing What?]

I can't think of a poltician I have worshipped, ever....

...except for the current PM.

[Who's Doing What?]

Flaherty has been receiving death threats since making the income trust change.

http://ca.news.yahoo.com/s/reuters/canada_...rty_threats_col

Holy crap $20 billion was lost!! I didn't think it was anywhere close to that much.

No wonder he needs security.

[geoffrey]

Yaaaaaaawn.....

David Dodge (Governor of the Bank of Canada - as independent as you get) spoke on the Income Trust issue today.

Link

Supportive of the Government move.

Seems to me like the Governor of the Bank of Canada is a little more independent than an accounting/consulting firm looking to make money helping companies conver to trusts. Or am I missing something.

Geoff re-focus the anger. Trusts are gone. Ain't comin' back.....

Read the article carefully.

He says it levels the playing field. Sure it does. I don't dispute that, non-trusts and trusts are now more equal. But placing a tax on all oil companies would do the same. Increasing taxes on profitable companies would of course make them less profitable, less productive and more in line with lesser profitable companies.

All in all the tax leakage has never been proven, and the productivity gains are obvious in every study. Access to capital to invest in R&D and capital expenditures is huge with a trust structure.

PwC is rather independant on this one I'd think too... sure they make money in consulting on trusts, but they also make money consulting on tax (far more actually). So really, it's money in the bank either way.

Dodge says that $20b to $25b has been lost by investors, but likely recouped by governments. Are you ok with that Ricki? Are you ok with increasing the tax burden by $25b??? I thought we were for tax cuts, not increases??

We needed to address the imbalance between structures by reducing corporate taxes enourmously, kind of like the Liberals tried to do unsuccessfully previously (due to their own straddling the fence). Instead, the CPC ignored the problem with Canada's lackluster productivity and investment... and took away the most promising development in both regards.

It's extremely contrary to the business community's well being in Canada.

--

Oh and since you don't believe me that most of the financial industry is on my side:

http://www.caif.ca/content/IncomeTrustsTax.Fortin.pdf

http://www.billcara.com/BMO%20Dec%204%2020...me%20Trusts.pdf

And an interesting paper from Fortin that shows how the new tax by Flaherty will both reduce government income and reduce our economic productivity:

http://www.caif.ca/content/TaxLossRecipe.Fortin.pdf

--

The idea was terribly concieved, poorly researched and 100% politically motivated. It's disgusting. I also encourage you to again try to find some independant research that supports the decision.

It's also understandable why this is a non-issue in the media and why so many people just blindly accept the 'facts' presented. It's so far above the head of the average Canadian that they don't bother to understand it. It must be true, the Finance minister says so, and I'll never understand an Income Trust enough to support them or otherwise. That's the situation. It won't be an election issue because the Liberals have not much of a better record on the matter and they can't educate the entire population in a month or two.

[madmax]

All in all the tax leakage has never been proven, and the productivity gains are obvious in every study. Access to capital to invest in R&D and capital expenditures is huge with a trust structure.

I have to agree with the above. I can easily find tax leakage in other areas. While there is a major concern with regards to income trusts, I haven't seen the proof. I have seen the fear of the government wondering what will happening when others followed suit in the income trust parade.

Dodge says that $20b to $25b has been lost by investors, but likely recouped by governments. Are you ok with that Ricki? Are you ok with increasing the tax burden by $25b??? I thought we were for tax cuts, not increases??

Ricki votes for the party, they determine the policy or the platform. Its a one track voting pattern, with no possible options. So if the party says NO, then it's good, or if the party says YES, then its good. Trust is put in the party. Unfortuneately for some whom actually put their money behind the parties words, they are out alot of cash.

We needed to address the imbalance between structures by reducing corporate taxes enourmously, kind of like the Liberals tried to do unsuccessfully previously (due to their own straddling the fence).

Certainly sounds like a Conservative principle.

Liberals Straddling the fence sounds Liberal

Instead, the CPC ignored the problem with Canada's lackluster productivity and investment... and took away the most promising development in both regards.

I think this is the killer. Productivity and investment in Canada is declining. This is a problem that needs to be addressed and it is more serious than many Canadians understand. I find many of these arguments with regards to income trusts to be beyond my scope without a lot of research to be quite frank. However,There needs to be a way to encourage more foreign investment in Canada. Without the investment, you won't see the productivity.

But the CPC flip flop, did more damage to the above problems then Liberal inaction or NDP opposition to Income Trusts.

The idea was terribly concieved, poorly researched and 100% politically motivated. It's disgusting. I also encourage you to again try to find some independant research that supports the decision.

I was very surprised by the speed at which the decision was made. If it was politically motivated, then CPC strategists, must be gambling that the fallout from CPC voters and income trusts investers will be lower than the gains made by swaying people from other parties into the CPC tent, with this announcement.

I don't know if that was the intent or not.

It's also understandable why this is a non-issue in the media and why so many people just blindly accept the 'facts' presented. It's so far above the head of the average Canadian that they don't bother to understand it.

I agree with this statement. Regardless there are intelligent business/corporate advisors and strategists within the CPC like any other party. These people would have been the voices behind the Party Platform to not touch income trusts. What happened to their voices?

[geoffrey]

I was very surprised by the speed at which the decision was made. If it was politically motivated, then CPC strategists, must be gambling that the fallout from CPC voters and income trusts investers will be lower than the gains made by swaying people from other parties into the CPC tent, with this announcement.

I don't know if that was the intent or not.

No doubt. Quebec loves it when governments go after the oil companies, regardless of the cost to Canada. And since Income Trusts (outside of reality, which isn't being taxed) are mostly resource based, Quebec was supposed to be just howling over this and all run and vote CPC. It didn't turn out that way apparently.

