Harper Governments Income Trust Mess

First this: (click this link for full story)

Excerpt:

Surprise move breaks major Conservative campaign promise to avoid taxing trusts

Finance Minister Jim Flaherty said he had no choice because he feared that increasing numbers of corporations were preparing to convert to trusts — a trend he said threatened Ottawa's tax base.

Then this: (click here for full story)

Excerpt:

There have been 12 takeovers of trusts announced or proposed in the five months since the Harper government announced a surprise 31.5-per-cent tax on income trusts, according to Deloitte & Touche...

...Finance Minister Jim Flaherty sold the trust tax as a way to recoup tax revenue that these corporate structures were not paying, but critics say the measure will ultimately cost Ottawa money as takeovers put trusts in the hands of entities, including foreign private equity funds, that won't pay Canadian federal taxes.

New foreign owners of trusts would pay less Canadian tax, says Ogilvy Renault LLP's Leonard Farber, a former Finance official. "Foreign takeover will result in less tax at both the federal and provincial levels," he said yesterday.

Now this: (full article here)

Excerpt:

The rash of recent income trust takeovers that critics blame on the Harper government's trust levy will cost Ottawa tens of millions of dollars in annual lost tax revenue, Bay Street investment experts say.

That's tax revenue that would have been paid by trust unitholders and will now be lost to tax avoidance by predominantly foreign entities that have snapped up most of the trusts in the last five months.

It's a sign of how misguided the income trust tax was, critics say, arguing that the levy sold by Ottawa as a solution to tax leakage is actually causing its own bleed of revenue from federal coffers...

...“If so-called tax fairness was intended to accelerate the sale of Canadian companies to foreign entities, then it is a success,” Mr. McIntyre said. “If it was intended to increase Canadian tax revenues, it is a failure.”

Mr. Flaherty justified the 31.5-per-cent trust tax by saying it was necessary to stem tax avoidance by trust investors that the Finance Department had estimated was at least $500-million a year.

It would only take slightly more than 15 per cent of the trust sector to be bought out by foreign private equity, and non-Canadian firms before Ottawa was losing annual tax revenue equivalent to what it said eluded its grasp before the trust tax.

What a mess.

Was this simply a big mistake made by a party unable to govern, or was this done on purpose?

I know a great number of ex-PCers who absolutely will not place their vote with the Harper Conservatives. This party is failing to represent their voter base. The Harper government has taken Alberta's oil&gas revenues and used the cash in the spring budget to buy votes in Quebec. They have not demonstrated transparency or accountability.

So where does a Canadian, who wants to see the power to make choices concerning their land and municipalities actually put back in the hands of the land owners and municipal representatives, where does a Canadian concerned with fiscal responsibility, social justice, and ecological sustainability place their political support?

Edited to Update: Green Party Income Trusts Media Release Here.