CAMBRIDGE TIMES QUESTIONS HARPER TRUST INITIATIVE

FINANCE MINISTER DEVASTATING SENIORS
-- Yet No Basis For Vicious Attack On Income Trusts!

The Cambridge Times
Mar 8, 2007

By John Power

I am reminded on a daily basis, every time I check my financial position on my computer, of the devastating effects of the Finance Minister's Halloween announcement on income trusts.

The rationale for this move was that Telus and BCE were about to apply for income trust status and the government could not afford the tax loss. Subsequent inquiries revealed that neither company was paying significant corporate tax to the government before deciding to become an income trust (and neither will pay any tax in the immediate future even though both have chosen to retain their conventional corporate structure and not convert to income trust status).

As the parliamentary hearings and debates on income trusts continue, the opposition parties are experiencing difficulty in obtaining the financial figures upon which the finance minister based his original decision. So far, he has not released any evidence that backs up his contention that the government was experiencing tax “leakage” (loss of tax revenues) because of income trusts.

Certainly his feet need to be held to the fire on this issue.

However, the effects of the Finance Minister’s actions, on seniors, are more crucial, since many investors lost hard earned dollars which they had invested in legitimate Canadian companies based on the Harper election promise that income trusts would not be touched.

With few exceptions, seniors are no longer employed or running businesses -- so our loss, as a result of the government’s irresponsible actions, is a permanent and lasting one. Also, since our incomes have been lowered, any so-called benefit for tax relief is of absolutely no value to those holding income trusts.

The Prime Minister promised to “protect seniors” and “NOT tax income trusts.” Now his government has broken that promise and caused irreparable financial harm to those Canadians who believed that promise and continued to buy and hold income trusts.

In the Enron scandal, senior executives who misled their shareholders paid a high price, including jail time.

In Canadian politics, it seems, one can misrepresent all kinds of financial matters and they are usually rewarded in some manner. Where does the PM’s much ballyhooed Accountability Act come into play? Or is this act exempt from such obligation?

How much advance consideration was given to this decision? Or was it just a improvised effort to destroy the income trust sector?

Why not limit the time frame a company could use the income trust structure to say 10 years, allowing the company to start up, and solidify its market and products, before it had to start paying corporate taxes?

Or, why not put a financial limit on the size such firms could grow to, and still let the income trust sector live on?

I'm certain there are a number of other solutions that would have satisfied the government’s purported aims (to stop further conversions of Canadian companies to income trusts strictly for tax benefits) and still have benefited trust investors, particularly seniors. But the more one follows the Commons hearings and debates on the income trust issue, the more one realizes that this Finance decision was hastily arrived at on the back of an envelope.

If the Conservatives expect the support of seniors in the coming election, major adjustments to this initial trust tax proposal of the Finance Minister's will be required -- not the inflexible stance he is presently taking.