Ottawa puts trust taxrulings on hold
Move could dampen rush to convert
OTTAWA • The federal government has postponed advance tax rulings for companies looking to convert into income trusts, a move that may dampen Bay Street’s enthusiasm for the tax- efficient investment vehicle.
The move also brought angry reaction from Bill Holland, chief executive of CI Fund Management Inc., which announced in early September that it is again pursuing a conversion, after the lead of several other major firms. The company filed an application for a tax ruling from the Canada Revenue Agency last Friday.
“ As a CEO, I’m livid,” said Mr. Holland. “ This has come out of left field.”
Ralph Goodale, the Finance Minister, said in a release the ban is to remain in effect until his department completes a consultation process on income trusts and how the investment vehicles are taxed.
As a result, it could extend well into 2006 until the government decides what to do. Complicating matters is an election will probably be held next year after the release of Justice John Gomery’s report on the sponsorship scandal.
“We launched consultations because of our concern about how the increased use of this type of business vehicle may affect economic growth,” Mr. Goodale said.
The move came after a flurry of announcements in the past two weeks regarding income trust conversions and public musings among the chartered banks about spinning off assets into trusts.
Mr. Holland said he’s unsure what Ottawa’s announcement yesterday means for his company’s conversion plans. “ It is important for a board to get a tax ruling? I think it is. Is it vital? I don’t know the answer to that right now.”
A spokesman for CanWest Global Communications Corp. said the ruling will not affect the company’s decision to spin off its Canadian newspapers.
See RULING on Page FP4 Terence Corcoran, Page FP19