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August 16, 2007
For immediate release
Attention: News/Business Editors
OTTAWA—Ordinary consumers and investors alike were ill-served by the financial rollercoaster ride of the income trust, says the Public Interest Advocacy Centre (PIAC) in a report released today. While supporting, in principle, the Conservative government’s introduction of a tax intended to place income trusts units and corporate shareholdings on an even tax footing, the report notes several shortcomings in the tax policy process and the governance of trusts that should be addressed to avoid future controversies.
John Lawford, PIAC legal counsel and co-author of the report, notes: “Income trusts were a tax accident waiting to happen. Tax policy reform is needed before the next major taxation controversy erupts. Investor protection and the taxpayer voice are sorely lacking – but obviously are needed – well before immense corporate investments make changing tax policy expensive to individuals and companies alike.”
The report takes a comprehensive overview not only of the history and function of the income trust, but also chronicles the tax policy questions, including the ongoing dispute about the size of the “tax leakage” caused by income trusts question. The report describes some of the major corporate reorganizations that occurred or were about to occur under an income trust structure, noting the unanticipated effect on corporate governance in major regulated industries such as energy and telecommunications. The report calls for changes to equalize the position of shareholders and trust unitholders in terms of rights. Finally, the report criticizes the general lack of transparency in tax policy-making and the seeming reluctance on the part of the federal government to release information on tax policy-making under the Access to Information Act.
The report’s recommendations include the creation of a regulatory oversight framework for income trusts comparable to that for securities offerings (shares) as well as increased efforts by the federal government in investor education through the Financial Consumer Agency. Finally, the report recommends the federal government no longer attempt to prevent disclosure of source documents involving tax policy on the grounds of “national security”.
PIAC is a non-profit organization that provides legal and research services on behalf of consumer interests, and, in particular, vulnerable consumer interests, concerning the provision of important public services. PIAC was established in 1976.
PIAC received funding for this report from Industry Canada’s Contributions Program for Non-Profit Consumer and Voluntary Organizations. The views expressed in the report are not necessarily those of Industry Canada or the Government of Canada.
A copy of the report is available on the PIAC website at:
PIAC Income Trust Report: Income Trusts – A Challenge for Regulators
For more information:
Public Interest Advocacy Centre
ONE Nicholas Street, Suite 1204
(613) 447-8125 (Mobile)
(613) 562-0007 (Fax)