“Call in the members!â€
Those are the words the Speaker hollers when a vote is about to take place in the House of Commons, and as he speaks them, one of the clerks puts a key in a wall box behind his chair and sets off the bells. Some MPs are in the House, some are in committee rooms, some are in their offices on the Hill, some are traveling, some are running for the Liberal leadership and some snoozing. It is their duty, if humanly possible, to get themselves into the House and into their seats before the bells stop.
Tuesday night the bells are scheduled to start ringing at 5:45 pm, and stop at 6:15. By about 6:10 pm, the House will be alive with activity, as MPs mill about, visit and yak. Among them will be the party whips, furiously counting heads and making sure all the troops have materialized. At the appointed moment, the two main whips – Jay Hill for the government and Karen Redman for the opposition – will enter from the double doors at the end of the Chamber, advance to the centre of the aisle, bow to the Speaker, turn and bow to each other, and be seated. Showtime.
Tomorrow there are two votes. One is an NDP opposition motion on veterans, put forth by the affable Nova Scotian MP, Peter Stoffer. I like that guy – I think he used to work as an airline employee before being elected – because he’s a free and independent thinker, not afraid to stand up to his party leader, speak his mind and differ with his colleagues when necessary. The NDP seems to tolerate him quite nicely. It’s only Conservatives who lionize conformity.
Next up will be Ways and Means Motion No.10, which amends the Income Tax Act. This is a confidence vote, which means if the Harper Administration loses it, there’ll be an election. And this is also the vote which will ratify last week’s bombshell move to tax income trusts while dismantling the entire trust business.
As stated, reforming the trust business and stemming the tide of conversions is necessary for the long term health of the economy and to ensure the feds keep raking in corporate taxes. But it did not need to be done now, nor as brutally as took place, nor with such painful consequences for small investors. It was a macho move from a PMO that likes to prove it’s got the stones to power through anything. Worse, it was a 180 from what we Tories told voters in last winter’s election. I still feel sick when I think of the seniors groups I spoke before, and repeated the Harper promise that “we will not tax your income trusts.â€
You see, I try not to lie. At it turns out, political life would have been less of a bitch for me if I’d just lied in a February media scrum and said I supported the appointment to cabinet of a floor-crossing Liberal. Piece of cake. But I didn’t, and look at my sorry state now.
Anyway, I would vote against Ways and Means Motion 10 simply not to support political lying. But that would be too simple.
That’s because wrapped up in this vote is a nice little tax cut for all seniors, and the ability of all pensioners to split income for tax purposes. This is something I’ve been fighting for over the course of months, and which is a major change in the country’s tax policy. Once passed, it will forever be the law, since no government will take it back. Plus, it opens the door nicely for income-splitting among spouses of working families, something my constituents loudly want.
Since I can cast only one vote, I must choose. Reject the brutal trust tax, and lose pension-splitting; or endorse the action that cost thousands of people billions of dollars, and at the same time gain some tax fairness. I’d like to thank all those who took time to pass comment on this predicament, and please note that I read every word carefully. Now that I am an Indie, with no whip to heed when it comes time to vote, I take this very seriously, as I know you would.
My decision, then, must be based on these questions: What will benefit the people I represent the most? What will be in the best long-term interest of Canada?
My vote will have to reflect the fact that decades of income-splitting will more than compensate for one week’s investment losses. My vote will acknowledge that wholesale corporate conversions to trusts are unhealthy in those same years to come. But my vote will not make me feel less compromised for deceiving people who believed what I said, as I believed what I was told.
Even when it is, yes.
53 comments ↓
I have been a critic of many of the actions of this government.
I am, however, very supportive of the actions being taken in relation to income trusts.
I feel that an income trust is not an adequate structure to replace large-scale corporations such as BCE and banks. Income trust structure is not conducive to a sustained, balanced, socially responsible business; e.g., income trusts pay out a high percentage of income instead of re-investing for the long term. Nor do income trusts seem to provide the same legal protections for shareholders/unit holders.
Income trusts constitute tax evasion on a major scale and I support the moves to tax them. There are already many ways in which corporations can reduce taxes. Revenue Canada currently seems to have trouble collecting a high percentage of the corporate taxes already due (though at least the taxes are “on the books”) – we can’t afford to lose more. Taxing income trusts is needed to avoid a haemorrhage of the tax base and a shift of the tax burden to the individual tax-payer.
I am also very supportive of the pending legislation to permit income-splitting.
Yours truly,
Marie
So the Tories want to tax trusts? Fine. There are a few things
they may have overlooked in their headlong plunge into this
matter.
