EEEEYahoooooo

[Kip Powick]

Won't mean to you young'ns yet but means alot to many of us "Dots"

As part of his wide-ranging tax reform plan Tuesday, Flaherty also announced that the government would:

— Increase the Age Credit Amount for seniors by $1,000, to $5,066 from $4,066, retroactive to Jan. 1, 2006, affecting low- and middle-income seniors.

— Allow income splitting among pensioners, giving tax relief to retired seniors and encouraging others to save for their retirement.

“We will permit income splitting for pensioners beginning in 2007,” Flaherty said. “This will significantly enhance the incentives to save and invest for family retirement security.”

There have been many people pushing for this item....Pionairs, CARP, RAPCAN, and many others including Garth Turner.....this is great news

[dagger]

Won't mean to you young'ns yet but means alot to many of us "Dots"

As part of his wide-ranging tax reform plan Tuesday, Flaherty also announced that the government would:

— Increase the Age Credit Amount for seniors by $1,000, to $5,066 from $4,066, retroactive to Jan. 1, 2006, affecting low- and middle-income seniors.

— Allow income splitting among pensioners, giving tax relief to retired seniors and encouraging others to save for their retirement.

“We will permit income splitting for pensioners beginning in 2007,” Flaherty said. “This will significantly enhance the incentives to save and invest for family retirement security.”

There have been many people pushing for this item....Pionairs, CARP, RAPCAN, and many others including Garth Turner.....this is great news

Long overdue, but the Tories attack on income trusts is proof that governments will give the middle class with one hand and rob it with the other.

[mrlupin]

Canada stuns market with pledge to tax income trusts

By Randall Palmer1 hour, 32 minutes ago

Stung by plans for multibillion-dollar conversions to tax-advantaged income trusts, Finance Minister Jim Flaherty shocked markets on Tuesday when he announced plans to tax the sector.

Flaherty signaled concern that the flow of conversions to income trusts could become an uncontrollable torrent that would damage the economy and erode government revenues.

His new plan, which he described as a way to level the playing field between trusts and regular corporations, broke a campaign pledge by the minority Conservative government not to change rules on how Canada taxes the trusts.

"Things changed a great deal this year and we faced a situation where Canada was moving to an income trust economy. Is that a good thing for Canada?" he said at a news conference.

"The answer is no, it's a very bad thing for Canada, it's bad for the Canadian economy. We're concerned about competitiveness and productivity."

Flaherty's package of measures would tax distributions by income trusts while also cutting corporate taxes by half a percentage point and changing tax policy for pensioners. He said it would ease the tax burden by C$1 billion a year.

Income trusts, now a C$200 billion ($180 billion) sector of the Canadian market, avoid most corporate taxes and pay the bulk of cash flow directly to investors. They have surged in popularity in recent years as investors embraced their rich yields.

However, even the government admits that the structure robs it of hundreds of millions of dollars of tax revenues, and economists say the model can deplete firms' capital and leave them less able to invest for growth.

One of the largest Canadian trusts, CI Financial Income Fund, savaged the surprise move.

"This is the most bizarre, Third-World policy that I could imagine," CEO Bill Holland told Reuters. "It doesn't even make sense to me -- how can they keep changing the rules?"

Flaherty said this year alone had seen C$70 billion in new conversions, and the tipping point appeared to have been trust conversion decisions by phone giants Telus Corp. and BCE Inc..

"It was cumulative this year. It was both the quality and the quantity (of announcements)," Flaherty told Reuters.

"It was the companies that were doing it and going to income trusts, the size of them and the fact that they're not passive investment firms -- they're capital-intensive firms -- and then BCE in effect feeling obliged to follow Telus."

But now with the new set of rules, he predicted: "Telus and BCE are not going to happen."

The total secrecy in Tuesday's announcement, as bankers and parliamentary staffers left early for Halloween, caught everybody off guard, in contrast with how the former Liberal government appeared to telegraph a decision a year ago to cut taxes on corporate dividends but to leave income trusts alone.

Knowledgeable market players made tidy profits as that decision was made, attracting a police investigation that contributed to the Liberal loss in January's election.

"I think this is a huge, huge surprise. Huge. I don't think they consulted with anyone," said Calgary lawyer John Brussa, considered the father of the income trust format.

"To do this seems quite troubling, and for a government that's supposed to be encouraging of business. This arbitrary action is not very conducive to business. This is going to cost a bunch of people a lot of money tomorrow."

Flaherty said trusts that begin trading from now on would be subject to his new measures in the 2007 tax year, while existing trusts would have a four-year transition period.

Full details are available from Finance Canada at http://www.fin.gc.ca/news06/06-061e.html

[mrlupin]

I wonder if these new laws will change anything at AC?? Will the reduced payout from income trusts have an large impact on the Jazz income trust and the Aeroplan income trust? If taxes have to be paid on income trust distributions, the yield will go down accordingly, driving down the price of each trust unit. Anyone know what the taxation rate will be?

Eric

[dagger]

I wonder if these new laws will change anything at AC?? Will the reduced payout from income trusts have an large impact on the Jazz income trust and the Aeroplan income trust? If taxes have to be paid on income trust distributions, the yield will go down accordingly, driving down the price of each trust unit. Anyone know what the taxation rate will be?

Eric

That's the rub - every other aspect of the announcement was specific except the tax rate on distributions. Could go in all at once in 2011, could be phased in over a decade, who knows?

[Guest rattler]

Won't mean to you young'ns yet but means alot to many of us "Dots"

As part of his wide-ranging tax reform plan Tuesday, Flaherty also announced that the government would:

— Increase the Age Credit Amount for seniors by $1,000, to $5,066 from $4,066, retroactive to Jan. 1, 2006, affecting low- and middle-income seniors.

— Allow income splitting among pensioners, giving tax relief to retired seniors and encouraging others to save for their retirement.

“We will permit income splitting for pensioners beginning in 2007,” Flaherty said. “This will significantly enhance the incentives to save and invest for family retirement security.”

There have been many people pushing for this item....Pionairs, CARP, RAPCAN,  and many others including  Garth Turner.....this is great news  

Good news indeed but if the change needs to be approved by the house it will not likely to be passed into law if Mr Layton has his way this week. If the conservatives are then returned to power with a majority, we will see the change, if the Liberals get back in we may not. But it does give thousands of retirees a reason to vote Conservative.

[Guest prob30]

No matter what the tax rate, this news is negative for the special distribution of aeroplan units to ACE shareholders.

While I fundamentally disagree with the size of the payout, there is no doubt that the plan to distribute the units at what was thought to be a market top was a sound one. That top is now history, so what to do to please Cerberus now?

Hey I know....shore up the balance sheet by paying down the pension deficits, and move towards a traditional dividend paying corporate structure! Busy day in the boardroom at ACE today....