Department of Finance Announces New Tax Fairness Plan
On Halloween, Minister of Finance Jim Flaherty spooked Canadians by announcing a new Tax Fairness Plan. In response to the rapid growth of income trusts, the Plan intends to impose a tax on distributions from publicly traded income trusts and limited partnerships. For new trusts that begin trading after October 31st, this measure will be applied in the 2007 taxation year. Existing trusts receive a four-year transition period; the measure will be implemented in the 2011 taxation year. Other key measures in the Tax Fairness Plan include:
-as of January 1, 2011, the general corporate income tax rate will be reduced to one-half percentage point
-effective January 1, 2006, an increase in the Age Credit Amount by $1000 from $4066 to $5066
-permitting income splitting for pensioners beginning in 2007.
Text of Canada’s new Tax Fairness Plan
Statement by the Honourable Jim Flaherty, Minister of Finance
It was great to meet you in person today, Agnese! (We were sitting close to each other at the Toronto Association of Law Libraries luncheon and finally met f2f).
Questions for you and everybody else:
– Do these changes not have to go through a legislative process before they are put into place?
– And if so, is the current government taking a gamble that a non-confidence vote won’t take place while the Liberal party has not yet selected a leader?
Inquiring minds want to know…
Cheers,
Connie
Great meeting you!
Yes, I believe there will be a legislative process. In today’s Toronto Star, the article “Trust group seeks to have tax blocked” states that Flaherty told the Toronto Star’s editorial board on November 1st that a ways and means motion was introduced at the House of Commons Tuesday. The article also says that a report by two TD economists says that draft legislation could be ready this year and legislation introduced into the Commons in early 2007. The Canadian Association of Income Funds is also demanding that Ottawa hold consultations rather then rush the legislation through.
The report by the TD economists does point out that the proposals may not be implemented because of the minority government situation. But it also states that they will most likely be enacted because the other measures in the Tax Fairness Plan benefit seniors. These measures will be included in the income trust bill, so voting against income trusts also means rejecting these other measures.
Another Toronto Star article from today “Flaherty: ‘I regret it was necessary'” says the current government will not fall because both the Bloc Quebecois and the NDP are expected to support the proposals.