As the various provinces release their budgets, an air of pessimism is gathering around the notion that provinces will trim their tax rates on dividend income, consistent with the proposal laid out last fall by former Federal Finance Minister Ralph Goodale...It's taken awhile, but the readily foreseeable consequences of Goodale's decision to reward tax evasion are now coming to pass. And the result looks to be reduced revenues for a number of provinces whose dividend tax schemes were linked to that of the federal government.
In November, Mr. Goodale announced he would not change the tax status of income trusts, and instead opted to cut dividend taxes, putting pressure on his provincial counterparts to follow in his footsteps. But in his first budget in the Ontario legislature yesterday, Dwight Duncan chose not to cut dividend taxes.
On Friday, CI Financial Inc. returned to a previous plan to convert into an income trust structure, saying Thursday's Ontario budget failed to level the taxation playing field between income trust and companies by cutting dividend taxes.
Of course, that problem would never be seen merely by reading the Globe and Mail's article, which seems to buy heavily into the dogma of corporate tax cuts. And with both the media coverage and the two largest federal political parties seeming to take as a given that the corporate giveaways are beyond question, there doesn't seem to be much prospect for public debate when the legislation supporting Goodale's decision goes through Parliament this year.
Which means that while the income trust issue seems likely to have some role in the Lib leadership race, the stealth corporate tax cuts accompanying Goodale's income trusts decision are expanding in scope. And neither the public which is left with the bill, nor the provinces who have seen Goodale's wrong decision effectively imposed on them, seem to have much choice but to play along.
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