November 3, 2006 | In Business, Politics, Law |
If you follow the Canadian stock market you likely know all too well that the federal government sprung a dramatic decision on investors earlier this week, which will see “income trusts” taxed at about the same rate as any registered corporation.
Trusts have long been exempt from normal corporate tax laws, allowing them to pay out larger dividends to investors than other publicly traded companies. In short, they are… sorry, were… a good option for the mid-risk income-oriented investor looking for a steady flow of cash from their investment holdings.
Although one could argue that the tax benefits of income trusts have been, on occasion, abused by big corporations, the fact remains that these investment vehicles have become an important component in the Canadian investment economy, upon which many people rely for regular income.
That’s why I was a little taken aback when Stephen Harper’s Conservative government, made the sudden decision to impose heavy taxes on trusts, effectively rendering them obsolete for tax purposes. In the closely fought election battle earlier this year, the Conservatives promised quite clearly that they would not be taking this move, and that investors had nothing to worry about.
By doing a complete 180 on this issue, however, (and gaining the all-to-eager support of some minority parties in parliament), the federal government has betrayed the trust of Canadian investors, after wooing them into a false sense of security.
The government claims that income trusts are “damaging” the Canadian economy. If this is the case, however, why did Harper promise to protect such a dangerous and frightening type of investment in the first place?
Personally, I came very close to purchasing an income trust just a few days ago, but ended up opting for a (safe) mutual fund instead. Had I gone the trust route, I would have lost a significant percentage of my portfolio, as many Canadians did.
Although this issue isn’t quite enough to make me want to vote Liberal, it does cause me to seriously question the Conservative government’s economic policies. Overall, this was a very scummy and underhanded course of action that voters won’t be forgetting about anytime soon.
