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Whose Oxe is being Gored

   Whose Ox is Being Gored
   “SIFT”ing Through the Debris of Income Trusts
   Pension Income Splitting and other tax measures

Whose Ox is Being Gored
The headline reads "Canada’s New Government Announces Tax Fairness Plan". And the introductory paragraph to the news release states "The Honourable Jim Flaherty, Minister of Finance today announced a Tax Fairness Plan for Canadians". This is a common claim among Finance Ministers - that they have brought in measures in the name of fairness and equity. My partner, Arthur Drache, many years ago, being interviewed on TV on Budget Night, opined that "Fairness and equity depend on whose oxe is being gored". If you are a pensioner, the measures introduced today which will allow full income splitting of pension income will be wildly favourable. If you are an ordinary Canadian corporation, the half point tax rate reduction is mildly positive. If you are an investor in income trusts or other flow through entities, it will be difficult to see that today's changes in the rules are anything but punitive. Is this a "Tax Fairness Plan"? It depends on whose oxe is being gored.
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“SIFT”ing Through the Debris of Income Trusts - Charles Rotenberg
In a surprise announcement, Finance Minister Jim Flaherty announced new taxes to, again, level the playing field between public corporations and “Flow Through Entities” such as income trusts and publicly traded partnerships. We say “again” because both Minister Flaherty and his predecessor, Liberal Finance Minister Ralph Goodale introduced new dividend tax credit rules to effectively equalize the tax treatment in the hands of investors between public company dividends and distributions from income trusts and partnerships. See our newsletter of July, 2006. It would appear, however, that there are still significant advantages for non-taxable entities, such as pension funds, and for non-resident investors, to invest in income trusts or other Flow Through Entities. So, in case the strong Canadian dollar has not done enough to discourage foreign investment, Minister Flaherty is ensuring that non-resident investors, who have a range of flow through entities in the U.S. that they can invest in, will be actively discouraged from investing in Canada.
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Pension Income Splitting and other tax measures - Charles Rotenberg
In addition to the new rules destined to kill the income trust as a tax-efficient investment vehicle, Finance Minister Flaherty introduced other tax measures which will provide some benefit to certain taxpayers. In one of the most significant provisions that we have seen in a long time, the Finance Minister has introduced the ability to split pension income between spouses.
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