Jim Flaherty, Canada’s finance minister, has announced sweeping tax changes to curb the growth of income trusts.
“It is a trend that has caused me growing concern. If corporations don’t pay their share of taxes, this tax burden will shift onto the shoulders of hardworking individuals and their families,” he said at a news conference last night. “Left unchecked, such corporate decisions would result in billions of dollars in less revenue for the federal government to invest in the priorities of Canadians.”
The government is proposing to apply a new tax on distributions to unitholders by newly formed income trusts. Existing trusts would receive a four-year transition period, which would end in 2011, allowing them to adjust to the changes.
The decision was a reversal of what opposition leader Stephen Harper said on Jan. 4, 2006 while campaigning in Toronto: “I assure you we are not going to apply new taxes on income trusts or in any way reduce the attractiveness of the income trust vehicle.”
Meanwhile, corporate income taxes would be reduced by 2011 to remove some of the incentives to forming income trusts.
Flaherty also announced income splitting among pensioners will be allowed starting next year. They will be permitted to split all of their pension income, not just their Canada or Quebec pension plan payments.
To comment on this story email craig.sebastiano@rci.rogers.com.