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Friday, 09 January, 2009, 00:40 GMT | more >>

'No tax break' for Canada trusts



By Upstream staff 

The Canadian government has no intention of exempting the oil and gas sector from its move to tax income trusts, an aide to Prime Minister Stephen Harper said today.

"(Finance Minister Jim Flaherty) has made a difficult decision this week that obviously the government will stick to, to ensure that there is tax fairness and that we don't have, effectively, major corporate sectors opting out of corporate taxation, which would be fiscally and I would say even morally irresponsible," said Jason Kenney, Harper's parliamentary secretary.

The government's surprise decision on Tuesday to end the tax advantages for trusts has enraged much of energy trust industry and shaved billions off the sector's stock-market value.

The biggest players in the sector are refusing to accept the decision, saying the credibility of the government is questionable since the ruling Conservatives had promised during the last election to leave the trusts alone.

"Why should we believe them now? They were lying the first time," said Marcel Coutu, chief executive of Canadian Oil Sands Trust, the country's largest income trust.

Coutu points to real-estate investment trusts, which were left out of the tax changes. He wants equal treatment and is not yet ready to concede that the finance minister's decision is final.

"They ought to just stop the current carnage and really reconsider all the options," he said.

Opponents of the move have argued that trusts - which have avoided paying tax on their cash distributions - often invest in low-margin, sometimes older assets that major oil companies have deemed too small and time-consuming to generate a large enough return.

Asked what he thought of oil and gas trusts, Kenney said they were an interesting form of investment from which a lot of people have profited.

But he added: "The government is obviously concerned that we were looking at the prospect of major companies in the oil and gas sector converting to income trusts, which would have meant prospectively billions of dollars in forgone revenue that would be shifted on to the backs of ordinary taxpayers."

He said that was "just not responsible or acceptable", Reuters reported.

Friday, 03 November, 2006, 19:36 GMT  | last updated: Sunday, 05 November, 2006, 12:18 GMT

Taking aim at trusts: Canadian Prime Minister Stephen Harper
 

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