![]() Canada's New Government Announces Tax Fairness Plan. Ottawa, October 3. Archived information. TheINQUIRER publishes daily news, reviews on the latest gadgets and devices, and INQdepth articles for tech buffs and hobbyists. Note: to read the PDF version you need Adobe Acrobat Reader on your system. If the Adobe download site is not accessible to you, you can download Acrobat Reader from. The System for Award Management (SAM) is an official website of the U.S. government. There is no cost to use SAM. You can use this site for FREE to. Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available. Related documents: The Honourable Jim Flaherty, Minister of Finance today announced a Tax Fairness Plan for Canadians. The plan will restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations."The measures I am bringing forward today are necessary to restore balance and fairness to Canada's tax system, to ensure our economy continues to grow and prosper and to bring Canada in line with other jurisdictions," said Minister Flaherty. Our plan is the result of months of careful consideration and evaluation. Our actions are clear, decisive and in the best interest of all Canadians."For months there has been a growing trend toward corporate tax avoidance. Top Canadian companies, operating within the current rules, have announced their intention to convert to income trusts. They feel compelled to seek more favourable tax treatment by capitalizing on an available tax rule. While these decisions offer corporations short- term tax benefits, they are creating an economic distortion that is threatening Canada's long- term economic growth and shifting any future tax burden onto hardworking individuals and families. If left unchecked, these corporate decisions would result in billions of dollars in less revenue for the federal government to invest in the priorities of Canadians, including more personal income tax relief. These decisions would also mean less revenue for the provinces and territories. Canada stands alone in its treatment of income trusts. The structure being used in this country was shut down in the United States and Australia."The landscape has changed dramatically in the short time I have been Minister of Finance, and in fact, this year we have seen nearly $7. Minister Flaherty. The current situation is not right and is not fair. ยท Rapid Benefits of Stopping. Whereas tobacco-attributable mortality increases slowly after the uptake of smoking, the effects of cessation emerge more. It is the responsibility of the Government of Canada to set our nation's tax policy, not corporate tax planners."The measures in the Tax Fairness Plan include: A Distribution Tax on distributions from publicly traded income trusts and limited partnerships. A reduction in the general corporate income tax rate of one- half percentage point as of January 1, 2. An increase in the Age Credit Amount by $1. January 1, 2. 00. This will benefit low and middle- income seniors. A major positive change in tax policy for pensioners. The government will permit income splitting for pensioners beginning in 2. These measures represent a major tax reduction. Our Tax Fairness Plan will deliver over one billion dollars of new tax relief annually for Canadians. For income trusts that begin trading after today, these measures will apply beginning with their 2. For existing income trusts and limited partnerships the government is proposing a four- year transition period. They will not be subject to the new measures until their 2. The time has come for Canada's New Government to act," said Minister Flaherty. Information and assistance to all businesses wishing to do business with the Department of Veterans Affairs in particular and the Federal Government in general. Get the latest science news and technology news, read tech reviews and more at ABC News. BibMe Free Bibliography & Citation Maker - MLA, APA, Chicago, Harvard. By introducing our Tax Fairness Plan today we are acting in the national interest, doing what's right for all Canadians, and significantly enhancing the incentives to save and invest for family retirement security."The Tax Fairness Plan will build on the steps taken in Budget 2. In that document Canada's New Government delivered significant tax relief for Canadians with 2. Additional details are available in the attached backgrounder or on the Department of Finance web site.___________________________________For further information, media may contact: Dan Miles. Director of Communications. Office of the Minister of Finance. David Gamble. Media Relations. Department of Finance. If you would like to receive automatic e- mail notification of all news releases, please visit the Department of Finance website at http: //www. The rapid growth of "income trusts""Income trusts" - or publicly- traded flow- through entities (FTEs)[1] - are an increasingly significant presence in Canadian business. As Chart 1 shows, these entities have grown dramatically over the past few years and now represent over $2. Despite the actions taken by the Government in the 2. Budget to help address these issues, there is no indication that this trend will change: in 2. FTEs or announced plans to do so. Chart 1: Market Capitalization of Publicly- Traded Canadian FTEs, 1. October 2. 0, 2. 00. The cause: unbalanced tax treatment. A major reason for the proliferation of these entities - and a major reason for the concern they have generated - is the unbalanced income tax treatment that applies to them and their investors. In short, tax rules that were designed essentially for non- commercial and portfolio investment trusts (and for owner- operated partnership businesses) are being used by large- scale business entities that are widely held and publicly- traded, and the results are not appropriate. Non- residents and tax- exempts continue to benefit. Publicly- traded FTEs are in many respects not very different from business corporations. Their tax treatment, though, can be radically different. In particular, FTEs and their investors have enjoyed substantially lower combined income tax rates than large corporations and their shareholders. Until recently, this was the case where an FTE's investors were taxable Canadian- resident individuals. The combination of corporate income tax and the shareholder's tax on the dividend was significantly greater than the tax an otherwise identical investor would pay on income distributed by an FTE. In its 2. 00. 6 Budget the Government resolved this difference for those investors, by reducing the rate of federal tax on dividends from large Canadian corporations. Table 1 shows the result: with the 2. Canadian individuals face a total tax rate on FTE income that is the same as the rate on dividends from large Canadian corporations. This has eliminated much of the impetus for taxable Canadian residents to prefer FTE investments to investments in Canadian public companies. However, Table 1 also indicates that non- residents (represented here by a taxable United States investor) and tax- exempt entities can obtain a sizable tax advantage if they invest in an FTE rather than a corporation. Table 1: Simplified Comparison of Investor Tax Rates (current system)Investor. FTE(Income)Large Corporation (Dividend)Taxable Canadian (*)4. Canadian tax- exempt. Taxable U. S. investor (**)1. All rates in the table are as of 2. Rates for "taxable Canadian" assume that top personal income tax rates apply and that provincial governments increase their dividend tax credit for dividends of large corporations.(**) Canadian taxes only. U. S. tax will in most cases also apply. As noted above, the pace of conversions of corporations into FTEs, in particular business trusts, has not abated. Since the Government has resolved the issue for Canadian- resident individuals, it can be concluded that the tax advantages still enjoyed by non- resident and tax- exempt investors in FTEs are now a driving force behind these conversions. Provincial implications. In addition to delivering a federal tax advantage to certain investors, FTEs create two serious difficulties for Canada's provinces. First, to the extent they have non- Canadian investors, FTEs deplete overall provincial tax revenues even more significantly than they deplete federal revenue. This is because although federal non- resident tax applies to income that a foreign- resident investor earns through an FTE, that income is not subject to tax in any province.
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