First, let’s go through the tax changes and what it means for
both taxable and non-taxable investors in Canada and the US.
For those in Canada, the new tax on distributions means
virtually nothing changes. In fact, if the trusts continue to
operate as they have been, the net result might well be a tax
cut, not a tax hike.
Right now, Canadians face a tax rate of 46 percent on dividend
income. That means whether paid at the source or upon receipt,
the new rate of 45.5 percent is a tax cut on the net cash
flowing into their accounts.
It’s actually the non-taxable Canadians that are going to be
hurt–again, all this is assuming some rational member of
Canada’s government doesn’t stop this lunacy.
Right now, the tax liability for non-taxable or tax-deferred
Canadian pension or retirement accounts is nil. And with the
new changes, the result will be a net rate of 31.5 percent.
This means the Ottawa government is hiking taxes on retirees
in their own country (including union members and other tough
voter groups) by that 31.5 percent.
This, in turn, means that the public-sector pension funds will
have to be topped off by Ottawa one way or another, given the
trillion-dollar shortfall in current liabilities. Trusts were
closing that gap helping to reduce the cost to the government
of that trillion dollars, which, if the tax law stays, will
now have to be paid.
So you take away some cash now, only to have to return it in
the pending years to come. That’s not too smart.
But let’s be selfish and look at the proposed new tax law on
trusts from a US investor standpoint.
If you continue to own the trusts in a non-taxable or
qualified tax-deferred account, the tax rate goes from 15
percent to 41.5 percent. This isn’t good. And if the law
stands, the trusts won’t work any more for non-taxable or
qualified retirement or pension accounts in the US.
The Canadians won’t get the tax with the elimination of
non-taxable retirement investors in the US. Right now, 15
percent is bad but not an insurmountable burden for retirement
account investors in the US. But at 41.5 percent, it becomes a
deal breaker. US investment leaves the Great White North and
doesn’t even pay the 15 percent any more.
For taxable US investors, the current deal has 15 percent
withheld, which is recoverable by Uncle Sam with a mostly
dollar-for-dollar credit against US tax liabilities, thanks to
the tax treaty between the US and Canada.
The pending legislation brings the net taxes to 41.5 percent,
which, if the trusts continue to operate as currently
structured, Uncle Sam will simply funnel the liability back to
the Canadians with the same tax credit on our IRS forms.
This means that potentially, if the trusts work their
distributions the right way, i.e., for taxable account
investors in the US, we just might have a zero impact on our
net after-tax cash flows from Canadian trust investments. And
the Canadian Dept of Finance won’t get one extra net dime from
US taxpayers.
But beyond the net impact on tax liabilities, there’s more
happening in the Canadian market for trusts.
With the massive selloff in trust share prices, many of the
quality companies, particularly those with quality assets and
revenue streams (which include all of our petrol and business
trusts inside the Portfolios of Personal Finance), will be
ripe for takeover.
Most of the trusts have little voting control over the net
companies, as most of the shares are trading in the public
markets. This means both publicly traded US and overseas
companies can grab some very nice companies at a discount to
their recent market valuations.
But forget about just the public companies grabbing trusts;
think private equity.
US and offshore private equity investors and funds will pick
off trust shares and pull them into their stables of big
cash-generating businesses. And with the revenues running
against leveraged debt costs, it will be quite easy to not
only take over control of Canadian companies by private equity
firms but also to run the books to cut out the Canadian Dept
of Finance from taxable profit streams.
Ron
Mr. Flaherty: Your recent actions against this category of investment is outrageously unjust to the retired population of this great Country.
It is inconceivable to me that your party during the last election gave comfort to this most vulnerable class of our society to continue to enjoy the returns from their investments and then within a year break that trust with the people. Shame on you.
Further credibility is lost when you said “left unchecked such corporate decisions would result in billions of dollars in less revenue for the federal government to invest in the priorities of Canadians.” If this is so, why did you ‘throw the baby out with the bathwater’ when you could have simply grandfathered existing trusts while enacting legislation against further trusts? Shame on you.
Your machiavelian approach to this situation has left me feeling betrayed, and that my government is deceitful, careless and as such, dangerous.
It is time that Canadians not only become aware of this shameful way of governing but become vocal and involved in demonstrating their outrage. If Canadians are not affected by this legislation they can be absolutely sure that they are next to be affected by some ill-advised knee jerk kind of government intervention.
I would suggest a moratorium on this issue so that you can garner advice and perspective which will hopefully lead to a more palatable solution.
Sincerely,
Robert L.
Kelowna
Good, reasonable choice.
