Liberals propose legislation to repeal Income Trust Taxation

[Slava]

Canadian Press
OTTAWA — The Liberal party has tabled a motion asking the House of Commons to demand that Finance Minister Jim Flaherty withdraw two controversial tax measures on income trusts and interest deductibility.
The motion tabled by leader Stéphane Dion says the government's decision to impose a 31.5-per-cent tax on trusts last fall and the March 19 budget measure that would eliminate interest deductibility for businesses that borrow in Canada to invest abroad are “making it increasingly difficult to Canadian businesses to succeed internationally.”
Mr. Dion said Prime Minister Stephen Harper should instruct his finance minister to withdraw the interest non-deductibility proposal and conduct public consultations on how the government could go after the use of tax havens without punishing legitimate foreign expansions.
The motion also calls on the government to replace the government's tax proposal on income trusts with a much lower 10-per-cent tax that would be refundable to Canadian residents.
In the last several weeks, Mr. Flaherty has said the decision on income trusts is final, but has left room for amending the interest-deductibility measure

[Cube Inmate]

If passed, would the motion be binding?

If so, would the Cons make it a confidence motion?

Are the Libs trying to precipitate an election in the hopes that the issue of income trust taxation is front and centre?

[FireFly]

Wow. Dion is an idiot. It was a MAJOR hole in Canada's taxation laws, and now they want to open it up again? Hell, the Liberals have always wanted to close that hole, but were scared to do it. The only reason Dion is doing this is to try and gain support from businesses. However, I don't really think he wants it to pass.

[Slava]

There were other ways to close that hole though; it didn't have to be a door that was slammed shut as quickly and fully.

[FireFly]

Rip the bandaid off. Don't pull slowly. You know, working for Telus, I was screwed over by that announcement. However, I still support it even though it cost me $1000.

[Lurch]

Wow. Dion is an idiot. It was a MAJOR hole in Canada's taxation laws, and now they want to open it up again? Hell, the Liberals have always wanted to close that hole, but were scared to do it. The only reason Dion is doing this is to try and gain support from businesses. However, I don't really think he wants it to pass.

I suspect if Harper could change his mind on this issue without looking like an idiot, he would. He probably caused more tax leakage by causing the sell off of these companies to foreign private equity that was actually there in the first case. This will likely go down as the biggest black mark for his term, both in terms of breaking a direct promise and also in terms of making truly bad economic policy.

[Slava]

Originally Posted by FireFly

Rip the bandaid off. Don't pull slowly. You know, working for Telus, I was screwed over by that announcement. However, I still support it even though it cost me $1000.

Thats because you're not trying to retire on that money (I'm assuming).

[Slava]

Yeah, the current legislation says four years to operate in same manner. I have heard that there are no real loopholes left by the legislation...unless its a REIT.

[FireFly]

Originally Posted by Slava

Thats because you're not trying to retire on that money (I'm assuming).

Well, Telus shares are back up to where they were before the announcement anyways, so the only thing that cost me was my own impatience. No, I'm not trying to retire on that money. I do understand what you're getting at though, and yes, i feel bad for people who were using Income Trusts as a way to help finance their retirements. However, assuming those people are smart, (I mean they're smart enough to plan for retirement, right?) they must have also known about the hole in taxation. Did they really think it would never be filled? Or did they just assume that they would get lucky and the filling of the hole would happen after they died/not affect them? A bit short-sighted, no?

[Slava]

Originally Posted by FireFly

Well, Telus shares are back up to where they were before the announcement anyways, so the only thing that cost me was my own impatience. No, I'm not trying to retire on that money. I do understand what you're getting at though, and yes, i feel bad for people who were using Income Trusts as a way to help finance their retirements. However, assuming those people are smart, (I mean they're smart enough to plan for retirement, right?) they must have also known about the hole in taxation. Did they really think it would never be filled? Or did they just assume that they would get lucky and the filling of the hole would happen after they died/not affect them? A bit short-sighted, no?

Well its only short sighted to the point that the promise was an election plank by the government, so for what that's worth plus $2.25 you could take a C-train all the way from Dalhousie to Somerset.

The issue here is not only the value of the holdings, its the taxation.

[Locke]

Originally Posted by FireFly

Wow. Dion is an idiot. It was a MAJOR hole in Canada's taxation laws, and now they want to open it up again? Hell, the Liberals have always wanted to close that hole, but were scared to do it. The only reason Dion is doing this is to try and gain support from businesses. However, I don't really think he wants it to pass.

Yup. And what is truly amazing is that I'm not certain he has thought about the consequences of this ridiculous strategy actually working. This loophole was closed as a reaction to the interest Bell Canada, Petro-Canada and Encana expressed in converting to income trusts. It had to be closed, and if he re-opens it again and then takes control, what would he be able to do when these big players become essentially tax exempt?

This had been a long time coming. I am not swayed by the 'retirement' argument. Period. Your retirement earnings are handled by investment managers who should have seen this coming eons ago and adjusted accordingly.

The promise of not taxing Income Trusts was contingent on a variety of factors and the rest up to now and continuing along is just Shadow Games plain and simple.

Locke.

[Dion]

Anyone who is stupid enough to put all or most of their retirement savings into one basket gets no sympathy from me. Instead of whining how the Harper govt cost them money, maybe seniors should take a look at how they manage their money. Better yet, go after their financial planner who advised them to invest income trusts. I can't believe how stupid some people can be!

[BlackEleven]

This is bizarro world. The Convervaties are acting liberal and the Liberals are acting conservative. Fiscally speaking, of course.

