Based on the Conservative Party’s 2006 campaign promise to allow income trusts to retain their non-tax status, more than a million Canadians invested in income trusts. The Conservatives broke their election promise and these investors lost over $30 billion. Many older Canadians saw their retirement savings disappear within hours.
The reason given for breaking the promise was that the government was losing revenue because the trusts did not pay tax. Finance Canada proceeded as if there was no tax revenue from income trusts. This was wrong. The trusts made payments to their investors and those payments were taxed. Recently, it has been revealed that the reason put forward by Stephen Harper at the time was not his real motivation.
There are public policy reasons to constrain or even discourage income trusts. If it could be proved that, over time, such arrangements led to a failure to re-invest profits in modernizing and expanding Canadian operations, action would be appropriate. So far this reasoning is intuitive and not empirical. What is clear is that the stated reason for breaking the promise, tax leakage, was not justified.
The Green Party condemns the Harper government for breaking an election promise and leaving citizens and companies in the lurch. The decision to tax income trusts has left Canadian companies more vulnerable to foreign takeover. It will be years before we fully understand the damage caused by this decision.
Green Party MPs will: