The Coalition of Canadian Energy Trusts has created a comprehensive study of the role of the trusts in the oil and gas sector as well as the Canadian economy. The CCET Report includes a number of downloadable elements (pdf). Their findings suggest that there is significant public harm including addition of environmental risk if the Conservative tax policies are allowed to cripple an otherwise healthy economic sector. The Coalition has called for due process and for policy makers to make decisions on facts and information. The iTrust Institute recognizes this report as an informative contribution to Canadian’s understanding of income trusts and related policy issues:

BACKGROUND Canadian Energy Trusts: An Integral Component of the Canadian Oil and Gas Industry

CCET REPORT (incl. executive summary)

Appendix A1 - Statement by the Minister of Finance - Oct. 31

Appendix A2 - Coalition Backgrounder

Appendix B - Taxation of Income Trusts: Is it Worth the Cost and the Turmoil? by Yves L. Fortin - Nov. 2006

Appendix C - The Inconvenient Truth about Trusts, by Gordon Tait (BMO Capital Markets)

Appendix D - A Perspective on Trusts and Taxes, by Gordon Tait (BMO Capital Markets)

Appendix E - Market Cap Weekly, BMO Capital Markets - Nov. 9

Appendix F - CO2 Enhanced Recovery: Where to from here? (ARC Energy Trust) - Nov. 21

Appendix G1 - Income trusts are efficient at investing and growing, PriceWaterhouseCoopers LLP - Dec. 7

Appendix G2 - Income Trust Report, PriceWaterhouseCoopers LLP - Dec. 11

Appendix H - Taxation Process for Trust Income

Appendix I - Comparison of Income Trusts and Public Corporations - Taxability

The release of the Report was made with a news conference that can be heard online.

The CCET should be applauded by investors and policy administrators for both the report and their invitation for public scrutiny.  The Institute is further reviewing the CCET release in the context of prior reports and analysis. 

A professional engineer working with a major gas producer writes: Imagine a nation whose citizens took pride in owning dynamic businesses that formed a significant part of its own economy - businesses dedicated to running efficiently and giving the resulting profits back to the people: A people who enjoyed a level of income from investment that afforded them a decent standard of living, replacing or supplementing their employment income, and topping up social security and pension income from their Government as they entered retirement. Until recently, Canada was this nation…

And he concludes a well-informed letter to suggest that the Canadian, ”government has just launched a devastating attack on the standard living and quality of life after retirement of most Canadians. The brunt of the attack is borne immediately by senior citizens, and those who for various and valid reasons cannot or choose not to enter the workforce. For the rest of us the effect will be delayed, but should start becoming apparent when the November financial statements arrive.

In summary, income trusts do not represent a significant tax issue to the government. More income generally means more income tax! More income in the hands of individual Canadians means a higher standard of living...and isn’t raising the standard of living of everyone really what it’s all about?

More »

Two new studies, one from BMO Nesbitt Burns and another from PriceWaterhouseCoopers have shown the inherent flaws and misinformation on which the Department of Finance has based its decision to tax trust distributions and to “say no” to the “Income Trust Economy”.

First BMO Nesbitt Burns issued a study: Trusts Provide Tax Gain for Government, written by Gordon Tait, an income trust analyst.  He said, “We looked at 126 businesses that converted from equities to trusts between 2001 and 2005 to prove that Ottawa reaped more, not less, tax revenue after firms converted to income trusts...We found that on average the government stood to collect 2.2 times more in taxes by taxing the distributions of the trust than had been paid by the corporations prior to their conversion.”

And then a few days later, we see a fresh report out from PriceWaterhouse.  Their findings were reported to suggest that, “A review of Canada’s more than 250 income trusts indicates that trusts have been making an important contribution to the economy, investing their capital and growing their businesses at impressive rates.”

Significant specific new conclusions included the idea that, among the 250 diverse trusts studied, there was the net income reinvestment rate with more than 200% in 2005 and almost 400% in 2004.

The author concluded that, “The data clearly refutes the notion that the income trust structure is best suited to mature, low-growth companies in stable industries.”