OPEN LETTER To Members and Clerk of the Finance Committee

Thank you for helping to make the preliminary study of income trusts happen and allow for public participation.  Canadians appreciate the process as some small way to rebuild trust in policy-makers in a situation where it has been terribly broken by tax and equity policy that defied past promises. 

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QUOTE:

“Either they didn’t do their homework [about trusts] and didn’t understand the issue, which means they are incompetent, or they did look at it and they flat out lied…You’ve either got an incompetent government or a bunch of liars.”

Trusts provide a “very good business model”, but “executives who support Ottawa’s tax changes just don’t understand income trusts”.

Article about Executive Survey
By Richard Blackwell
Report on Business, Globe & Mail

Responses from the public consultation on trusts 2005: Tax and Other Issues Related to Publicly Listed Flow-Through Entities (Income Trusts and Limited Partnerships).

The Department began posting public responses to this consultations initiative on Thursday March 16, 2006. Additional responses will be posted in alphabetical order as soon as they are processed. By the end of 2006, the Department had not yet completed the process as it worked through from letter “a” on to build an alphabetical list of responses.

After much discussion online, members of TrustInvestror.com voluntarily drafted a response to the Department of Finance Consultation on FTE’s.  There were numerous petitions on the Web. But the TrustInvestor petition to the Department of Financecalled for thoughtful consideration of policy given the news that, subsequent to the Consultation initiation but prior to its conclusion, the Minister of Finance, Ralph Goodale had requested a change in working policy at the Department of Finance.  He had put a stop to preliminary tax rulings desired by companies prior to converting common shares into structured trust structures.  In effect, the Minister had put a stop to income trusts prior to hearing feedback from citizens in the process he had initiated to do so.

REGARDING THE CONSULTATION PAPER:

Tax and Other Issues Related to Publicly Listed Flow-Through Entities (Income Trusts and Limited Partnerships)

TO Denis Normand, The Department of Finance, Ottawa Ontario trusts-fiducies@fin.gc.ca
With request and permission for publication by the undersigned

COPiED TO:

The Prime Minister of Canada, Paul Martin, martin.p@parl.gc.ca
The Minister of Finance, Mr. Ralph Goodale, rgoodale@fin.gc.ca

[October 1, 2005] Statements by the Finance Minister indicate that the government is considering the imposition of punitive measures on income trusts. These statements have roiled the markets and confused investors. In order to insure a fair tax policy and stable policy regime, we urge the Minister not to impose new taxes or other measures that could damage the vitality and growth of income trusts.

Whether tax revenue is lost due to income trusts is a very complex issue. The Department of Finance claims that $300 million in tax revenues were lost in 2004-05. This claim did not include a forecast of deferred tax collections from income trusts held in retirement plans. Nor does this claim consider foreign capital that has flowed into this sector and generated additional revenue. Even if we assumed the government estimate to be accurate, it represents only 15/100ths of 1 percent (.0015321) of the $195.8-billion in tax revenue reported by the Department as income for that year.

No available data supports the Minister’s contention that distributions made by income trusts harm either trusts or the economy. Rather, the profitable performance and growth of flow-through entities over more than ten years provides dramatic proof that this form of equity is an effective use of capital. A thorough analysis of income trusts’ total effects on the economy is needed before government intervention can be considered prudent.

Canada has created an innovative addition to equity markets in the form of income trusts. They are receiving international recognition and investment as a valuable form of security that offers the public opportunity to participate in the growth of Canadian wealth. They are uniquely accessible, high-yield, asset-backed equities that are priced in the market to reward investors for risk capital.

With their emphasis on ownership of productive assets, profitability and cash flow, many income trusts have enhanced standards of corporate accountability to investors and fiscal discipline by management.

Flow-through entities have revived investor confidence in financial markets while attracting low-cost capital to develop Canadian enterprise. The vitality of these securities is reflected in their growth and increasing value.

As investors in Canadian income trusts, we want to ensure the continued health, competitiveness and growth of our markets and economy.

Our confidence and participation in Canadian financial markets is instrumental to the Canadian government.

WITH REQUEST AND PERMISSION FOR THE DEPARTMENT OF FINANCE TO PUBLISH THIS SUBMISSION INCLUDING THE NAMES AND ADDRESSES OF THE MORE THAN 835 INDIVIDUALS, UNDERSIGNED: