Cooking the Books

Did the finance Dept. cook the books to exaggerate the tax leakage caused by trusts. In at least one case the answer is yes. The department didn't include the US trusts. Since almost all taxes paid by the US trust unit holders are gains, the tax leakage is overstated.

The US trusts paid little or no Canadian taxes prior to conversion. Most of them were based solely in the US and paid no9 Canadian taxes. The conversion to a trust didn't result in any tax loss for the Canadian government.

These trusts had very few if any Canadian investors, and therefore generated little tax revenue for the Canadian government from individuals. This changed with the conversion to trusts. The number of Canadian investors increased dramatically, and so did the Canadian taxes paid.

I doubt very much that this extra revenue would reduce the $500 million that the government claims it is losing to zero. looking to the future this extra revenue could certainly reduce the tax loss, if any, to zero, in fact it could easily produce a tax gain. The high cost of Sorbanes-Oxley compliance in the US has made it very difficult for smaller US companies to go public. The TSX reporting rules are much less costly to implement . Add to that the trust premium on unit price, going public as a Canadian trust was a very attractive option for private US companies. The proposed conversion of Bell and Telus would have legitimized the trust sector in the eyes of many investors who were not already investing in trusts. It would also have encouraged the directors and executives f US firms, both public and private, to look into the possibility of becoming trusts. The increased demand for trusts that would have resulted from the Bell and Telus conversions would have been met in part by the conversion of many US companies to Canadian trusts. Since the US is so much bigger than Canada the supply of companies for potential conversion to trusts could offset the tax losses, if any, that resulted from Canadian conversions.

The New Kid on the Block

A brand new blogger has entered an already crowded universe. What can you expect to see discussed in this blog? Eventually a wide range of topics, but, at least for now, primarily Canadian politics and investments. I had thought of starting two blogs, one for each major theme, but decided to combine them into one. While you may be primarily interested in one or the other main themes, I hope that you will at least read the posts on any other topics. Anybody who has had money invested in trust for the last two years knows that they are interconnected.

I will discuss my investment philosophy in general and give you specific examples of investment decisions I have made and the reasons for them have been very successful over the long term, considerably out performing the TSX index. Of course past performance does not always indicate future performance, so I may be setting myself up for a public record of how badly my portfolio will perform in the future.

On the political side I will be posting my thoughts on certain topics, sometimes in brief comments, sometimes looking at things that might not be obvious at first glance, hence the indepth part of my blog title.

Hopefully you will find my posts interesting and informative, sometimes amusing or infuriating but worth an occasional visit