My Big Idea: Income Trusts must be restored as the solution to many major problems facing Canada
Income trusts were/are a made in Canada solution to a number of major problems facing Canada, and provided Canada with many significant benefits including:
- dealing with Canada’s looming pension crisis and how to provide retirement income for Canada’s rapidly aging demographic
- leveling the playing field between the 75% of Canadians without pensions and the 25% of Canadians with pensions
- maintaining Canadian ownership and head office control; of Canadian enterprise and limiting foreign takeovers
- directing capital into a business model that places greater disciplines on management that is more aligned with the interests of society, rather than the interests of management per se, and the many abuses inherent in the corporate model
- maximizing the tax collection of businesses’ earning without restricting the businesses themselves
- providing Canadian businesses with an abundance of low cost, readily available capital and the competitive advantage which that entails
- eliminating the reliance of Canadian businesses on debt and the risks of bankruptcy and business failure that debt entails
- eliminating Canadians reliance on investment products like ABCP and similar schemes and directing Canadians retirement savings into the real economy instead
As such, income trusts need to be restored in Canada, by rescinding the Harper government's 31.5% income trust tax or by instituting the Marshall Savings Plan solution (marshallplan.ca) that has been endorsed by 79.6% of Canadians in a recent Environics Research poll.
Income trusts are a form of profit sharing investment vehicle that represented the "democratization" of the Canadian capital markets that was to the clear advantage of all Canadians, but to the perceived detriment of a very small and powerful few who were intent on maintaining the status quo and these people lobbied the government to shut down income trusts.
Apart from seeing 2.5 million Canadians lose $35 billion in the value of their retirement savings, the direst result of double taxing income trusts has seen 51 Canadian businesses fall into foreigners' hands and non taxable entities who can evade the 31.5% tax, which has now caused REAL tax leakage of $1.5 billion a year, as these foreigners and non taxable entities pay no taxes. Meanwhile the former Canadians who did own these trusts and paid taxes on their earnings at the average rate of 38% are being deprived of owning a piece of the country that they live and work in. The income trust tax was the consequence of intense commercial lobbying by the life insurance industry who were intent on killing their competition for Canadians' retirement savings, and were intent on selling Canadians their investment products that are synthetic and derivative in nature, like life annuities and variable rate annuities. During the Global Financial Meltdown these products were revealed to be the flawed instruments that they are.
Meanwhile Canadians are being deprived of investment opportunities that are better suited to their needs and the needs of the country at large, and as such income trusts need to be restored and encouraged to flourish for the betterment of all.
Brent Fullard, B.Sc., M.B.A.
Thursday, March 11, 2010
Posted by Fillibluster at 1:00 PM