Canadians--The Budget-- What do you think

[Victor Galis]

I see no inherent problem with money going to non-residents. I mean, they put money into Canada in order to receive that distribution.

[Kuciwalker]

The problem in that situation is that the money would be untaxed - making Canada possibly more attractive to foreign investors than domestic.

[Kontiki]

Originally posted by Kuciwalker


It would seem to make issuing or selling shares always an inferior strategy to taking out a loan.

Except that:

A) Many corporations, especially startups trying to raise capital, don't pay dividends on their shares at all.

B) The cost of equity is usually lower than the cost of debt.

C) Share offerings can quite often bring in more money than can be otherwise borrowed - again, very common with startups or small companies.

[notyoueither]

Originally posted by Victor Galis
I see no inherent problem with money going to non-residents. I mean, they put money into Canada in order to receive that distribution.

You would when you faced the personal income tax hikes to pay for the lack of corporate taxation when Telus, Bell, the major banks, and the rest of the TSE followed the leaders into income trusts.

[notyoueither]

Harper made a naive promise when he said he wouldn't touch the trusts.

Bay Street said, woh! You mean we can convert the major corporations of Canada into income trusts and eliminate one of the layers of taxation? We're there.

Telus and Bell had applied (that I heard of). Royal Bank and others were doing the ground work to convert.

The show had to stop.

[Flubber]

Originally posted by notyoueither
Harper made a naive promise when he said he wouldn't touch the trusts.

Bay Street said, woh! You mean we can convert the major corporations of Canada into income trusts and eliminate one of the layers of taxation? We're there.

Telus and Bell had applied (that I heard of). Royal Bank and others were doing the ground work to convert.

The show had to stop.

Exactly.

Bell had already created a trust for its Atlantic division . The Royal Bank had already told government that they intended to convert and at least three of the very largest Canadian oil ands gas corps were ready or readying to jump as well.

AS it stood, the corporate vehicle would almost become extinct to these things and that was something that would probably not be desirable for a number of reasons ( making distributions too attractive almost penalizes retaining any earnings in the corp for growth)

[notyoueither]

Originally posted by Flubber
AS it stood, the corporate vehicle would almost become extinct to these things and that was something that would probably not be desirable for a number of reasons ( making distributions too attractive almost penalizes retaining any earnings in the corp for growth)

One good exactly deserves another.

The reaon for their being was real estate and other investments into hard assets (like pipelines) that were paying off and never reinvesting.

I don't think that is what I would want our banks or other major corporations doing (any more than they already do).

I'm not even sure I want real estate exempted. Major property owners are encouraged to drain off cash and do nothing to improve and build.

[Victor Galis]

Originally posted by Kuciwalker
The problem in that situation is that the money would be untaxed - making Canada possibly more attractive to foreign investors than domestic.

Actually, at least in my case, the dividends were being taxed in Canada.

You would when you faced the personal income tax hikes to pay for the lack of corporate taxation when Telus, Bell, the major banks, and the rest of the TSE followed the leaders into income trusts.

Sounds like the problem there was that they were allowing companies that shouldn't be income trusts become income trusts. I mean theoretically income trusts are supposed to pay back all their income to shareholders. That doesn't really mix well with reinvesting it.

One good exactly deserves another.

The reaon for their being was real estate and other investments into hard assets (like pipelines) that were paying off and never reinvesting.

I don't think that is what I would want our banks or other major corporations doing (any more than they already do).

I'm not even sure I want real estate exempted. Major property owners are encouraged to drain off cash and do nothing to improve and build.

Right, which is why I think the government should have cracked down on certain types of firms applying for income trust status. It makes a lot of sense for an oil extracting firm, not so much for others.

[notyoueither]

They did. They said that all income trusts, except real estate, have to convert back to regular by the deadline.

I'd like to see real estate go the same way, but that is not to be.

[notyoueither]

Leaving 150 or so small trusts would have amounted to the same thing as allowing new ones, eventually.

Existing trusts would have been generously financed to buy telcos, banks, and everything else not nailed down.

You can't grandfather a corporation of this sort. They exempted a sector, not a form of corporation.

[Victor Galis]

Originally posted by notyoueither
Leaving 150 or so small trusts would have amounted to the same thing as allowing new ones, eventually.

Existing trusts would have been generously financed to buy telcos, banks, and everything else not nailed down.

You can't grandfather a corporation of this sort. They exempted a sector, not a form of corporation.

Well, except the regulators can block mergers and aquisitions.

To be fair, making dividends not taxable on the business end would achieve the old system without loopholes.

[notyoueither]

You can block an aquisition for reasons of competition. One each of existing trusts buy one each of major banks. You'd have to pass an act to block it. Why not kill off the new anciene regime in the cradle?

As for significant tax reform, that will require a bit of debate and should not come as an unintended consequence of what seemed like a good idea at the time (income trusts).

[Victor Galis]

Originally posted by notyoueither
You can block an aquisition for reasons of competition. One each of existing trusts buy one each of major banks. You'd have to pass an act to block it. Why not kill off the new anciene regime in the cradle?

As for significant tax reform, that will require a bit of debate and should not come as an unintended consequence of what seemed like a good idea at the time (income trusts).

Nor should the system be suddenly changed at the expense of shareholders.

[KrazyHorse]

Stop whining.

[Dinner]

Hey, the Canadians have a club thread.