This is interesting...
from (
http://www.budget.gc.ca/2008/plan/an...g.asp#business)
SIFT Tax: Provincial Component
"Specified Investment Flow-Through" trusts and partnerships (SIFTs)—publicly traded income trusts (including business and energy trusts) and partnerships—are subject to a tax (SIFT Tax) on their distributions of what are termed "non-portfolio earnings". (For SIFTs that existed on October 31, 2006, the SIFT Tax will not apply until 2011, as long as their growth does not exceed certain limits.)
The rate of the SIFT Tax is made up of two components. The first is equal to the federal general corporate tax rate,
and will be reduced in step with the reduction of that federal corporate tax rate to 15 per cent by 2012. The second component is an additional tax in lieu of provincial tax: its rate is currently 13 per cent, which approximates the average provincial corporate income tax rate. Revenues from the additional rate are to be distributed to provincial governments.
Budget 2008 proposes that for a SIFT’s 2009 and subsequent taxation years the provincial component of the SIFT Tax (and thus the provincial share of the resulting revenue)
be based instead on the general provincial corporate income tax rate in each province in which the SIFT has a permanent establishment. This will ensure that the rate of the SIFT Tax is the same as the federal-provincial tax rate for large public corporations with the same activities.
To determine this rate for a particular SIFT, the taxable distributions of the SIFT will be notionally allocated to provinces according to the general corporate taxable income allocation formula. Specifically, the SIFT’s taxable distributions will be allocated to provinces by taking half of the aggregate of:
- that proportion of the SIFT’s taxable distributions for the year that the SIFT’s wages and salaries in the province are of its total wages and salaries in Canada; and
- that proportion of the SIFT’s taxable distributions for the year that the SIFT’s gross revenues in the province are of its total gross revenues in Canada.
Applying the relevant provincial tax rates to these notionally allocated amounts will generate a dollar amount that, when expressed as a proportion of the SIFT’s total taxable distributions, will provide an average rate of provincial tax. This average rate will in turn be the provincial component of the SIFT Tax rate of the particular SIFT for the taxation year.
Taxable distributions that are not allocated to any province would instead be subject to a 10 per cent rate constituting the provincial component. The provincial tax rate applied to taxable distributions allocated to the Province of Quebec will be deemed to be nil to take into account the SIFT Tax imposed by that province.
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So basically, there is a slight relief of the tax that was levvied on the income trust sector a few years ago in this budget.
Combine that ruling with the TSFA and you could see a bit of a recouperation happening in the income trust sector (albeit modest).
Do the financial wizards of CP agree?