Stop the

Submitted by

Ken Boshcoff M.P.

This past Halloween marked the one year anniversary of the Conservative government’s decision to levy a 31.5% tax on income trust. Many Canadian investors, including large numbers of retired seniors, actually invested their savings in the income trust market because Stephen Harper had explicitly promised over and over not to tax them. He even wrote it directly into his election platform.

Ten months after being elected, Stephen Harper broke that promise resulting in the destruction of $25 billion of investors’ wealth in a single day. The majority of these were not slick savvy investors but ordinary Canadians who relied on their income trust distributions for their day to day necessities.

But that is only the beginning of the story. The Canada Pension Plan had been invested in large sectors of the income trust market and has lost $158 million on those holdings since Halloween 2006. And then of course there is the story of takeovers.

In the weeks following the broken promise, Liberal Members of Parliament began to warn the government that this sudden attack on the value of income trusts made them sitting ducks for hostile takeovers by large private equity firms. These firms can use a variety of tax write offs and as a result tend to pay very little, and often no taxes, to the government of Canada. At the time the government dismissed this as fear mongering.

And yet one year later roughly 15% of the income trusts have been bought out, mostly by foreign companies and private equity firms - a total of $37 billion dollars in market value.

The end result of Harper’s broken promise is that ordinary Canadians have lost significant chunks of their life savings. They no longer have access to this high yield investment vehicle but huge private equity firms can now buy the trusts assets outright and pay little to no tax in Canada. And he calls this “fairness.”

Under the Liberal plan, the moratorium on new income trusts would continue, however the government would be open to representations from sectors able to prove their suitability to the income trust structure.

We believe that this policy provides true tax fairness for Canadians, for corporations and for the federal and provincial governments. Canadian investors would recoup much of their losses caused by the Conservative government’s actions and would continue to benefit from the high-yield vehicle that many have come to rely on. The proposal would also help level the tax playing field between income trusts and corporations, another of the reasons the Finance Minister cited explaining his disastrous decision.

I will continue to work with my colleagues to educate the Finance Minister on more appropriate alternatives to ensure tax fairness for Canadians.