TORONTO, April 3 /CNW/ - The Conservatives campaigned in the last
election stating that they would bring a new level of accountability and
transparency to government. They also promised to never tax income trusts.
Nine months later and without public consultation, Jim Flaherty announced the
taxation of income trusts. This announcement led to the immediate loss of
$35 billion in Canadians life savings. Another aspect of the Finance
Minister's policy was to restrict the growth of existing income trusts. Many
knowledgeable individuals stated at the time that these circumstances would
lead to the inevitable foreign dominated takeover of the 250 income trusts
whose combined market capitalization was $200 billion.
Finance Minister Jim Flaherty based his new tax policy on the assertion
that income trusts cause a loss of tax revenue to the government. Mr. Flaherty
has steadfastly refused to satisfy the spirit of the Access to Information Act
by keeping his tax analysis secret. The foundations of tax policy should be
made public. Mr. Flaherty's unwillingness to release his analysis is in stark
contrast to the new era of transparency that the Conservative government
promised to usher in.
In the last several weeks there has been an acceleration in the number of
income trusts that have become targets of foreign private equity buyers as
many had predicted at the outset. A total of 17 acquisitions have been
announced totaling $15.2 billion, the majority by foreign acquirors.
Apart from the loss of market value resultant from Mr. Flaherty's tax
policy and his "central planning style" growth restriction, his recent budget
contained a very "foreign takeover friendly" measure, namely the elimination
of the withholding tax paid by foreign investors on interest payments. This
provision makes it significantly more economically attractive for firms like
US based KKR to complete their contemplated $40+ billion leveraged buyout of
Canadian telecommunications giant BCE. It also assures a loss of tax revenue
to the government. Furthermore, BCE would not be the target of foreign
acquirors like KKR if Finance Minister Flaherty had not intervened with
natural Canadian market forces and prevented it from becoming an income trust.
Many believe that Telus will be the next to be acquired by private equity
In response to the recent wave of announced acquisitions of income
trusts, Mr Flaherty yesterday stated: "Trust buyouts are not my fault".
Upon hearing this statement, Brent Fullard, President & CEO of the
Canadian Association of Income Trust Investors (caiti.info) stated: "Mr.
Flaherty brings a new low to the concept of being accountable for one's
actions, be it in government or in any walk of life. Not only does Mr.
Flaherty not understand the concept of "duty of care" he does not understand
the concept of "duty of office". His actions are reckless."
For further information:
For further information: Brent Fullard, (647) 505-2224,