Liberals' income trust plan adds uncertainty: CI's Holland
A Liberal election promise to reopen the controversial income trust issue would be a mistake, says William Holland, chief executive of CI Financial Income Fund.
That's because his company and others can't run their businesses properly if the tax rules keep changing, Holland said in an interview Wednesday.
"The issue just keeps hanging out there and hanging out there," he said.
The complex — and hotly debated — issue was thrust back onto the national stage when, earlier this week, Liberal Leader Stéphane Dion said he would alter the income trust tax system if the Liberals win the Oct. 14 general election.
With no party an obvious lock to win a majority, the trust issue would become a political football in a minority Parliament, Holland predicted.
The ensuing uncertainty would place CI and other companies in "a terrible spot," he said. "You can't run your business that way."
Lower tax burdenSeveral years ago, CI Financial, which operates several investment funds, wanted to turn itself into an income trust — a special structure in which most of the earnings are given to unitholders and the trust benefits from low corporate taxes.
After the then-Liberal government pondered new trust rules for years, the Conservatives came to power and CI announced it would changed itself into an income trust in March 2006.
But a few months later, as the trust bandwagon took on more and more companies seeking lower taxes, the Tories switched their policy. They announced that income trusts would become fully taxable by 2011, essentially destroying the vehicle's financial viability.
Now the Liberals have promised that, if they win the election, a new government would reduce the planned tax hike for trusts, something Holland would welcome.
What he hates is the possibility that neither the Conservatives nor the Liberals will win a majority.
"Then the issue would never get solved," he said.
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