[FireFly]

Originally Posted by Slava

Well its only short sighted to the point that the promise was an election plank by the government, so for what that's worth plus $2.25 you could take a C-train all the way from Dalhousie to Somerset.

The issue here is not only the value of the holdings, its the taxation.

And that's lovely, but what about in 5 years when there's a new government?

[calculoso]

Originally Posted by FireFly

Rip the bandaid off. Don't pull slowly. You know, working for Telus, I was screwed over by that announcement. However, I still support it even though it cost me $1000.

Without the rules being as they are, the initial jump would not have happened. Even after the Government tax announcement, the stock value was still higher than before the "transition" announcement.

I don't feel much sympathy for Telus stock owners. Oil company shareholders I feel sorry for.

[Slava]

Originally Posted by FireFly

And that's lovely, but what about in 5 years when there's a new government?

I still stand by the fact that the government could've tightened things up without having to stop the practice entirely. This is basically a compromise solution which most governments could live with. At the very least, the parties could at least state their intentions during a campaign and stick to them!

[Slava]

Originally Posted by Dion

Anyone who is stupid enough to put all or most of their retirement savings into one basket gets no sympathy from me. Instead of whining how the Harper govt cost them money, maybe seniors should take a look at how they manage their money. Better yet, go after their financial planner who advised them to invest income trusts. I can't believe how stupid some people can be!

###. Not that you should go after your financial advisor for investment decisions that you make, but there were a fair number of advisors pushing people into these holdings as the flavour of the week.

In fairness however; the PC's never hinted that this was coming...

[FireFly]

Originally Posted by Slava

###. Not that you should go after your financial advisor for investment decisions that you make, but there were a fair number of advisors pushing people into these holdings as the flavour of the week.

In fairness however; the PC's never hinted that this was coming...

You're right, they didn't. Does that make it their fault? What you're telling me is you would rather have the government losing hundreds of millions of dollars because of a tax loophole, and essentially, passing that loss of money onto us, just because some people took shoddy savings advice? The government gave them 4 years... I'm thinking that's enough time to figure things out. It's not like they said, "oh, and you people with your money in there... well that's too bad." Basically, they said "Telus, Bell... nice try. We've had enough and you're not taking our revenue away. Sorry."

I'm thinking that the plethora of announcements last summer and fall was enough of a hint that it would come. Do you think the Conservatives knew that by saying they wouldn't close the hole, a whole whack of new companies would try and set up income trusts? To be fair, the businesses didn't give them a hint either.

[Slava]

Originally Posted by FireFly

You're right, they didn't. Does that make it their fault? What you're telling me is you would rather have the government losing hundreds of millions of dollars because of a tax loophole, and essentially, passing that loss of money onto us, just because some people took shoddy savings advice? The government gave them 4 years... I'm thinking that's enough time to figure things out. It's not like they said, "oh, and you people with your money in there... well that's too bad." Basically, they said "Telus, Bell... nice try. We've had enough and you're not taking our revenue away. Sorry."

I'm thinking that the plethora of announcements last summer and fall was enough of a hint that it would come. Do you think the Conservatives knew that by saying they wouldn't close the hole, a whole whack of new companies would try and set up income trusts? To be fair, the businesses didn't give them a hint either.

Yes, absolutley. That is their point of existence, to manage these things. If they stuck their foot in their mouth regarding the trusts and were really losing the "hundreds of millions of dollars" then they should have to prove this beyond a shadow of a doubt. Since the announcement there has been a lot of discussion surrounding that figure and how it was arrived at.

The fact that a lot of companies were planning on going that route could not have come as a surprise. I knew of some of the companies looking at this; if I knew then I can guarantee that someone who is actually important knew. Businesses don't have to give them forewarning that they are considering operating within the bounds of the law!

Facts are:

1. PC's say that they will not tax trusts
1a. Average citizens invest accordingly, after first PC win in 12 years.
2. PC's see companies use this to plan their operations and save money on taxes
3. PC's do a 180 and slam the door shut on income trusts

Now the Liberals have caught them; basically the PC's can either vote for this and re-do the 180, or vote against this and take the (possible) punishment at the polls.

[FireFly]

Originally Posted by Slava

Yes, absolutley. That is their point of existence, to manage these things. If they stuck their foot in their mouth regarding the trusts and were really losing the "hundreds of millions of dollars" then they should have to prove this beyond a shadow of a doubt. Since the announcement there has been a lot of discussion surrounding that figure and how it was arrived at.

The fact that a lot of companies were planning on going that route could not have come as a surprise. I knew of some of the companies looking at this; if I knew then I can guarantee that someone who is actually important knew. Businesses don't have to give them forewarning that they are considering operating within the bounds of the law!

Facts are:

1. PC's say that they will not tax trusts
1a. Average citizens invest accordingly, after first PC win in 12 years.
2. PC's see companies use this to plan their operations and save money on taxes
3. PC's do a 180 and slam the door shut on income trusts

Now the Liberals have caught them; basically the PC's can either vote for this and re-do the 180, or vote against this and take the (possible) punishment at the polls.

Well that's never happened ever before... a political party doing something it said it wouldn't? God no!

If you can't see the Liberals are doing this for the purpose of the polls only, that's too bad. Who's to say they won't turn around and change their minds later too? It's something the party is known for doing. Liberals turning down more taxation income? That's new. They'd be stupid to push this through, and I think they're betting on at least the NDP voting against it with the Conservatives... that way they look like the good guys and gain points in the polls.