The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
Income Trusts and Other Trusts As we approach the end of the tax year, thoughts may again turn to the income trust episode, which, you'll recall, was beaten to death by the press. In the opinion of many, the move to tax income trusts was a "tempest in a teapot" and something the government had to do to save us all from excessive personal taxation not far down the road. Income trusts are securities that trade on the market like all stocks but don't (until 2011) pay corporate taxes. They pay their income to shareholders, who in turn pay personal taxes at their regular rate. These trusts make up about 11 per cent of stock exchanges, but there was a grave danger that huge and profitable corporations like Telus and BCE were going to convert to trusts and cost the federal treasury millions. Finance Minister Jim Flaherty made a swift and secretive announcement to tax income trusts as regular corporations, giving existing trusts four years before being taxed, while new trusts will pay right away. His Halloween bombshell angered the trust companies and their investors, who had been earning a cushy 9 per cent compared to 1-3 per cent (or less) that many of us had been making. A lot of the big oil companies in Alberta begged for an exemption for the oil patch, which of course they did not get. Ralph Klein backed Flaherty, noting that the untaxed trusts had cost the Alberta treasury millions. On paper, many seniors lost money but were abated by the government's adding of $1,000 to their tax credit, retroactive to last January, and allowing income splitting on pension revenue, which should save seniors many dollars. The trust industry tried to mobilize seniors and their organizations to threaten the Tories and have Parliament change the plan, but groups like CARP thanked the government. Why shouldn't they? Seniors are taxpayers, too, and they along with working families would have been paying more if the trusts had their way. The Liberals, of course, objected. They demanded the Harper government apologize for breaking a pre-election promise to leave the trusts alone. This coming from a party that invented breaking election promises. Remember the pledge to wipe out the GST? It was broken without even a hint of an apology. Flaherty rejected the Grits' pathetic argument and lambasted former finance minister Ralph Goodale for his musing on the trust issue during the election campaign. Michael Ignatieff said it was a "bait and switch tactic," revealing his lack of economic knowledge. Iggy also refused to answer reporter's questions about how he would have handled the issue. The Bloc and NDP supported the Conservative position, leaving the Liberals alone to object. Many Canadians, including this writer, have found a vast majority support the government on taxing the trusts Ð even those who lost money on paper. We also know that the real estate trusts or REITS were exempted from the new taxation. And as mentioned, seniors, whom the Liberals claimed lost a lot of money, will for the most part save money because of their new exemptions and the income splitting. Good for Jim Flaherty for not backing down! When should a politician's word be kept? How about the trustworthy example of Winnipeg Centre MP Pat Martin. Martin, a New Democrat and self-proclaimed expert on ethics, has been known for his occasional outbursts toward those who oppose gay marriage, and others. The former labour leader represents one of the poorest ridings in Canada, and the most crime-ridden. When Justice Minister Vic Toews brought in his tough-on-crime bill, which would have ended a lot of house arrests and conditional sentences and sent more hardened criminals to jail, Martin unconditionally supported it vocally. When the bill was weakened by the all-party committee, ostensibly to keep more people out of jail, Martin admittedly went back on his word, for which he was soundly lambasted by Winnipeg Sun writers and others. Martin had no explanation, but he was obviously convinced by his NDP colleagues to change his mind. Toews was saddened and astounded by the softening of the opposition, who had expressed a need to get tough on crime. What Vic needs is a majority government. We are rapidly heading to the year 2007. I hope that all readers have a happier and healthier year than 2006. Happy New Year! Roger's Right Corner runs Wednesdays.
