The Canadian Association of Income Funds, representing hundreds of companies structured as income trusts on the Canadian market, have issued a press release entitled, “Minister Flaherty, You have other options”.  The release said that, “reckless Government decision breaks Canadians’ trust” with “Billions Of Dollars Lost”. Along with ad hoc groups of trust issuers and investors, the organization has proposed political action to prevent new taxation of distributions from income trusts.

Specifically, CAIF suggested that, “The federal government’s punitive and unwarranted decision to tax income trusts has thrown Canada’s financial markets into turmoil and jeopardized the retirement savings of millions of Canadians – young and old.”

The organization said that the “Toronto Stock Exchange lost more than $30 billion in capital over the first day and a half of trading after the announcement. The pain caused by this loss is being felt by individual Canadians of all ages who have seen their personal finances irreversibly damaged. Many people lost more than $100,000 in a single day as a result of the government’s decision, and, according to media reports, some retirees say they may be forced to sell their homes or return to work to make ends meet.”

George Kesteven, President of the Canadian Association of Income Funds (CAIF) is quoted as saying.“Finance Minister Jim Flaherty’s reckless decision to tax income trusts has had a devastating impact on working and retired Canadians, and hurt the national economy. This widespread fallout will continue for the foreseeable future unless the government reverses course immediately.”

He then suggested that, “Mr. Flaherty has clearly made a poorly informed and costly decision on income trusts. The government had other options but chose to ignore them and Canadians are now paying the price. Once again, we urge the minister to reconsider his decision and look closely at the other available alternatives.”

CAIF has launched a national campaign that urges Canadians to contact their Members of Parliament and ask them to take immediate action to stop the destruction of their hard earned savings (contact information for MPs can be found at the Government of Canada Pariliamentary Members Web site).

Their campaign also aims to address the facts that the government ignored in its decision making process and continue the fight to protect the financial future of so many Canadians. And the press release noted that “the majority of income trusts are small to mediumsized businesses that use the trust structure to raise the capital they need to reinvest, grow and remain Canadian. If implemented, the new income trust tax will make it prohibitively expensive for these companies to access capital markets. As a result, many of these businesses could end up as subsidiaries of U.S. companies.”

In parallel with this formal campaign by income trust issuers, an ad hoc group of energy trusts has formed the The Coalition of Canadian Energy Trusts (CCET), including a group of more than 40 companies.  It is led by John Dielwart of ARC Energy Trust, but includes energy related companies like Enbridge Income Fund and such financial services firms as CIBC World Markets. The newly formed CCET called for the defeat of the Conservative government in the next election.

Investors have also put together ad hoc political initiatives. One group calling itself “TOITS (The Ontario Income Trust Society)” has set up a web site called The Truth On Trusts and is working to spread the use of bumper stickers that say “Stephen Harper, Keep your promise. Don’t destroy our trusts.”

It is not clear that any political leader in Opposition or in the Liberal Party will pick up on such political interests and then follow-through following an election to remedy the tax situation for trusts as imposed, by surprise, by the current Conservative government.

With intent to generally inform and educate on a non-partisan basis, the iTrust Institute has made contact to offer perspective to policy coordinators for all parties.