Liberal Leader Stephane Dion has said that the changes to the tax system introduced by the Conservative government has threatened the competitive ability of Canadian businesses.  Specifically, new taxes on income trust distributions have resulted in more than a dozen foreign takeover attempts in less than half a year. The trust tax, along with other government policies could threaten Canada’s economic sovereignty, according to Mr. Dion.

He is proposing specific remedies to what he describes as mistakes.

The Conservatives included in their budget, policies geared to eliminating a tax write-off for businesses that expand overseas. They also introduced a “crippling” non-refundable, 31.5% tax on income trust distributions.  Dion suggested that the policies must be reversed or there is risk of foreign takeovers and job losses.

He said that businesses will be left behind if the competitive disadvantage isn’t corrected in regard to tax write-offs because that kind of write-off is provided to companies in the United States, Europe and Japan. Mr. Dion described the situation as if Canadian businesses were being “forced to go into the arena of a globalized economy with one arm tied behind their backs.”

Some observers suggested that the Conservatives may be motivated to impose policy for purposes of a near-term revenue boost, but ignores the longer term and permanent potential for loss of economic strength in global markets.

In regard to income trusts, Mr. Dion also said that the Liberal Party would, if elected, change the income trust tax significantly, by reducing it to 10%, but also by making the tax refundable to Canadian investors.

“With Foreign companies clamouring to take over Canadian companies, this government is only making it easier for them,” Mr. Dion said.