Harper says taxing income trusts was most difficult decision

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This article was published 19/12/2006 (7108 days ago), so information in it may no longer be current.

OTTAWA (CP) – Stephen Harper says his decision to tax income trusts after campaigning against the idea was the most difficult choice he’s had to make as prime minister.

But he insists it was the right thing to do. “The toughest decision for the government was the income trust decision,” he said Tuesday in a yearend interview with The Canadian Press. “It’s not something we planned to do but it became apparent we had to do it. All neutral observers have concluded that.”

Trusts became a popular investment vehicle for seniors and other investors in recent years because they pay their cash flows to investors, avoiding corporate tax.

Despite promising in the last election campaign not to tax income trusts, the Conservative government reversed itself Oct. 31.

When Finance Minister Jim Flaherty unloaded his Halloween bombshell, he indicated existing trusts could engage in “normal growth” without provoking the government to cut short the four-year period before their distributions become taxable.

On Friday, Flaherty tossed the income trust sector a bone with what he called “generous” rules that allow existing trusts to double in size by 2011 without forfeiting their tax-free status.

Trusts will also be able to convert to a corporate structure without triggering capital gains taxes or other tax consequences.

The minister has also said that nearly all pending trust deals will be allowed to go ahead, but trusts will also be able to seek permission to grow more than the limits if they feel they have a special case.