The Canadian Association of Income Funds (CAIF) has written a letter to members to launch a “multipronged action plan,” to “set the record straight”. With a paid advertising program, the association of trusts will hire “third-party experts” to dispell negativity about trusts.

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Amid all the talk about the tax leakage and problems for small investors and the government due to income trusts, we see that the Canadian Pension Plan Investment Board (CPP IB) has prposed to the federal government that it should spin-off and build a real estate investment trust (REIT).  The CPP invests on behalf of 16 million working Canadians and not only holds income trusts of all kinds.  With business trusts in its equities portfolio, the CPP has turned the public pension fund from deficit to surplus during the 10 year rise of income trusts.

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The income trust as an asset class and the market for trusts has matured since participants were threatened by a new tax regime during the Liberal watch on Ottawa, in late 2005. The Department of Finance Consultation on Flow-through Entities was not a problem for trust owners or issuers.  But the stop on trust tax rulings and surrounding negativity by officials in the media appeared so threatening that it caused the single-most significant trust sell-off in more than a decade. Retail investors sold trusts and prices fell 17% on average.

However, the trust market recovered with added strength from both the destructive force of political threat and the Finance decision to reduce taxes on dividends, to “level the playing field” for equities.

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