Tuesday, September 23, 2008

Liberals warmed over Income Trust Stew

This is from the Financial Post. Sometimes I wonder if the Liberal campaign team is working to make sure Dion does not do well. It is hard to explain their gross incompetence otherwise. It might make some sense to bring up the income trust issue just to stress that Harper does not keep his promises. But the Liberal counter plan is as the article points out a funky stew that probably is not all that more palatable than the Conservative plan. Also, both the NDP and the Bloc support the Conservative legislation so it seems that the Liberals are trying to outflank the Conservatives on the right! Duh!

What's new from Liberals on income trusts? Not much
Posted: September 22, 2008, 1:11 PM by Vieira

There was much anticipation Monday on the release of the Liberal Party platform, in particular what it had in store for income trusts.There was speculation, based on published reports, that the Liberal Party would "scrap" the income trust tax. But once the dust settled, it became clear there was no "scrapping" of the tax in the works. The election platform merely repeated what the Liberal Party proposed, in February of 2007, as an alternative to the Conservative government's plan to slap a 31.5% tax on income trusts, starting in 2011. The main elements of the Liberal plan included:• Imposing a tax of just 10% on trusts, as opposed to the 31.5% levy. • Canadian residents would be eligible for a tax refund.• And a ban on new trust formations, but with the possibility that exemptions for particular sectors are possible if a number of conditions are met.The Liberal platform's reference to income trusts can be found here (proceed to page 18). At the time the Liberals released their income trust policy in February, 2007, tax experts from the C.D. Howe Institute called it a "politically funky stew" that did not offer the same certainty to markets, compared to the government's proposal. (Which has since been passed into law.)Of note is that the Liberals anticipate that its 10% trust tax would raise $1-billion over a period commencing Jan. 1, 2011, to March 31, 2013. In its initial announcement on Oct. 31, 2006, the Conservative government projected its 31.5% trust tax would raise $500-million, from Jan. 1, 2011, to March 31, 2012. It is not clear how the 10% trust tax would raise more cash for the federal treasury compared to the 31.5% levy -- unless the underlying assumption is that existing income trusts would choose to continue operating as a trust structure because the levy would be much lower, at 10%. Under the current setup, there are provisions for trusts to convert into corporations without incurring tax consequences.In response, the Prime Minister, Stephen Harper, ruled out any changes to the government's plan to tax trusts. His trust plan has the support of the Bloc Quebecois and NDP.Moreover, the NDP was distributing information Monday to certain journalists that alleged that a handful of Liberal MPs who ran for the party leadership in 2006 received campaign contributions from among the most vocal opponents of the Conservative's trust tax, based on data the party said it collected from Elections Canada.In any event, pollsters have long argued that the Conservative government's flip-flop on income trusts -- promising not to tax them during the last election campaign, and then doing so as a result of a bevy of big corporations seeking to convert to the tax-friendly trust status -- would not, on its own, change voter intentions. More likely, the Liberal attack on income trusts is a way for the party to remind voters that Mr. Harper does not necessarily keep his word.Paul Vieira-->

No comments: