"This is not for publication?"... Canadians must trust

November 24, 2006

Dear Mr. Fullard:

Thank you for your e-mail message regarding the government's decision on income trusts. I am pleased to have this opportunity to respond.

I understand your disappointment with this decision. We recognize that Canadian investors, including many pensioners and seniors, have made important investments over the years and benefit from the current income trust structure. However, Canadians must trust that their government is watching out for them and is upholding the values that define us, like fairness They expect us to fix problems, right injustices and close loopholes.

As you know, over the past few months we have seen a clear tax avoidance trend in the creation of new income trusts. Corporations are converting to these structures and the decisions are based largely on tax considerations. The sheer number and size of the Canadian companies attempting to gain short-term tax benefits was threatening Canada's long-term economic growth. Corporations have used this tax rule to create an economic distortion. This year alone there have been almost $70 billion in new income trust announcements.

Canada's New Government strongly believes that the tax system must be progressive, fair and competitive. It must provide the right incentives to create an economic advantage for companies to invest and grow. The tax system must create an advantage for Canada, not an unfair advantage for some Canadian corporate taxpayers. The current income trust situation is not fair.

When corporations don't pay their share of taxes, this burden is shifted onto the shoulders of hardworking individuals and families. We have taken decisive action to protect the best interests of all Canadians. Our Tax Fairness Plan will restore balance to the federal tax system and level the playing field between income trusts and corporations.

Our plan is the result of months of careful consideration and evaluation. The measures we have chosen represent a major tax reduction. The Tax Fairness Plan will deliver over $1 billion of tax relief annually to Canadians. The plan includes:


1) A distribution tax on distributions from publicly traded income trusts.

2) A reduction of the general corporate income tax rate of one half percentage point effective January 1, 2011.

3) An increase in the Age Credit Amount by $1000 from $4,066 to $5,066 effective January 1, 2006. This measure will provide tax relief for low and middle income seniors.

4) The government will permit income splitting for pensioners beginning in 2007. This will significantly enhance the incentives to save and invest for family retirement security.

The Tax Fairness Plan restores balance and fairness to Canada's tax system. It will ensure that our economy grows and prospers, while bringing Canada in line with other jurisdictions. It is the responsibility of the Government of Canada, not corporate tax planners, to set nation's tax policy. Taxes must not be shifted unfairly onto the shoulders of individuals and families. We have developed a plan that upholds the value of fairness and delivers major positive changes in tax policy.

Once again, thank you for taking the time to share your thoughts. I invite you to visit the Department of Finance website at http://www.fin.gc.ca/news06/06-061e.html for full details regarding the Tax Fairness Plan.
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Sincerely,


The Rt. Hon. Stephen Harper, P.C., M.P.
Prime Minister of Canada