Leave Income Trusts Alone!

The undersigned demand that the government of Canada not change the taxation rules of income trusts in a manner which would reduce the net (after-tax) income currently derived from holding these securities.

The Finance Minister - Ralph Goodale - has expressed alarm at the 'calculated' loss of $300 Million per year in tax revenues. This represents about 0.16\% of government revenues, yet amounts to a significant portion of the income being relied upon for basic living expenses by many Canadians. We believe that this quick calculation does not take into account the additional revenue received by the Canadian government as a result of many US-based companies becoming TSX-listed income trusts.

The Finance Minister has also said that he is concerned about how income trusts may be affecting productivity. We suggest to the Finance Minister that his concern is misplaced: Many Coroporate CEOs have used the extra cash generated by their businesses to build themselves empires with little concern for shareholder value (e.g. BCE, Nortel). Income trust managers, by contrast, tend to have a much more disciplined approach to growing their businesses. Often, they must go to market to fund new acquisitions. This effectively affords the stakeholders the opportunity to 'vote' on the wisdom of a given acquisition.

If the government is concerned about 'penalizing' companies which choose not to convert to income trusts, then they can increase the dividend tax credit.

Despite tacit governmental approval of income trusts over the past two decades, the Finance minister has suddenly declared war on income trusts and their investors. In so doing, he has already destroyed Billions of dollars of wealth in terms of market capitalization of income trusts. Ironically, this will lower capital gains taxes collectable by Billions of dollars thus dwarfing the $300 Million that Mr. Goodale says he is so concerned about.

Despite the irrational disdain expressed by the Finance Minister, income trusts are working for Canadians and working for Canada. We demand that the Finance Minister state his intention to leave the tax rules for income trusts alone.