I don’t think the two issues are mutually exclusive (real or perceived longterm costs to seniors from IT decision, and the Finance Minister’s decision to introduce changes on senior’s income splitting.)
Perhaps, in Halton, the demographics of seniors may not be representative of their peers in the rest of Canada in terms of amounts of investments and investment income, but I suspect (without having statistics to back me up) that most Canadian seniors are ahead of the game as a result, and feel more secure due to your efforts on pension splitting, acknowledged in the H of C by the Finance Minister.
So, I’d suggest standing tall when voting in favour of the bill. Quite an accomplishment, in my opinion.
Garth
The income trust issue and pension splitting has gathered most of the attention in the last few days. I am personally more interested in Mr Stoffer’s Veterans Bill. Should that vote pass and then the Government lose confidence, will the first vote be binding? Veterans across the country have been awaiting this vote for a long time.
Garth:
I’m sadddened to hear you are going to bury your head in the sand and follow the PM.
I have heard so much about “accountability” for PMSH that it makes me sick. Maybe he should look in the mirror.
I lost some money in Income Trusts, and who knows what the future holds- nobody. But the Conservatives combined this bad mistake with a few goodies to seniors (like th income splitting) just to get your vote of approval.
Voting this down is not saying you are against income splitting. I would be voting against it because the Income Trust issue can be better dealt with in much better ways.
The income splitting seniors is a good start to your objective, but it’s minimal compared to the effects of the tax changes for Income Trusts. I think you are casting your vote for the least economic benefit to the people across Canada (sorry this vote is about more than Income Trusts, but of course it is all deliberate politics).
Don’t be so political and do the right thing- you are an Independent now.
Politics sucks! Each of these proposed economic changes should be voted upon separately.
”Taxing income trusts is needed to avoid a haemorrhage of the tax base and a shift of the tax burden to the individual tax-payer.
I am also very supportive of the pending legislation to permit income-splitting.”
So Marie, you don’t want the tax burden shifted onto you where trusts are concerned, but don’t mind shifting your tax burden onto someone else where income-splitting is concerned.
Garth, you haven’t answered my question.
How do you determine the value of home work for households that are not eligible to split their income and how do you account for it in the tax system?
Turner’s brand of humility: “You see, I try not to lie. At it turns out, political life would have been less of a bitch for me if I’d just lied in a February media scrum and said I supported the appointment to cabinet of a floor-crossing Liberal. Piece of cake. But I didn’t, and look at my sorry state now.”
Oh my gawd, you’re soooooo noble Garth. I’m all a-quiver at your shining goodness.
I guess you MUST compliment yourself otherwise it would never happen. Everybody else thinks you’re an idiot.
Well shame on you Garth,
You are being blackmailed by the Conservatives who put out this “package deal.” Surely you are smarter than that.
To say that seniors are going to be greatly helped by the income sharing is just so intrue. It may affect a relatively small number, but the seniors who are most in need of help are the singles, widows, and widowers who have to try to support a household on one income.
I am not from your constituency, but I hope that your constituents would treat you the same in the next election as they do the Cons if you vote for this.
Or is it that you REALLY WANT to be accepted by them again?
Hi Garth, Do you think that Mr. Flaherty added in the pension splitting knowing that that would get your vote. It seems much more clear that that might have been the case as he probably didn’t know how the other parties would like it. You now as an independent have a strong vote in the House as the numbers sit right now. Good luck to you with your vote and I hope it works out the way you would like. Regards
Garth, isn’t it just amazing how many of us British Columbians are into your web site?
Just goes to show how poorly we are represented by our own MPs. We have to go to you in Ontario.
It sounds to me that your vote on this issue is the same one that I would have to place. Kind of “rock and a hard place” position to be in.
Go for it!
You have to vote to stop income trusts. The ethical problem sits with the original election promise not to tax trusts. If that waw naive OK but I do not thnk so. If it was “spin” SHAME. If it was electoral hyperbole for the purpose of getting votes without a characer commitment stnding behind the promise we should throw them out like we did the Liberals for secretly spendinf millions to “save Quebec” only to actually wilfully ignore the checks and balances of proper procedure that then enble fraud to flourish.
I have linked to your site from my blog and will personally be visiting you often.
vote yes for the Ways and Means Motion.
