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VOLUNTEER NITIATIVE |
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TrustInvestor |
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| [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:
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