VANCOUVER, Feb. 9 /CNW/ - The Canadian Retired & Income Investors'
Association today called for a full public review of the Department of
Finance's tax calculations on income trusts.
At last week's income trust hearings held by the House of Common Finance
Committee, expert witnesses and expert reports seriously undermined the
accuracy and credibility of the Department of Finance's analysis.Specifically:
- Dennis Bruce, of HLB Decision Economics Inc., an Ottawa consulting
firm that worked with Finance as it prepared the federal government's
2005 consultation paper on income trusts, provided data and
supporting documentation that discredited Finance's tax leakage
claims. "The department is sharply overstating tax leakage," said
Mr. Bruce. In contrast, a past HLB study found federal tax revenues
from income trusts are higher than those from corporations.
- An analysis by Len Farber, a former Finance Director General of Tax
Legislation and one of Canada's longest serving tax policy mandarins,
pointed out that the net effective marginal corporate tax rate for
oil and gas companies is about 6% because of special industry tax
breaks. He noted that foreign (mainly US) investors, who own about
50 per cent of energy sector income trusts, pay a 15% withholding tax
to Canada on their distributions. "If they preserve the corporate
structure, Ottawa is only getting six per cent on that 50-per-cent
foreign stake -- not 15 per cent," he notes. "So, really, that
argument about tax leakage doesn't hold there."
- Gordon Tait, a leading financial analyst at BMO Capital Markets, has
produced a report that looked at 126 actual businesses that converted
from corporations to trusts. Based on that "real world" data, he
found the government stood to collect on average "2.2 times more in
taxes by taxing the distributions of the trust than had been paid by
the corporations prior to their conversion".The government has taken a brickbat to seniors' savings by shaving
$20-30 billion off the value of income trust holdings. The biggest financial
loss ever attributed to one government action.
Given the huge losses and hardship suffered by many ordinary Canadians,
there needs to be clear, compelling and unassailable data and analysis on this
important matter. This can be achieved through a transparent public review and
consultation.
Canadian retired and income investors are fighting mad about this.
Despite a clear promise not to do so, the government has taken action that has
"financially gored" those who relied on their promise. Canada is generally
known for treating people fairly and with compassion. So far, the actions of
the minority Conservative government have been the opposite of what Canadians
have come to expect from a democratic and caring government.
The government is hoping this issue will just go away. It will not,
because too many people have been too badly hurt and too badly treated.
About CRIIA
The Canadian Retired & Income Investors' Association is a federally
incorporated not-for-profit corporation representing the interests of ordinary
Canadian retired and income investors. See our website at www.criia.ca.
For further information: Alexander Irwin, General Secretary to CRIIA,
criia@telus.net, (604) 230-0980