It’s simple…..income trusts need to be taxed fairly. Yes Flaherty and the Harper government lied to the voters about Income Trusts and that is wrong. But you’d have to be a fool to believe them in the first place. After all the Conservative Party of Canada was created through deceit and lies. Perhaps you Mr. Turner were a bit naive in repeating the Harper promise that “we will not tax your income trusts.†Perhaps if you (Turner) would have studied the income trust issue and Mr. Harper you might not have been repeating Harpers promises. Perhaps you liked the sales pitch of a clear positioin towards Income Trusts. You no doubt also liked Harpers stance on ethics and accountibility. Well atleast you were’nt afraid to speak your mind (after voting season that is). Indeed the moment Mr.Emerson crossed the floor you were quick to complain and i commend you for it. It was the first of what i percieve to be lie upon lie that the Harper government has sold to Canadians. Too bad you towed many of those party lies before the last election.
Anyways keep up the good work Garth….and try to speak your mind not just after you’ve been elected but also before the election too….
Also of importance is the NDP’s Veteran First Motion which is much deserved as it is an important motion for the rights of Veterans. How could you say no to this motion??
Kick the bums out
Garth, “The NDP seems to tolerate him quite nicely. It’s only Conservatives who lionize conformity.” You do have a short memory. Remember Bev Desjarlais, the hard working NDP trooper, who Jack Layton basically kicked her out because of ONE vote against the party line!
Anyway – do what you have to do – you seem to have more support from your Bay Street friends, anyway. The Conservatives will get their 40 votes they need from others.
And for others, who are bitching about income trusts – take a look at the markets – they are already rebounding…. so your greed will be upheld! These are probably the same type of investers, who John Roth catered to and killed Nortel, with risky management. He leveraged Nortel’s future to meet the shareholders short term returns, while Cisco remained viable during the high tech bubble burst.
“The NDP seems to tolerate him quite nicely. It’s only Conservatives who lionize conformity.”
Hey Garth, ever heard of Bev Dejarlais? I’m not sure she would have the same opinion on the NDP’s “lionization of conformity”.
“It’s only Conservatives who lionize conformity.” Garth, I do believe that the Liberals follow the same path – Carolyn Parrish, for example, got the boot. I believe that the other parties also follow this path but their members are more discreet. Yes, Harper is a control freak and, yes, you and he butted heads. I am sure this occurs in the other parties, but they contain the conflict.
Riverview: “I’m sadddened to hear you are going to bury your head in the sand and follow the PM.” I do not feel that Garth is doing this. He fought for income-splitting and he should support it, regardless of the politics involved. This is what Garth has battled – conformity for the sake of conformity. Although I do not support Garth’s publicizing his conflicts, I do support him in doing what he believes is right for his constituents and for what his constituents want. Riverview, your attack on Garth is exactly what is wrong with out system of governance – opposing for the sake of opposing based on personal or political differences. This is not the way it should be.
Garth’s approach, in this case, is correct. He is setting aside his politics and doing what he is supposed to do.
I support you in this regard, Garth.
The only politician that I can remember that kept most of his promises was Mike Harris, and a lot of people hated him for doing what he said he would. I loved how he stood firm on his promises.
Pinnochio McGuinty seems to have reversed on almost every promise he made, yet he still does okay in the polls. Maybe there is something to this lying politician behaviour.
The problem with the arguements for comparing the benefits for seniors of tax splitting with the losses of the income trust debacle is that every seniors situation is different. For some, those that had little or no exposure to income trusts income splitting will be of great benefit. For those who had a significant part of their investments in income trusts, it will take along while for income splitting to make up for their losses, not to mention those widowed seniors who won’t be able to split income.
Depending on which of the many seniors scenarios you look at, the solution will be different, benefiting some more than others.
This isn’t a perfect world and a flat tax seems more and more like a better idea.
One thing, Garth, your vote, either way, will be based on an informed and considered opinion, and not because a whip says so!
revenue Canada does a very poor job of collecting taxes from big corporations who pay millions of dollars to look at tax loopholes……….
while hiring thousands of Revenue Canada employees to bully the small businesses and the contracters…..
Easy targets to bully see to annoy…..
Is this fairness…………..
They have even stopped date stamping of tax returns submitted by accounts and delivered on the premise……………..
This is just plain crazy…..when you think how many hands………pass these documents……..and the government will always make a mistake…………
Stupid………..
If you are rich like the Brofmans…..who get to take your billion dollar assets out of Canada Taxfree…….
As an Investment Advisor, I just have to put my 2 cents in on this issue..
Investing 101 – Risk/Return correlation
If you are getting a cashflow yield of 8-10%+ in current markets, it is because you have agreed to take on a great deal of risk (nothing good comes for free)!
Although I sold off most of my clients’ income trusts last year when this whole issue came up (warning, hello??!!), those who still hold them have large portfolios and their income trust allocations do not exceed 10% of their holdings (as with most any holding in their portfolio because I believe in proper diversification!).
