Saturday, September 22, 2007

Green candidate says Finance Minister Jim Flaherty got it wrong on Income Trusts

Recently nominated Whitby-Oshawa Green Party candidate, Doug Anderson who will be running aginst finance minister Jim Flaherty, says Flaherty was wrong to impose a 31.5% tax on income trusts in his mini-budget last Fall.

"There was no public consultation leading up to that announcement," says Anderson, "and as the fallout emerges it is very evident that there were assumptions made which were clearly wrong."

"There have been two hugely damaging effects from this tax," says Anderson.

"Firstly, a large percentage of the money that had been invested in income trusts was retirement savings, so this tax has particurlay targeted seniors. The tax is especially heinous because the Conservatives had said only months earlier that they would not tax trusts," said Anderson.

"Secondly, the tax has reduced the equity value of these trusts which in turn has reduced their access to capital and has made them takeover targets, especially by foreigners."

Anderson cited a quote from a US investor newsletter that he received yesterday:

  • I think there's going to be a great Canadian Energy Trust Takeover Wave, and I want you to be on it. I know I'm on it, and I know our subscribers are on it. What about you?
  • I can say with the utmost confidence that we're going to see a number of multi-billion dollar takeouts. I'm not just talking about the little ones that have already happened -- I'm talking about billion-dollar ones.
  • Canada's "Conservative" party simply does not understand that there's a global economy out there with global capital markets.
  • Canada's Minister of Finance Jim Flaherty seems to think his job is to increase the cost of capital, as opposed to reducing it.

The principal assumption leading to the trust tax was that there was "tax leakage" but Anderson cited an extensive analysis from BMO Capital Markets which indicated that the pre-existing trust status where distributions were taxed as income in the hands of the unit holders would in fact yield considerably more tax revenue for the government than taxing the trusts themselves.

The opposition to the "Tax Fairness Plan", as Flaherty dubbed it, has been building steadily and a new advocacy group, "Canadian Association of Income Trust Investors" (CAITI) has been particularly vocal. It has placed large ads in numerous newspapers including, locally, Oshawa-Whitby This Week.

The CEO of CAITI is Brent Fullard and he is one of several people that Anderson has consulted on the issue.

"Canadians can be thankful that Brent has taken this issue out of the corporate boardrooms and made it into a public issue." said Anderson.

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for further information contact:

Doug Anderson
Federal Councillor
Green Party of Canada
candidate, Whitby-Oshawa riding