HYPOCRITICAL HARPER'S SELL-OUT OF THE WESTERN OIL PATCH

TAX UNFAIRNESS: ENERGY TRUSTS RIPE FOR PICKING THANKS TO TORIES

by Lisa Schmidt,
The Calgary Herald
Published: Friday, April 13, 2007

The Harper government plan to tax income trusts has left Canadian energy trusts "sitting ducks" for foreign takeovers, federal Liberal finance critic John McCallum said yesterday.

Speaking to a town hall meeting in Calgary - where the Liberals hope to capitalize on investor anger in the wake of major stock market losses after the new trust tax was announced last fall - McCallum said the trust tax will contribute to the "hollowing out" of corporate Canada.

"Far from being a tax fairness proposition, which benefits the individual Canadians and make corporations pay their fair share - that's the language - it does the opposite," McCallum told about 200 people. "It makes the energy-trust sector sitting ducks to be acquired by foreigners, which pay no tax. That's not tax fairness, that's tax unfairness and it's stupidity."

The trust tax change affects ordinary Canadians: Liberal finance critic John McCallum.

The new tax rules kick in four years from now, but already many oil and gas trusts and business trusts are openly considering their options, including privatization.

Since the new rules were announced, there have been 12 income-trust deals with total enterprise value of $7.3 billion, according to Canaccord Adams. Of the 12, nine will see income trusts end up in the hands of foreign private-equity shops, foreign corporations, Canadian private equity or Canadian pension funds, none of whom pay taxes in Canada.

A Liberal government would address the trust issue as one of its first orders of business, McCallum said. Instead of the

31-per-cent corporate tax rate, the Liberals would set a 10-per- cent tax on trusts, which would be refundable to Canadians, and continue the moratorium on new trust conversions. "This is not a fat cat corporate issue, this is an ordinary Canadian issue for the one million-plus of Canadians that have a real dent in their life savings," he said.

John Dielwart, chief executive of ARC Energy Trust and a co-chairman of a coalition of Calgary-based oilpatch trusts that have been fighting the tax, said that only a change of government could derail the new rules, which were included in the budget bill last month.