Income Trusts are considered an equity and not a fixed income product so there are no “guarantees” and they are subject to market conditions and a great deal of volatility. It is a real shame that so many Advisors and investors made the mistake of chasing yield while not realizing the risks involved and most of these, unfortunately, were seniors trying to increase their income! In my opinion, income trusts are not a suitable investment for most seniors, only those with a lot of investment/stock market experience should be holding them, fully understanding all the risks.
I also don’t quite understand the logic for buying income trusts into an RRSP since they are used primarily for cashflow (RRIF, yes.).
If these people want to be angry about this whole issue, then they should be blaming their Investment Advisors (or themselves) for the poor decision to hold so much of this stuff that they experienced a big paper loss (which I suspect will be back to gain positions by year end).
In any event, in 4 years the “good” companies will have bounced back and have made good gains so investors will retain them when they revert back to common shares (or whatever) and some of the smaller or “bad” companies will die out, it will be a good clean up!!
Part of my investment philosophy is to buy into things when they are but small paragraphs on Page 16 of the business section and sell when they become Page 1 news because, by then, you’ve usually “missed the boat”. Income Trusts have been on page 1 for a long, long time, I am sure Bay Street knew this was coming, it was just a question of “when”!!
Paully, I’m with you up to a point. I was a happy supporter of Mike Harris; love him or hate him, he did what he said he’d do. However, he then went on to amalgamate cities and tinker with our hydro supply. The amalgamation has been a disaster for my corner of the world and as far as hydro is concerned…
Garth writes, “As stated, reforming the trust business and stemming the tide of conversions is necessary for the long term health of the economy and to ensure the feds keep raking in corporate taxes. But it did not need to be done now, nor as brutally as took place, nor with such painful consequences for small investors. It was a macho move from a PMO that likes to prove it’s got the stones to power through anything.” I guess I just don’t understand. When should the intention to tax trusts have been introduced, Garth? Later – after more blue chip companies announced their plans to convert to an Income Trust structure? Wouldn’t waiting have only made the situation worse – precipitating a fall in value for each of the additional companies that converted or planned to convert to an Income Trust structure? Now, concerning it being brutal – it strikes me that, given the fact that the new tax won’t take affect for 5 years and given the fact that the group of taxpayers most likely to be negatively impacted by this (single-income pension couples) obtained a nice tax break, this was not brutal. I know, I know every senior who “lost” money (because the value of their trust units fell from the level they were prior to the announced tax) will provide lots of fodder back, indicating how harsh this has been for them. But, look, distributions from trust units will remain unaffected by the proposed tax until 2011. If seniors planned to hold these units for their cash distributions – as you would expect is the case – then there is no problem. These will continue to receive their cash payments. “Panic selling” is at least a good chunk of the reason that those that have realized losses have realized losses.
John – make no mistake: Garth is not an idiot by a long shot. Annoying at times but never an idiot.
What would be the point in reversing the ‘income trust’ bill now – the damage has been done? Didn’t the same thing happen last fall, except the guy in charge then didn’t have the stones to follow through? Seems if he did at that time, we would’t have this problem today.
The problem is the fact the current government ‘lied’ to investors. The issue here is not if you believe these trusts should be taxed or not, but the ‘lie’ told. The public was told income trusts would not be taxed – and if you believed them – many retirees invested in these trusts. Now that they lost money, they have a right to be upset.
Dear Garth,
You should start your own party. Call it the independents. I am sure you will gain a large majority of both ON and AB to vote for you.
I will cast my vote for you now.
Regards
David
Garth, after all the uproar over the last week regarding the tax changes to income trusts, curiosity got the best of me. I’ve noticed something odd – from the best performers to the worst performers, most of the trusts have recovered to better than average. As a matter of fact, most of the ones that I looked at had much lower trades in the last 52 weeks than the losses caused by the Feds. I think that the person who complained about losing 39% of his wealth last week should probably take a second look; at this particular moment that loss is probably less than 10%. The long-term effects of the income tax changes for seniors should far outweigh the short-term losses in income-trusts.
Dear Prime Minister,
As an Oakville Ontario citizen who voted for you in the last election let me say how disappointed I am with your proposal to change the taxation rules re unit trusts.
I am a senior who has saved diligently in order to have a comfortable retirement, only to find at 69 I still need to work full time. I have now lost a large amount of capital overnight because of your finance ministers decision to change his mind about the taxation rules after making an election promise not to do so.
Where is the accountability that you talk about?
