Thursday, April 12, 2007

HARPER'S ODOROUS SELL OUT OF CANADA!

TRUST FIASCO HELPS HOLLOW OUT CANADA

by George Kesteven,
Financial Post
Published: Thursday, April 12, 2007


Last week, Finance Minister Jim Flaherty was quoted as saying that the current sale of income trusts to foreign entities and private-equity buyers was "not something that has to do with a particular tax policy." After months of staunchly defending his policy on income trusts, the Finance Minister ducked as the long-term impact of his plan began to emerge.

Is this how Mr. Flaherty demonstrates accountability to Canadians? With Parliament about to take up income trust legislation, the time has come for a reality check at the Department of Finance.

The Conservative government deliberately went ahead with its punitive tax on the distribution payments of income trusts despite repeated warnings from financial analysts, investors, opposition politicians and income trust executives about the devastating impact the new tax would have on this vital economic sector.

It was also pointed out to the Finance Minister that the Conservative policy could push trust assets into other accepted corporate tax structures -- domestic or foreign -- that would generate less revenue for federal and provincial governments. Now these warnings have come true and the government denies any fault.

The fallout from the government's proposed tax on income trusts was clear and immediate. The Toronto Stock Exchange recorded its biggest loss in more than two years the day after the income trust tax was announced. Within three days, more than $25-billion of capital had been erased from Canadian financial markets. Trust valuations were reduced, access to capital was cut off, and opportunistic acquisitors began to circle the trust sector like vultures. The editorial pages of leading newspapers began sounding the death knell for the income trust sector within a week of the tax being announced.

But now, as a growing number of income trusts fall into foreign hands and the hollowing out of Corporate Canada escalates, the Finance Minister has the audacity to tell the national media that the loss of Canadian income trusts "is not something that has to do

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