11 replies to this topic

[mat]

The news today on the CP going back on their election promise not to change income trust status will have a big impact, especially here. Many pensioners, most middle aged investors, and businesses, have ties to income trusts. This will take millions out of the cash economy and we will see a direct slowdown in monthly spending.

What kind of government makes a policy change that takes 20 billion+ out of the stock market in one day - this is ludicrous.

[Holden West]

It was a tax loophole. A way for corporations to evade paying their fair share of taxes. Income trusts are for sophisticated risk-aware investors. They should've seen the writing on the wall and realized it was dirty money and that the free ride had to end sometime.

So grandpa has to buy a Buick instead of a Cadillac. Anyway, this has little to do with vibrant Victoria.

[mat]

"This has little to do with Vibrant Victoria" - this is a post on the South Island Economy, and you are a moderator - shame.

Realize that tens of thousand will wake up tomorrow in the CRD with far less money coming from their monthly funds than they expected - it is going to have a big impact.

It does not matter what you think about income trusts - the fact that this government has taken 25 billion out of the economy and dropped the TSX by 300 points is, let's say, less than professional. Imagine what would happen to the UK or US governments if they did something similar - well, in fact the UK dropping out of the EU stabilization pact in 1991 is an example.

This has not directly affected me - but I do know people who rely on RBC and CIBC monthly trusts to pay mortages and/or business loans. To ignore this, or disavow the impact is childlike.

[Galvanized]

After this story broke I was surprised to hear how many "Moms and Pops" out there have a large amount of income tied to these income trusts. This will affect our condo market as many retirees or "empty nesters" are now going to be with less funds to spend on their retirement. The last party I would expect this policy from was the Conservatives, I wouldn't have been surprised if it were the NDP. I supose it was bound to happen now that the big corporations are now trying to hide behind them.

[G-Man]

Personally I think that this is great news. It actually gave me a sliver of hope for the current government. It takes a lot of guts to know when you made a mistake and stand up and make a change that your supporters won't like. The thing is most Canadians in general think this is a good idea. It will save you and I money in the long run because our taxes won't be subsidizing corporations.

[Number Six]

A 150 point flucuation in the TSX is common and although a 300 point single day drop is the largest in 2 years the exchange is now at the level it was 10 days ago. A small price to pay if it corrects a loophole that had large corporations restructuring for the wrong reasons. I rarely defend the Tories but I'll give them credit for having the balls to make this move.

[m0nkyman]

I rarely defend the Tories but I'll give them credit for having the balls to make this move.

... and not having news of it leak to people beforehand. :shock:

[G-Man]

Yep this is my feeling exactly.

[gumgum]

Okay fine. It should have been done. Granted.
But it shouldn't have been done so secretively. There should have been some warning months ahead. Other options should have been in place for people, therefore not putting such a shock to the economy.
Many pensioners watched 15 to 20% of their nest egg dissapear yesterday. They weren't given a chance, a warning, nothing. Nor were their advisors.
I don't see this as a ballsy move by the conservatives. I think it just an indication of an amateur, greenhorn party to me.

[Holden West]

Look, I feel sorry for those who have lost value in their trusts. And the grandpa joke may have been harsh, but it got the point across.

You ask what would happen if the U.S. did something similar. Well, the U.S. and Australia cracked down on income trusts long ago when they, too realized the harm it was causing ALL citizens. This is not just about a tax dodge. Income trusts funnel more money to individual investors and less money gets reinvested into the company for growth and research, making the company weak and vulnerable over time. This is bad for the economy.

The fact that major corporations like Telus and Bell Canada were going the trust route was the final straw and the Government had to put its foot down. This was no surprise as a clampdown had been talked about since the Paul Martin era.

We can fairly debate the details; should it have been phased in differently, is the reduction in corporate tax rate sufficient etc. I'm not an economist and I don't know what the consequences of giving prior warning would have been. But to assume Canada would be better off turning a blind eye to this abuse of the financial system is unrealistic.

I will repeat: Income trusts are fairly high-risk investments. A company merger or god forbid, a bankruptcy can be devastating. Investors that aren't diversified that put a significant portion of their nest-egg in a single form of investment have no-one to blame but themselves.

[Number Six]

I prefer the bombshell to the slow leak ... at least everyone was affected equally. I also think they realized that if they tested the waters (like the Liberals did) they may have developed cold feet due to the political backlash.

The changes to current trusts don't take affect for 4 years so there was some grandfathering built in.

[VicHockeyFan]

It was a tax loophole. A way for corporations to evade paying their fair share of taxes. Income trusts are for sophisticated risk-aware investors. They should've seen the writing on the wall and realized it was dirty money and that the free ride had to end sometime.

So grandpa has to buy a Buick instead of a Cadillac. Anyway, this has little to do with vibrant Victoria.

Exactly. And when BCE and Telus announced they were converting to income trusts, their shares went up 10-15%. So they went back down 10-15% yesterday. So be it. The Liberals should have cut this loophole out long time ago.