Halloween scare or show of responsbility?
It's ironic that the Conservatives have decided to tax income trusts to bring them closer to the way corporations are taxed. After all, they're supposed to be fiscally conservative and working towards reducing government interference in the market. I do think its brave (after all the Liberals never did it) that the Harper government has taken this step, apparently going against where they stand on the political spectrum.
The new measures are supposed to prevent the tax burden from shifting to individuals in the wake of the growing trend of income trust conversions, including major corporations like Telus and BCE (Bell Canada). Trust conversions cost $300 million in tax revenue in 2004, and would have cost the federal and provincial governments $1.1 billion in lost taxes once Telus and Bell completed their conversions.
The changes in the tax system are proving unpopular with the business and investment sectors. The TSX lost billions in market value yesterday and many corporations are now rethinking their conversion plans.
It's praiseworthy that the Conservatives has risen above minority government politics and acted in what seems to be the best interests of the country as a whole. They could have easily chosen to do nothing and leave the decision to whoever was in power after the next election. Perhaps its a sign of their intention to ensure they continue to form the government for some time to come.
5 comments:
Well that's the other side of the story, I suppose. But there's reason to believe things may not be so bad for those who've invested in or been relying on income trusts.
The markets have recovered since the big fall right after Jim Flaherty's announcement, and income trusts are regaining some of their lost value. Also, seniors have a number of tax relief measures in the new changes in tax structure.
As for the broken promise side of it, yeah I don't have much to defend the Conservatives on that point. This isn't the first time politicians have gone back on their word. Canadians will find it all the harder to have faith in Harper's platform come next election.
I'm await a comment from Mr. Tanveer since he is employed by one such trust.
Yeah the markets have recovered somewhat but it's mostly because people are taking the money they had in income trusts and investing in lesser alternatives.
I agree though that the other new tax measures (such as income splitting)will benefit many.
Sorry, folks been a while since I checked this blog. Reason being I am no longer employed by an income trust and have moved on to another company recently, so been busier than usual.
All in all, the right move by the Conservatives, even if a number of people (myself included) took a hit from the step. It was expected...the only question was who would have the courage to take the step and how large would the problem grow before the pain was delivered. The Liberals disappointed me in their flip-flop last year, but this was a ticking time bomb and the Torys did good on this one. It was one election promise that deserved to be broken...but aren't most?
IMO party-based Western democracies simply cannot deal with the big picture issues. Elections tend to be driven more and more by the inconsequential, short term concerns of specific voting groups, not the best interests of society as a whole. Parties trip over each other to pander to the niches and promise the moon to the pivotal swing voters and contributoes, to the detriment of society as a whole.
As for all the investors who plowed into trusts, well they clearly didn't understand the risks of what they were investing in. Nothing new there. People get burned investing all the time. Someone's loss is someone's gain. In most cases, the masses lose and a few profit. But that's another topic.
Interesting set of comments. I especially liked the last one by tanveer - I agree with these sentiments wholeheartedly. A good investor spreads their risk around a little bit. I think that Harper is, for the most part, looking at the broader perspective, and is making decisions based on sound reasoning, rather than public or media frenzy. For those who have lost their pants on this particular announcement, I would recommend that they try to take some responsibility for their investment actions. I am more for the decrease in business and personal tax (which sounds imminent), which will benefit a much broader scope of citizens.
Adam - http://canadalawstudent.blogspot.com
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