No wonder why every corporation that could become an income trust wanted to.
But when BCE did, the party was over, and now Jim Flaherty has to play killjoy:
Finance Minister Jim Flaherty announced late Tuesday that the government will impose a tax on income trust distributions, a move expected to upset markets and halt conversion plans by two of Canada’s biggest corporations.
The tax will be introduced in two phases. Distributions from existing trusts will not face charges until 2011, giving them four years to adjust to the change.
But distributions from new trusts would be taxed beginning in 2007. This is key as two of Canada’s biggest corporations, Telus Corp. and BCE Inc. announced this fall they would convert their multibillion-dollar operations into tax-friendly trusts.
In a hastily-called news conference, Mr. Flaherty said he was forced to act due to the "growing trend of corporate tax avoidance" — an estimated $70-billion in new trusts coming to market this year alone.
"We were faced with a situation where Canada was moving to an income trust economy. Is that a good thing for Canada? No," he said.
"If corporations don’t pay their share of taxes, this tax burden will shift onto the shoulders of hardworking individuals and families. This is simply not fair."
This policy change should pass with little difficulty. I can't imagine any of the opposition parties wanting to cast themselves as defenders of Bay Street tax avoiders, not even the Liberals.
Source: National Post