Tuesday, 28 July 2009 08:43
On October 31st, 2006, the Conservative’s announced a new 31.5% tax on public income trusts and partnerships without warning or consultation, and decimated $25-$35 billion in savings overnight.
Much of that enormous loss was suffered by Canadian seniors who have come to rely on income trusts for monthly income to pay the bills. This action broke a clear election promise Stephen Harper made to Canadians just 10 months earlier not to tax income trusts. Many Canadians relied on that promise and were betrayed by the Harper government.
A government led by the Progressive Canadian Party would take the following actions with respect to income trusts:
- Cancellation of Conservative Plan / Moratorium Pending Full Review - We would cancel the ill-conceived Harper/Flaherty plan, returning matters to their pre- October 31, 2006 status. A moratorium on new trust conversions would be put in place pending the outcome of a full review and consultation process.
- Comprehensive Review - A comprehensive review and public consultation process concerning the tax and economic issues associated with the grow th of businesses structured as income trusts would be conducted. Issues for examination would include: tax revenue, levelling the playing field for trusts and corporations when all sources of tax revenue are taken into account, business competitiveness, capital markets competitiveness, special “sector” ; considerations, and meeting the investment needs of an aging population.
- Future Rules - After completion of this comprehensive review and public consultation process, a set of proposed future rules will be developed based on empirical evidence, the views of stakeholders and policy merit. The possible outcomes may include no significant change to the pre-Oct. 31/06 rules, or may involve so me new rules. There may also be sector exclusions from any new rules where there is strong economic and policy merit to recognize the unique or differing circumstances of a particular sector (such as oil & gas royalty trusts and other sectors related to depleting resources).
Any new rules developed under the above process will be announced at least 2 years before coming into force to give individuals and markets time to absorb the change in an orderly fashion.