Tax Leakage the Big Lie                           HOME

              ( If you repeat a lie long enough it will generally be accept as the truth)

Income trusts do not cause tax leakage, in fact the reverse is true. The highly guarded and secretive Department of Finance analysis underlying Harper's assertion of tax leakage fails to include ANY of the taxes paid by the 38% of income trusts that are held in RRSPs and retirement accounts.

     No wonder they think there is leakage - they left out almost half of the taxes!

These theoretical analyses are only as good as their assumptions, data and methodology, and clearly Finance used the wrong methodology. A more definitive analysis can be had by looking at the real world. BMO Capital Markets performed such a real world exercise by looking at all 126 of the businesses that converted to income trusts since 2001. Here are the summary results:

 

 

 

This comprehensive real world analysis clearly shows that Income Trusts generate more tax revenue than corporations by a factor of 3 times. There is no tax leakage, so why does Flaherty keep insisting there is?  What are Harper's motives? Who benefits?

BMO Real World Tax Leakage Analysis  Excel File  jpeg version

 

              Inconvenient Truth About Trusts                  Digging Deeper

A full list of reports on this subject can be found here.

Note 1)  We have treated all account types as taxable because after all taxes have to be paid on money withdrawn from RRSP accounts. The 62% figure is assuming Flaherty's ridicules assertion that they are not taxable, even in this case the government collects nearly twice the tax revenue from trusts. The 50% scenario is assuming half the nation is some how cheating on its taxes even then the government comes out ahead. Individual Canadians are not as efficient at avoiding taxes as corporations.