The Investment Dealers Association of Canada today released today its submission on income trusts to the Minister of Finance. The submission recommends a more neutral tax system to ensure trust conversions are driven by economic rather than tax reasons, and that remedial policy measures are closely monitored to achieve their intended objectives.

The IDA had recommended in discussions with the Finance minister the reduction of dividend tax rates in conjunction with lower corporate tax rates to achieve neutrality in the tax treatment between the corporate and trust structures.

“The Minister has set the right direction on dividend taxation, but the planned reduction of corporate taxes may not be sufficient or soon enough to achieve the desired outcome. The market impact of the policy decision should be carefully monitored to assess its effectiveness.” said IDA senior vice-president Ian Russell, in a release. “We are pleased the Minister has wisely chosen to stay clear of new taxes on trusts or their unitholders” continued Russell.

The IDA submission provides a detailed analysis of the income trust market and policy guidance to address the issues raised by the government. The IDA points out the unique role that income trusts play as a high yield instrument in promoting capital formation and enhancing portfolio diversification.

The IDA submission is available on the IDA Web site.