It is bad enough that you choose to claw back my age allowance and old age security from my income. With these claw backs my effective taxation rate is 52%. It is not surprising that Canada has a $13 billion surplus. How big now?
Due to this latest broken promise, I will NOT be voting for your party at the next election and in discussions with my peers/colleagues/friends, many who helped to get you into the prime ministers office, I will be surprised if you return to that position after the next election.
David – if it were a party called Independents, the members would no longer be independent because they would belong to a party. Can you imagine a party with multiple members with multiple attitudes and agenda? Hmm, sounds like the Fibs and Dips, come to think of it.
In your election campaign, Steven Harper had said that income trusts would never be taxed. However, we now find that the Conservative government is proposing to do just this. Your voters DO NOT want this to happen. We are AGAINST this action. Please listen to the people that you represent. Do not bow down to the pressure of money/profit hungry banks, pissed off that they are losing out because they don’t offer better ways of investing money and saving for retirement. Represent your people and do what you promised you would do by them. Many baby boomers and any of us younger who know we will never have a Canadian pension are depending on these investments.
Thank you,
Joanna
PM Stephen Harper:
I understand that you needed to move on the problem of new income trust conversions. However, I feel a better answer is to only stop new conversions and leave existing trusts alone. This would stop the problem you said you were trying to address but honour the promise you made to not tax trusts (that existed at the time you said it). Thus Canadians investing at that time would have no issues based on trust placed in the promise.
There would now be new rules that we would need to work with go forward and that would be ok.
As the current measure sit, they will hurt RRSPs/RESPs by introducing a double tax. Clearly you did not want to hurt retirement and education accounts.
Please leave the existing trusts alone. REITs were given special treatment, so I see no issue with this.
Hope you can see clear to take this action. If you can not support this compromise, I will no longer be able to support you and will ACTIVELY work to support other parties.
Hon Jim Flaherty:
Thank you for what you have done for seniors. This will definately put my vote on the conservative side, going forward.
I was infuriated by the comments of Ms. Lahey in the Toronto Star of this week. Some people just don’t get it, and we are so glad you and your party did.
I have responded as follows…
Dear Ms. Lahey,
I read your article to the Toronto Star and you are way off base. As a lawyer, I am surprised that you would not have more, accurate information on this issue before writing such a denouncement.
I would also have thought that being a woman and a lawyer, you would have a better understanding of the true situation of many “Senior Women and Retired Couples” in this country and how many senior couples do live near the poverty line, even though one may have a pension.
A dual system?… Yes. This fairness initiative “may” prove beneficial to some wealthier couples but it has already been substantiated that most of those, can and already have, set up their retirements in a fashion that has allowed them to “pension split”. They, like yourself have vehicles open to them that the “majority of working Canadians” do not, due to mandatory corporate pension plan contributions. The wealthy, for the most part, won’t benefit from this tax change since they have already provided pensions for their spouses through targeted investments and spousal plans, therefore any splitting of pension income will have no value.
It is the hard working, middle and low income pensioners who built this country and did not have the same options. They, and there are many of them, have a hard time making ends meet and maintaining their homes in this latter stage of life.
This has been a dual taxation system with couples having to combine income for certain tax requirements but claim as individuals for taxes owing. Those same couples, if they were to divorce today, would have tax advantages that senior couples do not. (and sadly, we know retired couples that have done just that).
Our armed forces retirees that travelled frequently as part of serving our country, were in a position where the spouse could not have continuity in a job situation and therefore no retirement pension.
Retired women of today were not fortunate enough to have obtained pay equity, maternity leave, child care subsidies and in many cases, while raising a family and paying for child care in order to bring a little extra family income, were unable to set aside money into RRSPs.
Perhaps the retirees of the future will be in a better position because of changes that have been implemented, but those who have fought for this country, worked to achieve a priviledge place for you and others, deserve to have fair treatment when it comes to supporting Canada’s needs of today, through our tax system.
Ron and Wendy Kool
Ottawa
PMSH got rid of a tax loophole that was about to kill Canada’s economy and productivity.
If that is enough to drive your vote back to the Liberals, you never did vote Conservative , as you have claimed.
The ONLY party that doesn’t support the move, is the Liberals, because it illustrates how spineless they were when in power.
A new poll out, says 60% of Canadians do NOT think Liberals are ready to lead Canada again.
I believe you seriously overstate the situation, but congratulations on being a good partisan! As for my voting record, check it before you say something foolish, as I have been consistent in supporting fiscal conservativisim. As I wrote, I will be doing so again tonight. — Garth
American PE companies will buy up the good assets at a good price. They’ll structure them as flow through LLCs. (Yes, you can do that in the States, there are income trusts in the US only they don’t trade on the market so you have to have at least a million bucks US to buy into them.) These new LLCs operating in Canada will find ways to avoid sending their profits north. After all, the profit is made at the point of sale, not at the point of production.
