The other day Jim Flaherty was asked a questions about reports that once all these income trusts businesses are forced to convert to the corporate model where they will avail themselves of the endless tax loopholes of the corporate model (like interest deductibility etc) which result in corporations only paying average taxes of 6.2% (according to StatsCanada, and less once Flaherty’s 22% corporate tax cut kick in) he said;
“The change to the rules in income trusts was to ensure there was fairness in the tax system, and we will continue to aim for that goal.”
If that’s the case perhaps someone could ask Flaherty the following;
“What incentive is there for the income trusts that were acquired and taken private by the various pension funds to convert to corporations and start paying some taxes, given that they will not incur that 31.5% tax, as would have been the case if they were held by the public and given that you exempted these businesses from the tax? How does this ensure fairness in the system, in view of the following tax dodge driven takeovers to date (with more likely to come)?
OMERs: Teranet Income Fund $2 billion (September 2009)
Caisse: Legacy Hotel Income Fund $815 million (August, 2007)
OMERs: Golf Town Income Fund $237 million (August 2007)
PSP: Thunder Energy Trust $419 million (April 2007)
BCIMC: CHIP Income Fund: $1,265 million (August 2007)
How much “tax leakage” will this be costing all taxpayers? Is CAITI’s estimate of $162 million a year from these 5 transactions (alone) correct?
If so, how is that possibly fair or equitable? Why do pension funds get to directly access the pre-tax cash flow of active businesses, but RRSP investors can not? Why do the 25% of Canadians with pensions get a better deal than the 75% of Canadians without pensions? Why the two-tiered pension system? I thought RRSPs were created 50 years ago by Liberal government to provide for a level playing field?
Friday, January 29, 2010
Posted by Fillibluster at 2:11 PM