Canada’s New Government Announces Tax Fairness Plan

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 $70 billion in new trust announcements," said Minister Flaherty. "The current situation is not right and is not fair. It is the responsibility of the Government of Canada to set our nation’s tax policy, not corporate tax planners."