Thursday, November 02, 2006

Too Trusting

Now you'd think that the Toronto Star would be cheering the Conservative government's decision to tax income trusts, thus preventing more corporations from avoiding paying their fair share of income tax.

But this is the self-proclaimed newspaper champion of the common man, after all, so naturally they've found some common men as victims:

On paper, former hospital janitor Ron Cann is down about $18,000, which is more than he earns in a year. Noel Chaney of Vancouver Island estimates he lost about $65,000 and has started to think about selling his house. David and Lorraine Marshall of Cornwall stand to lose about $100,000, and that's enough to make David regret every lawn sign he pounded into the ground for the Conservatives in the last election.

"The big thing is they lied to us," said Marshall, a former trucker, of the government's decision to tax income trusts, a popular investment vehicle among retirees. "I worked for the candidate here, putting lawn signs up and all those things based on this one issue, income trusts.

"They said they wouldn't touch it. This is completely out of the blue."

It isn't just that the Conservatives changed the rules on income trusts; it's the fact they reversed their stance on the issue that has investors hopping mad.

Lost in all these heart-wrenching stories of retirees' dreams and financial security cruelly shattered overnight is one simple fact: no one forced them to put all of their eggs in one basket.

If they gambled everything on income trusts, the responsibility for their losses is theirs alone. Market conditions change every day, and it would have been irresponsible to assume that income trusts would remain untouched forever.

Don't shed too many tears for those who forgot the first lesson of investing for retirement: diversify!


Anonymous said...

The concept of 'Corporations fair share of taxes' is socialist drivel. Corporations do not pay taxes! Their shareholders (-$25,000,000,000 yesterday) pay those taxes.

For a corporation to pay taxes, it would have to have a large hoard of cash to draw down. In the absence of this hoard, they pay taxes out of their gross revenues leaving less for their employees, clients, shareholders, and suppliers.

The money corporations earn is either invested, or distributed. If it is invested the taxes are deferred to allow future growth. If it is paid to others (employees, shareholders, suppliers), it is later taxed in their hands.

If the corporations distributions are to foreign interests, there should be a witholding tax.

Joanne (True Blue) said...

You can't protect against stupidity and greed. As you say, diversify.

Steve said...


Anonymous said...

I wonder if they bought bags full of Nortel at $100 too.....

Jim L

Scrubs & Shines said...

Wow! I have never never never supported the Conservative Government in Canada...never! I'm reconsidering this position now.

Kitchener Conservative said...

Anonymous is an idiot, Of course corporations pay taxes.

That one of the reasons corporations moved to income trusts to avoid corporate income tax.

Corporate Income tax is paid on Earnings not revenue

IE: revenue - expenses = earnings

Corporations didn't lose anything on Wed., in fact some gained.

Income Trusts have become so popular because the earnings are passed to the investors or shareholders who pay personal income tax.

This was a smart move on the part of the government, but they also are going to allow income splitting for seniors which is going to help immensely, and the new rules aren't going to take effect for 4 fours. Hopely enough time for those to put all their eggs in one basket to hang in there until things settle and then move then to another basket.