Goodale promises quick review of income trusts
Last Updated Tue, 01 Nov 2005 11:20:44 EST
CBC News
Finance minister Ralph Goodale promised Tuesday that his review of the burgeoning income trust field will be a quick one.
"I intend to move very quickly, as soon as the consultation is concluded," Goodale said, denying speculation that the review could take years.
The public consultation period ends in December.
"I hope to be able to react very quickly once the consultation is done," he said. Goodale launched a review of income trusts in September and froze advance tax rulings on trust conversions. The move upset many trust executives, who say the uncertainty caused by the review has caused a multi-billion-dollar drop in the sector's market value.
That uncertainty has led several companies to cancel or postpone plans to convert to a trust, including Fishery Products International and CI Financial.
Income trusts have soared in popularity over the past few years. There are now more than 300 listed on the Toronto Stock Exchange. Total market capitalization exceeds $180 billion.
Hundreds of companies ranging from hamburger chains (A&W) to mattress retailers (Sleep Country) have converted to income trusts because trusts don't pay corporate income tax. Instead, they pass through cash directly to individual investors who pay tax on the income. The distributions typically yield far more than traditional interest-bearing investments.
Goodale estimates that the federal treasury now loses $300 million a year in tax revenue from trust conversions – an amount that will keep on growing if more companies join the stampede to trust status.
Ottawa is also worried that investment in research and development will suffer because trusts flow through all their cash to unitholders rather than investing it in the company.
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