In three short paragraphs – Keith Fountain whips up an “elevator brief”. Upshot: A lot of hard working Canadians just watched $23 billion of retirement funds go up in a cloud of Ralph Goodale’s smoke.
In three short paragraphs – Keith Fountain whips up an “elevator brief”. Upshot: A lot of hard working Canadians just watched $23 billion of retirement funds go up in a cloud of Ralph Goodale’s smoke.
Yep, that about sums up the foresight of the Liberal party: wipe out $23 billion in retirement funds and $9 billion in annual taxes to get $300 million.
Only in Canada, eh? Hopefully.
This issue could prove to be the last straw for the liberals.One of their fear tactics has been to imply that the CPC would reduce seniors pensions (ie.scary).Add heating fuel increases to the equation and the fiscal side of the liberals platform becomes hollow.
Dion = Kyoto. More free taxes; more fiscal chicanery by AdScam Martin’s gang. CP, mouthpiece for Liberals, telling you what you should know/do/who to vote for & etc. Down with the Liberals. Quebec, Quebec, Quebec. >>>>>>>
Quebec fighting for Kyoto cash
By DENNIS BUECKERT
OTTAWA (CP) – Environment Minister Stephane Dion says he is close to agreements with nine out of 10 provinces on how to allocate billions of dollars in Kyoto implementation money.
The lone exception – Dion’s home province of Quebec – is the one sour note in what has the potential to be an important good-news story for the Liberals in what could be the final days before an election. >>>> via cnews
People will punish the Libs for the income trust fiasco. And there’s no way to get that money back before the election. No amount of promised tax cuts, which would never materialize anyway, can undo the harm Goodale’s mouth, with Paulie’s blessing, has done. Funny what will trigger outrage, but this seems to have done it even more than corruption/sleaze/thuggery could do.
Woo! This is verrrry interesting Kate. I hadn’t heard word one about this fiasco, even with my other half being tuned right in to the business news.
Most informative. Thanks!
I really hope the Conservatives hammer this point relentlessly. Overall, it just contributes to the theme that “You cannot trust a Liberal with your money”
I’ve long held that the liberals’ “wonderful performance” on the deficit had little to do with them.
The Tories ruled in times of recession. Furthermore their budget management efforts were constantly undercut by vociferous Liberal, NDP and Media opposition. When Mulroney took office, we were borrowing money every year for program spending as well as for interest on our debt.
By the time Chretien took over, we were headed towards prosperity again, NAFTA was kicking in and the public had finally accepted that something needed to be done about our finances.
The Tories had managed to eliminate the program deficit (not the overall deficit, due to interest costs) and the payments ratios improved dramatically.
I’m pretty sure running some graphs would indicate this. Been meaning to do it for years.
… and my point is that Liberal fiscal management is highly overrated.
(I sold my income trusts about a week before the announcement.)
I generally concur with Mr. Fountain’s “elevator brief”, and I’d rather cut off a pinky than defend a single thing the Lieberals have done, but the income trust issue is somewhat more nuanced than what’s (understandably) presented in the brief.
Income trusts avoid “double tax” because they are intended to be “flow-through” vehicles – that is, any income generated is not retained in the trust, but paid out annually to unit holders. Because unit holders have to report and pay tax on these “flow-throughs” annually (unless they are a tax-deferral entity like an RSP or pension fund), an argument exists that they are LESS appealling investment vehicles from a tax perspective than others.
While it is true that income trust units can be held in an RSP, there have always been restrictions on the extent to which pension plans can invest in income trusts. These restrictions had less to do with muddled Lieberal fiscal policy than with legal uncertainty as to whether unit holders enjoyed the same “limited liability” vis a vis the activities of the income trust as did shareholders of a corporation. I believe it is this latter issue that has been a significant, if certainly not the only factor leading to the current review of the rules.
Again, my point isn’t to defend what Gooddale and the rest of Little Paul’s sycophants are doing, but to provide additional context.
A provincal 10 year bond came out yesterday with a yield of 4.347%. Compare that with a high quality trust yielding 10%. Trusts have allowed many seniors to live on their investment income without having to dip into their capital. At the end of the day the feds may put some restrictions on new trust issuance, but I fairly certain that existing structures will be left alone. One must consider the amount of trust income that is collected, monthly, in Toronto. Hard to win an election when you impoverish your base.
Great walls of fire note and the original “elevator brief” are very good descriptions of a subject a little arcane for the average person. Investment co’s have pushed this vehicle however it is not for every person. Unit trusts because of their flow thru generate their cashflow to the unit holder – assuming they are profitable – however that denies the co. growth and investment potential. If you are more interested in capital gains this is not as good. Most seniors looking for a steady income flow better than bonds or GIC’s have a mixed portfolio of trusts to avoid all eggs in one basket mess.
I’ve read too much recently, from various sources about some of the various problems associated with trusts. I’m not entirely convinced that they’re the right investment vehicle for seniors on a small pension. A 10% return sounds great in theory, but the reality is at a certain age you don’t invest in something whereby you could see your nestegg disappear.
I think the government or the appropriate Securities Commissions should look closer into the entire Income Trust sector, not to get their grubby hands on the revenue, but to make sure that it’s being properly regulated and all investors are properly protected.
I don’t understand why Conservatives are so supportive of what amounts to a tax loophole.
Yes, you’re right Jason. After all, more taxes equates to a better standard of living right? I guess the only question would be; for who? I guess the Liberals alone. Y’know, its OK to kill any investment in Canada, because the government will always be there to pay your way.
*SIGH* Are Canadians this blinded by our oppressive taxation/government system that we defend the governments closing of a investment vehicle that makes the average Canadian some money? Note that I have not said I agree that this is a “tax loophole.” I would say a tax loophole is one where you pay out say 1000 bucks and get 2000 bucks in tax credit.
We should all get Royal Bank daily interest saving accounts. I think its about 1.75% annually now. And no nasty “loopholes”.
PMPMs doctors’ private clinic is an income trust. Read it this morning in the Calgary Sun.
Jason,
Like many investment vehicles the trusts are more nuanced than could be presented on any blog. Since you choose to go the simplistic route of calling them “tax loopholes” let me explain why this Conservatives supports the basic premise of the trusts.
Big Co. X makes a profit is taxed on said profit and then distributes via dividends to shareholders the after tax profit who are the taxed again on their profit.
Same pre-tax profit, Income Trust X didtributes the pre-tax profits to investor who pays the tax on their distrbution.
Same profit, taxed once not twice.
As I said, a simplistic view, it is more complex than that but while we should all pay our FAIR share of taxes, taxing the same income twice UNFAIR, though I realise that is the Canadian way
Trusts units do not use a loop hole. They simply pay the dividend tax as per the Gov.ruling (on trusts ) once instead of twice as you do with stock div..
I understand how they work. I had to do some research on them for a lawyer once. I also understand that Conservatives want taxes lowered. However, the income trust is not something that is available to all. It is a “loophole” because it is a way to avoid the tax rate that others pay. If you want lower taxes, then argue for it. If you want to let some pay lower taxes than others for no good reason, then fight for income trusts.
Sorry Jason,
you are wrong, a loophole would imply tax is leaving the system. No tax is leaving the system; it is being paid once, by investors in the issuer rather than by the issuer and the investors under a corporate structure.
Trusts are owned by about 3 million Canadians and employ about 250,000 Canadians and have been around in one form or another since Economic Investment Trust Limited in 1928. Trust Paid about $16 billion in distributions to investors in 2005 and represent about 10% of the TSX.