Comments on: The Income Trust Saga Ain’t Over Yet

By: Canadian Money Blogs Reviewer

Canadian Money Blogs Reviewer — Thu, 18 Jan 2007 03:22:47 +0000

Phil: I might be wrong here, but I think one negative tax consequence (from the government point of view) is that foreign investor were obviously not paying income tax (minus a 15% withholding tax) so some money was “escaping” the government …

By: Phil S

Phil S — Wed, 17 Jan 2007 20:47:58 +0000

To Jon. But that’s exactly my point. The theory is that the income is taxed in the hands of the unitholder, not the corporation. Companies that are organized as sole proprietorships and limited partnerships have always operated in this manner – the proprietor or partner claims the business income as their own personal income.
So, where taxation is concerned, an income trust is really just the same as a limited partnership. So, income trusts are not any more exempt from tax than a sole proprietorship or a limited partner in, say, your corner neighbourhood restaurant is.
There is, however, a large legal difference between an income trust and a limited partner, but where the CCRA is concerned, the two are the same.

By: 0xcc

0xcc — Wed, 17 Jan 2007 17:02:21 +0000

It seems to be official now. The hearings will start Feb 2.

By: Matt

Matt — Wed, 17 Jan 2007 16:59:49 +0000

If the conservatives thought that the income trust tax they levied would simply go away is sheer silliness. To make the decision to tax income trusts had such a large financial impact that I am surprised that foreign investors haven’t done more to fight it including suing the canadian government though I’m not entirely certain how they would go about that.

The decision was very shortsighted in my opinion and one that will probably become a very hotly discussed issue during the next election.

By: Jon D.

Jon D. — Wed, 17 Jan 2007 16:35:19 +0000

I don’t like the idea of a corporation or trust getting a free pass on taxes while the average worker pays through his/her nose. I also don’t like how corps are taxes on income, then the shareholder is taxes again on those dividends regardless of the “magic bean” enhanced div. credit.
Clearly the tax system for capital markets is and has been broken for many a year, and corps and investors have been playing the system as best can be to minimize tax liabilities. Such as Telus or whomever taking over another company for tax credits to reduce taxes, why is it when I married my Wife and “assumed” her student loans I couldn’t “write off” my income?

By: Phil S

Phil S — Wed, 17 Jan 2007 13:29:52 +0000

We obviously cannot rely upon our government who appears to have manic-depressive tendencies in everything they do. So, I’ve personally been hedging my income trust position by taking long positions in investment banking and private equity firms. I think they will be the beneficiaries in the event of the death of income trusts.
As for what the government will do, who knows? But if I were a betting man, I don’t think any of the opposition parties are really willing to make a stand in favour of income trusts, as they have all bought into the grossly inaccurate media reports by uneducated reporters and bloggers that income trusts have been getting away without paying taxes. The government isn’t interested in the truth, they only want to appease the socialist public who believe that higher taxes is better for the economy.