It's also understandable why this is a non-issue in the media and why so many people just blindly accept the 'facts' presented. It's so far above the head of the average Canadian that they don't bother to understand it.

I agree with this statement. Regardless there are intelligent business/corporate advisors and strategists within the CPC like any other party. These people would have been the voices behind the Party Platform to not touch income trusts. What happened to their voices?

It was overwelmingly shut out by the idea of making quick gains in Quebec.

One thing behind the CPC getting away with this, especially in a very Liberally dominated media environment, is that the journalists can't understand the concept either.

Beyond that, there is already work and some development of a new system of lending that would tie equity and debt into a single instrument and have the debt portion paid out at some every changing interest rate. Essiential same idea, company writes off this massive 'interest expense' and the shareholders get money out of the company without double taxation.

So the government can't win. We'll always be a step ahead with things like this. But instead they took a competitiveness and productivity increasing measure off the shelf. Now it will be replaced by measures to escape our unreasonable tax burden that are less certain to produce real results for Canadians.

When you look at this decision objectively, you realise it was pretty piss poor all around. Flaherty should resign. I could list a dozen other ways how he's shown his imcompetence in the portfolio.

[Saturn]

I was very surprised by the speed at which the decision was made. If it was politically motivated, then CPC strategists, must be gambling that the fallout from CPC voters and income trusts investers will be lower than the gains made by swaying people from other parties into the CPC tent, with this announcement.

I don't know if that was the intent or not.

Mr. Flaherty had to find the cash to offer income-splitting for seniors. He figured that far fewer seniors would lose from taxing income trusts than would benefit from income splitting, so overall he made a lot more people happy than unhappy. In addition to the income trust loophole should have been closed years ago and it had to be done eventually. Those who claim that income trusts were not a significant leak on tax revenues and did not have a negative impact on capital markets, well, have another drink!

[Fortunata]

Regardless of opinion of whether it was a necessary thing to do or whether you think it is a backwards step the fact remains it could have been done differently so there was not the damage done to persons depending upon that income. Moratorium placement, loopholes closed, discussion with financial experts from both sides .... Flaherty when pressed in committee wouldn't even answer the question whether or not the government had advice on this. There is always more than one way to skin a cat.

[geoffrey]

Those who claim that income trusts were not a significant leak on tax revenues and did not have a negative impact on capital markets, well, have another drink!

Any evidence of that claim?

I've produced academic and industry sources that say otherwise. So let's see your facts behind that?

[Saturn]

Those who claim that income trusts were not a significant leak on tax revenues and did not have a negative impact on capital markets, well, have another drink!

Any evidence of that claim?

I've produced academic and industry sources that say otherwise. So let's see your facts behind that?

It's pretty simple. ITs and corps compete in capital markets and favourable tax treatment for ITs means they had an unfair advantage over the corps. A level playing field is necessary for capital markets to function efficiently. ITs became such a popular investment (and corps were converting to ITs) precisely because of the tax leak. If it wasn't for the tax leak, ITs wouldn't exist in the first place.

[Who's Doing What?]

Explain how there is this "big tax leak" when people who invest in IT's are paying taxes on the income that is generated by the IT's?

The money paid to the investors is the same money that would fall under corporate profit is it not?

[madmax]

Explain how there is this "big tax leak" when people who invest in IT's are paying taxes on the income that is generated by the IT's?

The money paid to the investors is the same money that would fall under corporate profit is it not?

That is my take on it. But I am just learning about income trusts.

What I do find interesting is that Ricki Bobbi and Saturn are arguing the same point. I do think h*LL is freezing over.

What I am concluding is that Jim Flaherty did this about face in short order. I don't think that was fair to the proponents or the investors. Certainly a debate of some sort would have allowed for people to have a better understanding of what direction our country should be going with regards to taxation and income trusts.

[Riverwind]

Explain how there is this "big tax leak" when people who invest in IT's are paying taxes on the income that is generated by the IT's?

The 'tax leakage' shows up in two ways:

1) Foreign investors don't pay taxes in a Canada and the withholding tax rates are much less than the corporate tax rates. These withholdings rates also cannot be increased easily because they are set by international tax treaties.

2) Investors who hold trusts in their RRSPs defer taxes to the future which reduces gov't revenues today.

The rules on income trusts had to be changed. If people really believe that the gov't should reduce taxes on corporations then they should be calling for taxes to be reduced on all corporations. Giving a complete exemption to a single corporate structure is simply dumb.

[Who's Doing What?]

Explain how there is this "big tax leak" when people who invest in IT's are paying taxes on the income that is generated by the IT's?

The 'tax leakage' shows up in two ways:

1) Foreign investors don't pay taxes in a Canada and the withholding tax rates are much less than the corporate tax rates. These withholdings rates also cannot be increased easily because they are set by international tax treaties.

2) Investors who hold trusts in their RRSPs defer taxes to the future which reduces gov't revenues today.

The rules on income trusts had to be changed. If people really believe that the gov't should reduce taxes on corporations then they should be calling for taxes to be reduced on all corporations. Giving a complete exemption to a single corporate structure is simply dumb.

How much is the tax loss is to foreign investors?

Does it offset the taxes generated by the additional R&D fueled by IT investment?

RRSP's are still taxed eventually. Really, why would it matter what form of investment the RRSP was? Why single out out IT's for taxation?

[Riverwind]

Why single out out IT's for taxation?

You are missing the point: income trusts were given a special break that put non-income trust companies at a disadvantage. Taxing income trusts levels the playing field and brings some sanity to the tax policy in this country.

If you believe that lower corporate taxes is good for the economy then you should be calling for the reduction or elimination of taxes on _all_ corporations. It makes no sense to demand that income trusts be given a special tax exemption.