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New rules for income trusts
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| TO guy |
http://www.thestar.com/NASApp/cs/Co...ol=968793972154
Finance Minister Jim Flaherty said yesterday that he is changing the rules for trusts. Basically eliminating their tax free status. I'd like to hear what Jayx1 (and everyone else!!) has to say about this move. Seems like it goes against the rest of the CPC's economic policy (reducing GST, reducing Federal Tax, reducing capital gains tax). |
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| ShadoWolf |
When BCE announced its intention to convert, yesterday's announcement from the Minister became inevitable.
The move is not inconsistent with the rest of the CPC's policies. You omitted the other changes announced yesterday:
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http://www.thestar.com/NASApp/cs/Co...ol=968793972154
-To provide income tax relief to low- and middle-income seniors, the government will increase the age credit amount by $1,000 to $5,066 from $4,066 retroactive to Jan. 1, 2006. The tax savings for seniors are expected to total $2.2 billion over six years.
-Beginning in 2007, the government will allow pensioners to allocate some of their pension income to their resident spouses for tax purposes. This so-called "income splitting" is designed to increase the incentive to save and invest for retirement. It will cost Ottawa nearly $4 billion in lost tax revenue by 2011.
-The corporate income tax rate will be reduced by half a percentage point as of Jan. 1, 2011a move that will cost Ottawa an estimated $700 million a year in lost revenues when fully implemented. |
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| Moral Hazard |
| quote: | Originally posted by ShadoWolf
The move is not inconsistent with the rest of the CPC's policies. |
It is, however, inconsistant with their stated position on the matter....
| quote: |
The plan
A Conservative government will:
Confirm its commitment to the Canada Pension Plan (CPP) and Old Age Security (OAS) as well as the
Guaranteed Income Supplement (GIS) as fundamental guarantees of income security in retirement years.
Stop the Liberal attack on retirement savings and preserve income trusts by not imposing any new taxes
Protect the integrity of the CPP investment fund to stop politicians from raiding it to balance the budget
or pay for other political projects.
Protect seniors from over-taxation by raising the pension income tax amount that is eligible for a federal
tax credit from $1,000 to $2,000 per year in 2006, and to $2,500 in five years.
Appoint a Seniors Council comprised of seniors and representatives of seniors organizations to advise the
minister responsible for seniors on issues of national importance. |
2006 Conservative Policy Platform
Ahhhhh, brokerage politics, you have to love it. |
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| TO guy |
| quote: | Originally posted by ShadoWolf
When BCE announced its intention to convert, yesterday's announcement from the Minister became inevitable.
The move is not inconsistent with the rest of the CPC's policies. You omitted the other changes announced yesterday: |
It seems inconsistent as they are raising taxes, rather than reducing them. I thought they were coming to power with a model simillar to the Alberta case (low/no tax = increased spending = better for citizens and government). If they want to increase seniors' available money they can make changes to CPP or OAS, instead of increasing their deduction limits. Besides that .... Income Trusts can be a good source of income for seniors (or anyone). |
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| Moral Hazard |
| quote: | Originally posted by TO guy
Besides that .... Income Trusts can be a good source of income for seniors (or anyone). |
Which is why the above portion from their 2006 policy platform was taken from the "protecting our seniors" section. Good to see the seniors take such high priority (as none of those platform commitments have been fulfilled and they've alreay reversed one). |
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| TO guy |
| quote: | Originally posted by Moral Hazard
Which is why the above portion from their 2006 policy platform was taken from the "protecting our seniors" section. Good to see the seniors take such high priority (as none of those platform commitments have been fulfilled and they've alreay reversed one). |
Pretty soon everyone is gonna be retired. Your industry, as well as the financial industry is going to be a mess. They need to start planning for all the "cashing out". |
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| ShadoWolf |
| quote: | Originally posted by TO guy
It seems inconsistent as they are raising taxes, rather than reducing them. |
Did you not read my previous post? They are raising the tax on income trusts AND lowering an assortment of other taxes. The intent is to be as revenue neutral as possible. The problem is that after BCE converted, the big banks seriously started looking at converting as well. That would have meant that no large existing corporation (future trust) would pay any tax, and that individuals would shoulder almost the entire tax burden of the state. |
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| Moral Hazard |
| quote: | Originally posted by TO guy
Pretty soon everyone is gonna be retired. Your industry, as well as the financial industry is going to be a mess. They need to start planning for all the "cashing out". |
It's already happened to the insurance industry in Quebec. I know adjusters who have recently made $25K bonuses to jump ship to other companies and are earning 70% commission (industry standard is 50%) simply because there is a scarcity of people. The same will happen in Ontario 10 year from now.... I'm waiting with baited breath. |
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| ShadoWolf |
| quote: | Originally posted by Moral Hazard
It is, however, inconsistant with their stated position on the matter....
2006 Conservative Policy Platform
Ahhhhh, brokerage politics, you have to love it. |
| quote: | Originally posted by Moral Hazard
Which is why the above portion from their 2006 policy platform was taken from the "protecting our seniors" section. Good to see the seniors take such high priority (as none of those platform commitments have been fulfilled and they've alreay reversed one). |
It certainly is a flip-flop of sorts. However, conditions definitely changed after Telus and then BCE announced their intentions to convert (and then the big banks started moving in that direction).
You're wrong on the other platform commitments you mentioned, as they've all been either fulfilled or in progress.
http://www.fin.gc.ca/budget06/bp/bpc3ae.htm#cpc |
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| TO guy |
| quote: | Originally posted by ShadoWolf
Did you not read my previous post? They are raising the tax on income trusts AND lowering an assortment of other taxes. The intent is to be as revenue neutral as possible. The problem is that after BCE converted, the big banks seriously started looking at converting as well. That would have meant that no large existing corporation (future trust) would pay any tax, and that individuals would shoulder almost the entire tax burden of the state. |
Its just tax deferral, it all gets paid. Most individuals pay a higher rate than most corporations anyhow, so taxing individuals their "corporate earnings" would increase goverment funds. |
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| Moral Hazard |
| quote: | Originally posted by TO guy
Its just tax deferral, it all gets paid. Most individuals pay a higher rate than most corporations anyhow, so taxing individuals their "corporate earnings" would increase goverment funds. |
This also applies to the post justifying the flip-flop. Personally, I see nothing wrong with this, however, it really goes to show that the new government is just the same as the old government. Both are typical brokerage politics parties, neither can play the rightousness card. |
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| ShadoWolf |
| quote: | Originally posted by Moral Hazard
This also applies to the post justifying the flip-flop. Personally, I see nothing wrong with this, however, it really goes to show that the new government is just the same as the old government. Both are typical brokerage politics parties, neither can play the rightousness card. |
One major difference is that the Liberals tipped their Bay Street friends to the change, resulting in dubious after-hours trades (a criminal act). In contrast, Flaherty's announcement was very professional and (rightly) took everyone off-guard. Another major difference is that Flaherty announced off-setting provisions (corporate tax reduction, etc.).
If anything, the original CPC position was based on brokerage politics, being tailored to big corporations and seniors. The new position is more broad and doesn't target a specific group per se. |
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