tax on income trusts

As politicians’ broken promises go, the Conservative government’s decision in October 2006 to reverse course and put a new tax on income trusts was a doozy. The move was so surprising and so punishing for hundreds of thousands of Canadian investors, that it became known simply as the Halloween Massacre. Today, Liberal leader Stéphane Dion announced that, if elected, he would scrap the tax—replacing it with a lesser, 10 per cent levy, which would be refundable for Canadian residents, but not foreign investors. The government would still generate some revenue ($1 billion over four years) while also helping to restore some of the billions of dollars in value the trusts lost when the Conservatives announced the tax, the party says. But while it’s sure to appeal to those still invested in income trusts (particularly retirees who rely on them as a source of monthly income), most observers say the Liberal plan is more political pandering than sound economic policy.