HARPER WRONG TO TAX TRUSTS -- GREEN PARTY

TAXING INCOME TRUSTS A TORY MISTAKE, SAYS GREEN PARTY

OTTAWA – The Conservative government’s decision to tax income trusts has left seniors and many other Canadians in the lurch despite knowing that adhering to a budget is a major concern for pensioners.

The Green Party of Canada believes Minister Flaherty's decision was not only a promise broken, but lacked any evidence to justify the decision. In other words, the case for "tax leakage" was full of holes.

More than one million Canadians invested in income trusts following the 2006 Conservative campaign promise to leave income trusts alone. The Conservative’s hasty and contrary decision to then tax income trusts led to an exaggerated devaluation of this type of investment. In many cases seniors lost their entire retirement savings within hours as part of the overall $30 billion loss to individuals.

Green Party Finance Critic, Peter Graham, expressed disbelief at the careless attitude demonstrated towards senior citizens and many other Canadians. “These trusts were already taxed when dividends were paid out to individual investors. The government’s sudden decision to levy another tax on these funds that hold investors legally liable was reckless and inconsiderate. I’m sure they knew what the effects of this tax grab would be.”

In addition, and according to an April 2007 CIBC World Markets report, the new tax structure has the further effect of taking investments out of the hands of individuals and putting it into the hands of large cap foreign equity firms who will pay little or no Canadian tax.

The report states: “It is now quite obvious that trusts taken private will in all likelihood adopt capital structures that recreate the tax position present in the trust prior to the October 31st tax changes. The likely effect of trust taxation reform, therefore, will not be to reduce tax leakage, but rather to transfer the benefits of a tax-advantaged capital structure from small individual investors (largely Canadian) to large, sophisticated institutional pools of capital (largely foreign).”

The Green Party is calling for the government to redress the significant damage done to Canadians and adjust tax rates in light of that error and ensure foreign holders of trusts are taxed at a higher rate.

“It seems to me the Conservatives have a lot to learn about responsible governance, in a corporate and political sense,” said Graham.

Contact: Camille Labchuk

EMAIL: clabchuk@greenparty.ca

http://www.greenparty.ca/en/www.greenparty.ca/en/releases/10.04.2007