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Tuesday, September 23, 2008

Will Dion rescue income trusts?

Stéphane Dion has announced that he would eliminate the tax on income trusts. He would replace it with a 10 per cent levy—refundable to Canadian investors but not foreign residents. The replacement tax is estimated to generate $1 billion over four years, and is expected to restore some of value lost by the trusts when the Conservative government broke an pre-election promise and implemented the tax.

The Stephen Harper government imposed the 31.5 per cent tax—which will not take effect until 2011—because Telus, BCE and others had indicated they would convert to the income trust structure—income trusts don’t pay corporate taxes, but distribute all their taxable income to unit holders.

Income trusts appeal to investors like retirees because they are a good source of monthly income. Many of these will probably welcome the Liberal plan.

When the Conservatives announced they were going to tax the income trusts, it was a very unpopular move. But most observers believed it was necessary because the move to the income trust structure by so many large companies would have resulted in a significant loss of revenue for the Canadian government.

Chances are, the Grits will arrive at a similar conclusion once they get another chance to balance a federal budget. and so I'd not advise seniors to hold their breath waiting for the Grits to cancel the tax.

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  1. This is another Dion tempest in a teapot like the arts funding one-minute-wonder. This clown's hypocricy is overwheming. On one hand he whines about Stephen Harper and his 'friends in big oil' while he turns around to stick it to the taxpayer to help out his friends with big incomes. How many average working guys and gals have enough cash to invest in these income trusts in sufficiently large amounts so as to make it worthwhile. I sure don't know any.
    I suspect it's simply a bone to 'Juicy" John McCallum who has had his tail in a knot ever since the Tories did their about-face. I suspect old 'Juicy' either stuck a whole bunch of his taxpayer salary into these companies or advised his wealthy cronies to do the same.

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