Stunt
Diamond Member
- Jul 17, 2002
- 9,717
- 2
- 0
Here's what's happening...
This is not a tax increase but more of a rebalancing of the corporate structure in Canada. In the beginning Canada had a lot of farmers and small businesses that were family run; when the estate holder passed away, trusting the assets avoided paying the massive tax when transferring the assets to another person. This model was allowed from the mom and pop shops to medium sized collectively owned businesses all the way up to $50 billion dollar companies. Hell our banks were thinking of converting to the trust structure; some of which hold over $450 billion dollars in assets.
The trust structure was created by the government and started with real estate, then mature oil fields and businesses which had steady stream of cash flow, low capital investment and low growth. The model worked well as it served as a form of fixed income; non-cyclical companies with steady margins to spin off to owners. Many popular trusts were real estate property, mature oil companies, yellowpages, watse disposal, etc. The problem again was this slippery slope where every company saw the tax advantage in the model. Instead of a corporation paying taxes and the dividends taxes, the income trust was only taxed at the investor side. As you can tell this was a huge tax loss for these massive Canadian companies (effectively Canadian blue chips).
What the conservatives have proposed is taxing the trusts, but only coming into effect in 2011 and will lower the corporate tax rate for all companies. The Liberals tried and failed at lowering the playing field by dropping the tax rate on dividend paying stocks but this didn't work; all that did was encourage more people to buy dividend stocks and income trusts where these companies are less likely to invest in R&D like a typical corporate structure. Keep in mind the US and Australia had similar structures but were killed almost immediately because the slippery slope is tough to stop; companies will trend twards the lowest tax rates see here.
"In 1987, conversions numbered more than 100 and Congress estimated that the trend was costing Washington $245-million a year in lost revenue."
This was an abused business model and all other nations have since banned it or have implemented policies to stop their existance. Personally I am sad to see them go as there is a place for them, but it obviously wasn't working. Somebody had to make it right, and I'm glad the Conservatives had the balls to do it. Harper and the Canadian Conservative Party of Canada are small government oriented, are not involved with social conservatism in the least, and will continue to cut as many taxes as they can. The difference is they'd rather see tax cuts for all companies rather than just income trusts and those who collect corporate welfare.
OP is misrepresenting what the Conservatives in Canada stand for to take a shot at Republicans. There's enough reasons to bash them, don't try to take reasonable Conservatives down a notch.
This is not a tax increase but more of a rebalancing of the corporate structure in Canada. In the beginning Canada had a lot of farmers and small businesses that were family run; when the estate holder passed away, trusting the assets avoided paying the massive tax when transferring the assets to another person. This model was allowed from the mom and pop shops to medium sized collectively owned businesses all the way up to $50 billion dollar companies. Hell our banks were thinking of converting to the trust structure; some of which hold over $450 billion dollars in assets.
The trust structure was created by the government and started with real estate, then mature oil fields and businesses which had steady stream of cash flow, low capital investment and low growth. The model worked well as it served as a form of fixed income; non-cyclical companies with steady margins to spin off to owners. Many popular trusts were real estate property, mature oil companies, yellowpages, watse disposal, etc. The problem again was this slippery slope where every company saw the tax advantage in the model. Instead of a corporation paying taxes and the dividends taxes, the income trust was only taxed at the investor side. As you can tell this was a huge tax loss for these massive Canadian companies (effectively Canadian blue chips).
What the conservatives have proposed is taxing the trusts, but only coming into effect in 2011 and will lower the corporate tax rate for all companies. The Liberals tried and failed at lowering the playing field by dropping the tax rate on dividend paying stocks but this didn't work; all that did was encourage more people to buy dividend stocks and income trusts where these companies are less likely to invest in R&D like a typical corporate structure. Keep in mind the US and Australia had similar structures but were killed almost immediately because the slippery slope is tough to stop; companies will trend twards the lowest tax rates see here.
"In 1987, conversions numbered more than 100 and Congress estimated that the trend was costing Washington $245-million a year in lost revenue."
This was an abused business model and all other nations have since banned it or have implemented policies to stop their existance. Personally I am sad to see them go as there is a place for them, but it obviously wasn't working. Somebody had to make it right, and I'm glad the Conservatives had the balls to do it. Harper and the Canadian Conservative Party of Canada are small government oriented, are not involved with social conservatism in the least, and will continue to cut as many taxes as they can. The difference is they'd rather see tax cuts for all companies rather than just income trusts and those who collect corporate welfare.
OP is misrepresenting what the Conservatives in Canada stand for to take a shot at Republicans. There's enough reasons to bash them, don't try to take reasonable Conservatives down a notch.
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