Just for fun I looked up LLC and FTE
hmmm….
its OLD news I guess..
” tax issues related to business income trusts and other flow-through entities (FTEs)”
http://www.fin.gc.ca/activty/pubs/toirplf_1e.html
I am NOT sure at all what all this means but there is an official canada government site about them:
http://www.fin.gc.ca/activty/pubs/toirplf_1e.html
“1. Executive Summary
In Budget 2005, the Government of Canada announced it would conduct open and transparent consultations with stakeholders on tax issues related to business income trusts and other flow-through entities (FTEs).
The release of this paper by the Department of Finance Canada launches these consultations. The purpose of this paper is to promote discussion and third party input on a number of key questions by providing background information on FTEs and related economic efficiency issues, an international comparison, as well as the estimated impact of FTEs on federal tax revenues.
FTEs: The Policy Challenge
Trusts and limited partnerships have been used by investors for several decades. In the last 10 years, publicly listed income trusts, and the trust sector more generally, have gained popularity as investment vehicles. Since 2000, this growth has accelerated sharply and appears poised to continue doing so.
The issues for consideration and consultation with respect to FTEs include:
The impact of their tax treatment on how businesses are organized in Canada.
Their impact on federal tax revenues.
The potential role tax-exempt investors (e.g. pension funds) may have in this market.
The impact of FTE tax treatment on the Canadian economy.
What Are FTEs?
FTEs include income trusts and limited partnerships. The use of the term “FTE” in this paper refers to FTEs that are publicly listed on a stock exchange in Canada.[1]
Income trusts, which are governed by provincial laws, are an ownership vehicle for certain assets or businesses and typically raise funds by selling units in the trust to public investors (i.e. unitholders). The unitholders are the beneficiaries of the trust, and their units represent their right to participate in the income and capital of the trust. Income trusts generally invest funds in assets that provide a return to the trust and its beneficiaries based on the cash flow of an underlying business. This return is often achieved through the acquisition by the trust of equity and debt instruments, royalty interests or real properties. There are three primary types of income trusts: business income trusts, energy trusts and real estate investment trusts (REITs). Business income trusts are a more recent development in Canada than energy trusts and REITs, which have existed since the 1980s.”
My guess is this web site is about to be completely out of date after the vote tonight.
-Tom
I guess this is the way it USED to be:
“Tax Policy Implications of FTEs
One of the factors contributing to the growth in the use of FTEs has been the ability of such vehicles to “flow through” income to investors so that income tax is not paid at the entity level. This differs from the tax treatment of corporations and their shareholders, where tax is paid by both the corporation (at the entity level) on its income and by its shareholders when the income is distributed—with some recognition at the shareholder level of the taxes paid at the corporate level. It is important to note that FTEs can also distribute amounts (i.e. return of capital) that are generally taxable upon disposition of the units rather than upon receipt of distributions, which would normally be the case for a dividend paid by a public corporation.
Under Canada’s income tax system, some types of businesses are better suited than others to the FTE structure. For example:
The corporate structure may be more suited for growing businesses (businesses that are not distributing a large proportion of their cash flow as dividends). This is because income retained in the corporation generally bears less tax than if the income is earned at the personal level.
The FTE structure may be more suited for mature businesses. This is because FTEs can distribute cash flows in a manner that achieves full integration of the personal and corporate income tax systems, removing an impediment to distributions.
Section 3 provides more details on the tax policy implications of FTEs.”
Maybe they will want to update this web page….
Some people seem to think that payouts from Income Trusts will be unaffected. However, Income Trusts will now be seeing a much higher cost of capital. Marginal projects, which made economic sense under the old regime, no longer make sense under the new one. A lot of the energy trusts are marginal. When they shut down those projects, clearly distributions will have to fall.
Thus, this new tax regime is very destructive. “They had to destroy the industry to tax it.”
What’s the problem with all the companies converting into trusts? Apparently the government is upset because tax-free recipients will literally get their income tax-free. Yet, wasn’t that the original idea? And with the government in surplus, and the trust industries booming, I’m having a hard time figuring what the problem is with the present situation. And even if there is a problem, it sounds like the current “reform” is close to the worst possible.
