Possible Victory For Canadians and Canadian Income Trusts Investors
Liberals say change income-trust tax level and help investors
OTTAWA (CP) – Drastically cutting the tax on income trusts and making it refundable to Canadian residents could help investors recoup two-thirds of the billions they lost when the government announced its plan to tax the trusts last fall, the Liberals said Tuesday.
Liberal Leader Stephane Dion and finance critic John McCallum, a former bank economist, said their plan would help revitalize the income-trust sector and help thousands of investors who saw billions of dollars vanish in the wake of the government’s Oct. 31 announcement.
They said the 31.5 per cent tax imposed by the Conservatives should be replaced by a 10 per cent tax refundable to Canadian residents.
This, they said, would make up for the tax “leakage” lost to federal coffers, while restoring as much as two-thirds of the estimated $25 billion lost in the wake of the tax announcement.
They said the government should maintain a moratorium to prevent further expansion of income trusts.
Dion said the government should have taken care to protect investors when it reneged on its election promise and imposed the tax on income trusts.
“The government broke a promise and imposed a radically higher tax that resulted in a $25-billion blow to the savings of hard-working Canadians.”
McCallum called the tax a “destructive” decision.
Finance Minister Jim Flaherty has said the tax was needed because income trusts were escaping normal corporate taxes, leaving ordinary Canadians to take up the slack. The trusts were also spreading and the country risked becoming “an income-trust economy.”
But McCallum said it was wrong to respond to corporate demands for a level tax playing field by “blowing away” the savings of ordinary Canadians.
“Rather than considering what is best for Canadians, the prime minister simply decided that he was going to put an end to the income trust sector,” McCallum said.
“After hearing from dozens of expert witnesses we have developed a proposal that is fair to Canadian investors, to corporations and the income trust sector as well as federal and provincial governments.”
While the Liberal plan may be attractive to investors contemplating their battered portfolios, it may have trouble getting through the Commons. The NDP have supported the government decision on income trusts and together they have enough votes to ensure its passage.
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