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InvisibleLuddite
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Registered: 03/23/06
Posts: 2,946
Canadian investors lose $25 billion
    #6249593 - 11/05/06 09:31 AM (17 years, 2 months ago)

Tory trust move is a 'bait and switch': Ignatieff
Updated Thu. Nov. 2 2006 5:00 PM ET

Canadian Press

TORONTO -- Canadian investors have become the victims of a "bait and switch'' following the surprise Conservative government decision to impose new taxes on income trusts, Liberal leadership front-runner Michael Ignatieff said Thursday.

In delivering an economic platform that took aim at Prime Minister Stephen Harper's "ideologically driven'' cuts to the GST and social programs, Ignatieff conceded that the income trust tax "advantage'' had to be addressed.

Still, the leadership hopeful railed at the Conservatives for recklessly changing "the rules of the game overnight.''

"It's not so much the objective here, but the way it was done just makes your mouth drop open,'' Ignatieff told an audience of business leaders in Toronto.

While protecting the government's tax base is "important,'' predictable regulations from Ottawa are "essential,'' he said.

"We can't have a market where major players announce their intentions one day, and government changes the rules of the game overnight.''

On Tuesday, Ottawa announced it would impose a distribution tax on payouts by income trusts, taking effect next year for newly formed trusts while existing ones get a four-year transition period.

Income trusts avoid corporate income taxes because they distribute most of their cash flow to investors to be taxed in their hands.

Canadian telecommunication giants BCE Inc. and Telus Corp. were among the latest companies to announce plans to convert to trusts.

The government's surprise decision -- the Tories had campaigned on not introducing new taxes on income trusts -- severely rattled the markets and led to a loss of more than $36 billion over two days.

"Mr. Harper induced many Canadians to take him at his word and put their hard-earned savings into income trusts. . . induced many companies to go the income trust route,'' said Ignatieff.

"Bait and switch is not the way, not the way, to deal with Canadian investors.''

On Thursday, Harper defended the move as one that protects seniors and average Canadians from paying taxes that are currently paid by large corporations.

"(The trend toward income trusts) would have shifted the tax burden to ordinary Canadians. . . that is not fair that is not what this government promised,'' Harper said during the daily question period.

"This government is determined to have a fair system of taxation.''

In delivering his economic platform, Ignatieff also lamented Canada's "lacklustre'' performance in overseas markets and said Harper's ideologically driven cuts to social programs only undermine Canada's competitive edge.

The rookie MP unveiled a six-point plan for the economy that focused on immigration, education, innovation, infrastructure, trade and environmental sustainability.

Taking aim at the conservative ideology of minimal government intervention, Ignatieff told the audience "this country does not want to be administered, it actually wants to be led.''

Ignatieff heads into December's Liberal leadership convention in first place in delegate support, followed by former Ontario New Democrat premier Bob Rae, Gerard Kennedy and Stephane Dion.

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20061102/ignatieff _speech_061102/20061102?hub=Canada


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InvisibleLuddite
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Re: Canadian investors lose $25 billion [Re: Luddite]
    #6249596 - 11/05/06 09:32 AM (17 years, 2 months ago)

Liberals accuse Tories of 'deception' on trusts
Updated Wed. Nov. 1 2006 11:35 PM ET

CTV.ca News Staff

The Liberals blasted the Conservatives with both barrels in question period, accusing them of breaking a campaign promise on income trusts and destroying $25 billion in market value.

They tied the attack to Prime Minister Stephen Harper, who had promised in his party's election platform to "... preserve income trusts by not imposing any new taxes on them."

"Why did he engage in a deception of such monumental and costly proportions to all Canadians?" asked interim Liberal Leader Bill Graham on Wednesday.

"The commitment of this party was not that we would have no taxes for Telus," responded Harper, referring to one corporation that had been planning to convert to a more tax-friendly income trust.

"It was a commitment to protect the income of seniors. The minister of finance has brought in an age credit, he has brought in pension-splitting, he is imposing fair taxes on the corporate community, and I challenge the Liberal Party to support those things," he said.

Graham said that's not what Harper said during the election.

"He gave his word, Canadians acted on his word, and he broke his word."

Liberal MP Lucienne Robillard, the second Liberal MP to speak, accused the Tories of lying and taking money out of peoples' pockets.

Finance Minister Jim Flaherty said there is substantial provincial support for the initiative, "including the finance minister of Quebec."

He painted the decision as one of tax fairness: "Should corporations pay their fair share of taxes in Canada, or should we shift the balance more and more onto individual taxpayers."

Neither Bloc Quebecois Leader Gilles Duceppe or NDP Leader Jack Layton used their questions to ask about income trusts. They stayed with the climate change issue.

The New Democrats had issued a statement praising the Tories for closing the tax gap between income trusts and corporations.

Why now?

Jane Taber, guest host of CTV Newsnet's Mike Duffy Live, asked Flaherty if he made his move now because he didn't want to include the contentious change in a spring budget.

"I have a fall economic update to do some time in November, plus the release of the economic plan," he said. "There was no particular magic to do it on Oct. 31."

He insisted tax fairness was the overriding factor, plus ways to help seniors and pensioners.

"This pension decision to allow pension-splitting is a huge benefit for pensioners in Canada," he said.

On the broken promise aspect, Flaherty repeated Harper's point from question period: "Well, we promised security for seniors ... Our focus was not to protect corporations from paying their fair share of taxes in Canada."

The erosion of the corporate tax base concerned him, he said, adding this move carried political risk because major tax changes were a matter of confidence in the government.

Flaherty said the announcements by telecom giants Telus and BCE to consider converting to income trusts helped spur the government to action.

Those two companies signaled Wednesday that their conversion plans are on hold.

Finance critics react

On Mike Duffy Live, Liberal finance critic John McCallum said people are angry "because a commitment was broken."

Earlier Wednesday, McCallum had heaped scorn on the Conservative government's "incompetent" plan to tax income trusts -- saying it has made us the "laughingstock" of North American capital markets.

Judy Wasylycia-Leis, the NDP's finance critic, praised the Conservatives' move, noting her party had called last week for an income trust moratorium.

She rejected the idea these changes were an attack on seniors.

"Not every senior has a stockbroker, and some of these provisions will help all seniors. Also, many seniors were losing their savings because in fact income trusts were not reporting their true value," she said.

"Some will lose, yes, but in the long run, Canadians will win."

McCallum said many seniors are invested in income trusts. With the $25 billion drop in market value, it will take 25 years to recoup that through the estimated $1 billion per year in other tax benefits introduced, he said.

Wasylycia-Leis described the income trusts as a huge tax loophole for Canadians.

"We agree with the long-term destination ... what object to is the dishonesty and the process. It was not necessary to have a $25-billion meltdown to get to that destination," McCallum said.

The Liberals got into massive political trouble almost a year ago when there appeared to evidence of an insider leak of that minority government's policy announcement on income trusts.

Wasylycia-Leis asked the RCMP to investigate the issue. The force thought there was enough evidence to proceed with a criminal investigation and made an announcement to that effect in the middle of the federal election campaign.

She said Wednesday that the investigation is ongoing.


http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20061101/trusts_po liticalreax_061101?s_name=&no_ads=


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