Some people think that with so many companies converting to trusts, there will be major problems — problems with the future growth or stability of those companies. In other words, all those companies that are changing over don’t know how to run their own business. Yet is that theory very likely? They’re all using the same spreadsheet software, perhaps, with a common error affecting everyone’s results? Usually, when the government needs to “help” companies make the right decision, the result is failure. It’s very likely the companies know exactly what they’re doing. The market mercilessly kills off those that don’t.
Someone said that conversion to trusts is unfair, because it shifts the entire burden of taxation from the companies to individuals. That objection is absolutely nonsensical, because the individuals receive higher dividends and thus have precisely the wherewithal to pay the added tax.
The way this change is being rushed is very fishy. Act in haste, regret at leisure. Why not spend some time thinking about this whole issue in depth. Just put a moratorium on conversions during the brainstorming period. Because the current approach is so unspeakably bad, it’s extremely likely that a better approach will be found.
Garth…just curious, what’s it like being the most wonderful righteous person you know?
A constant burden, actually. The groupies are the worst part… — Garth
And this stupid poll comes on the heels of one that have the neo’s and Liberal’s neck and neck .
Guess that is what happens when all you call are card carrying neo-con’s .
We’ve had a of week of inconclusive dialogue concerning … promises… lies… income trusts…tax…financial ruin… etcetera, etcetera. None of which mitigates the fact that what needs to be done for the welfare of the majority, HAS TO BE DONE. Indications are that it will be tonight.
Once enacted, income splitting will benefit not only seniors, but all the youngsters who plan to age. Equally important is that passage will be a precurser for further tax change. To the dismay of the selfish, trust tax
will also be ratified.
This isn’t a case of choosing the lesser of evils. Both are necessary and I endorse a yes vote.
But, WDIK.
Don – thanks for your post. I have a question on what you have written: why does the cost of capital invariably rise for all income trusts because they are not subject to corporate taxes in 2011?
Sorry Don – a typo in my question to you: why does the cost of capital invariably rise for all income trusts because they are now subject to corporate taxes in 2011?
Your single handed efforts to bring the taxation splitting to seniors will make a positive change in many peoples lives-thank you john mccormick
It’s amusing that people like Ron and Jim, claim that they were strong Conservative supporters and now they aren’t….
It’s politics 101. Claim that you were a strong supporter and now will switch your support and claim that you will actively work against that party. It’s trying to fool people into getting their attention and influencing them to switch their voting pattern. “I was one of you….”
Wilson: Then I guess 40% of Canadians believe the leaderless Liberal Party is ready to lead the Government of Canada? I think those are great numbers for the Liberals!
Listen, Garth, you’re either for or against this anti-trust thrust. Lets knock off the equivocating. Who gives a shit about how the move was made, you agree that it was necessary so lets get on with it. Harper made a tough choice, give the bastard some credit. Martin didn’t have the gonads to pull the trigger but he did manage to create havoc in the markets. This is now a dead issue except for the Libranos of the CBC & CTV.
I also don’t quite understand the logic for buying income trusts into an RRSP since they are used primarily for cashflow (RRIF, yes.).
Higher Yields + Capital Gains + Distributions that can be re-invested monthly instead of every 3 months.
Garth, no one cheered when the Ways and Means Motion passed the House this evening but you sure could hear the cheering out here.
On behalf of all seniors who will benefit from your support, heart felt thanks
Ken Schofield
Garth:
Without your leadership, especially with the October 3 Conference, I do not know where we would be tonight.
Thank you for your work. I hope that you do not stay out in the cold too long.
David
Garth:
Regardless of what your future in Parliament may be you have endeared yourself to a multitude of seniors right across this country and gained their ongoing respect and support for the intelligence and conviction that you so clearly demonstrated in getting this issue implemented.
Robert A. M.
Oxford Mills, Ontario
We watched your performance on CPAC tonight – as always you are spectacular.
I was ecstatic to have been involved with such an elite focused group, for the benefit of Canadians, especially those seniors who are concerned what government has in store for them. This is a positive step and they come few and far between. We must concentrate our thoughts to those things positive.
Roy,
“We must concentrate our thoughts to those things positive.”
Good point!
However lets not forget that we do that in an effort to correct those things negative and diminish the making of errors.
A point the Harper gov’t and PMO require to heed.
Well done Garth!
Thank you for your tremendous help in bringing about pension splitting, Garth. I sympathize with you that you had to suffer the dilemma of having to vote for the income trust legislation as well.
Pension splitting is a fairness issue that waited for many years to be resolved. Many who pursued it had earlier pursued income splitting but had given up on that in favour of the compromise alternative of pension splitting, knowing it would be more palatable to the government. Now that we have pension splitting, I’m glad to see that you are pushing for income splitting and wish you the best of luck.