The firm Blake, Cassels & Graydon, LLP is a leader in both Canadian tax and structured finance law.  It issued a bulletin entitled ”Canadian Minister of Finance Announces a Proposed New Tax Regime for Income Trusts and Public Limited Partnerships - November 2006”.

They said, ”On October 31, 2006, the Minister of Finance announced significant changes to the taxation of publicly-traded income trusts and partnerships. These changes have been brought on by the recent announcements of a number of large Canadian public corporations that they intended to convert into income trusts. However, the Minister also said that the proposals are the result of “months of careful consideration.” The Minister has concluded that, although the 2006 federal budget proposal reduced the rate of federal income tax on dividends received by individuals, this did not sufficiently overcome the benefits to corporations of converting into income trusts because the reduction did not address the significant tax advantages enjoyed by non-residents and tax-exempt investors. As a result, the new proposals create a tax regime for publicly-traded trusts and partnerships and their investors that is similar, but not identical to, that for public corporations and their shareholders.

Like other law firms employed in the trust sector and by government, provided details about the new trust tax without opinion on it.

Mr. Werklund said in a press release that, In a sea of confusion and uncertainty, CCS Income Trust is confident that it is on solid ground. With a history of delivering value to unitholders, a phenomenal growth record and the best third quarter in history, CCS is confident the government’s “Tax Fairness Plan” won’t be derailing its growth plans.

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The firm Blake, Cassels & Graydon, LLP issued a bulletin entitled ”Canadian Minister of Finance Announces a Proposed New Tax Regime for Income Trusts and Public Limited Partnerships - November 2006”.

They say, ”On October 31, 2006, the Minister of Finance announced significant changes to the taxation of publicly-traded income trusts and partnerships. These changes have been brought on by the recent announcements of a number of large Canadian public corporations that they intended to convert into income trusts. However, the Minister also said that the proposals are the result of “months of careful consideration.” The Minister has concluded that, although the 2006 federal budget proposal reduced the rate of federal income tax on dividends received by individuals, this did not sufficiently overcome the benefits to corporations of converting into income trusts because the reduction did not address the significant tax advantages enjoyed by non-residents and tax-exempt investors. As a result, the new proposals create a tax regime for publicly-traded trusts and partnerships and their investors that is similar, but not identical to, that for public corporations and their shareholders. And then the specific details are provided without opinion from the Law firm.

QUOTE:

Criticism of the planned conversion of Telus into a trust is “very superficial”. It’s by no means a tax dodge and won’t handicap the firm’s ability to reinvest and grow.

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QUOTE:

“We are calling for a moratorium on any further conversions...There needs to be a study assessing how the government purse and investing patterns will be affected before any more companies are allowed to proceed...they lack transparency and accountability.”

The concern is that many income trusts are being overvalued, that there is a gap between what they actually hold and what they are committed to paying out...If we tighten the rules up a bit, we could play a role in protecting people.

FROM: Tavia Grant and Roma Luciw
For the Globe & Mail
in Report on Ottaw Press Conference