For Immediate Release: February 28, 2007
Canadian Association of Income Trusts Applauds Finance Committee Report
Urges Government to Adopt Recommendations — 31.5% Is “Tax Unfairness”
CALGARY – George Kesteven, President of the Canadian Association of Income Funds (CAIF), applauded the House of Commons Finance Committee report on the draft legislation regarding income trusts and urged the Minister of Finance to accept the committee's recommendations and amend the draft income trust legislation before tabling it in Parliament.
“This report clearly states that the government did not do its homework on income trusts,” said Mr. Kesteven. “Not only does the report uncover serious flaws in the tax leakage estimates that have been the Finance Minister's entire case for this punitive tax, but the report shows that ‘fair’ options are available that would be far less damaging to investors than Mr. Flaherty's destructive 31.5 per cent tax on income trust distribution payments.”
Mr. Kesteven said that the Finance Committee report finds more than enough fault with the government's income trust rationale to warrant legislative amendments that will reduce damage done by the Minister’s unprecedented tax burden on income trusts and their investors.
“It is now clear that the Finance Committee is more concerned with Canadians’ retirement savings than is the government”, he said.
In particular, CAIF urged the government to adopt two recommendations in the report: To reduce the tax on distribution payments to 10 per cent as part of a comprehensive income trust policy, and to extend the four year transition period to 10 years.
“Each alternative would help seniors restore part of the savings they lost when the Conservative government broke its promise to not tax income trusts. The income trust industry would welcome the opportunity to discuss these options leading to amendments to the legislation,” he said.
Billions of dollars of investors’ hard earned savings were destroyed when the federal government shocked financial markets on October 31, 2006 and announced that they would impose a tax on the distribution payments of income trusts. The Conservatives had previously promised Canadians that it wouldn’t tax income trusts once in office.
“Not only did the government get it wrong, they wouldn’t provide the basis of their tax leakage calculations, despite the Finance Committee’s request to do so,” said Mr. Kesteven. “The current proposal will ultimately destroy more than 250 income trusts and continue to damage the savings of thousands of Canadians. These companies are vitally important to the Canadian economy and more than one million investors,” he added, noting that companies structured as income trusts employ 250,000 Canadians and allocate $16 billion annually in distribution payments.
“The government needs to make informed decisions in order to safeguard Canadian financial markets and ensure the future growth of the economy. Yet so far all we have are inflated numbers and blacked out documents that hide the evidence used by the Finance Minister to justify this devastating tax on the savings of many seniors and retirees,” said Mr. Kesteven, adding that “Several expert witnesses appeared before the Finance Committee and found severe flaws in the government’s tax leakage calculations.”
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For more information, please contact:
Brenda Paul-Ishikawa, CAIF
W: (416) 469-0188
M: (416) 420-4538
communications@caif.caJoel Baglole, Hill & Knowlton Ottawa
W: (613) 238-4371, ext. 237
joel.baglole@hillandknowlton.ca