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Dr. Grant A. Bracher's Submission in Response to Finance Canada's Tax and Other Issues Related to Publicly Listed Flow-Through Entities (Income Trusts and Limited Partnerships) consultation:

Dear Sir or Madam,

I wish to make a submission on the consultation paper Tax and Other Issues Related to Publicly Listed Flow-Through Entities (Income Trusts and Limited Partnerships). Specifically, I would like to comment on issues that the document does not address but should.

The document focuses on the Government of Canada's perceived loss of revenue from the recent proliferation of flow-through entities, nowhere is the human side of the issue presented. By the human side, I Canadians, especialy retirees and the soon to be retired.  In these times of low interest rates, increasing inflation (real inflation, i.e., including the cost of energy and housing) and high taxation, many retirees and people approaching retirement age were steered into income trusts by their financial advisors. For retired folk, the income from these trusts often means the difference between a comfortable life and one of impoverishment. Increasing the taxes individuals pay on income from trusts would adversely impact one of the most vulnerable segments of society - the elderly.  The review of  income trust taxation by the federal government and resulting uncertainty has already taken a toll on portfolios holding such investments.

Many pension funds in Canada are currently underfunded. Limiting the proportion of flow-through entities that pension funds could hold may adversely affect their ability to meet future pension obligations. The consultation paper makes no mention of this.

Nowhere is the fundamental reason for the recent popularity of  flow-through entities identified - the absurd level of taxation in Canada. The high levels of corporate and personal income tax in this country have naturally caused companies and investors to seek out legal means to keep more of the fruits of their labour. If the Government of Canada is truly concerned about reduced revenue and the well being of its citizens, it should dramatically reduce corporate and personal income taxes, cut the red-tape associated with starting and running businesses, and create at atmosphere that fosters entrepeneurship.  The resulting new businesses and jobs and taxes would soon make the issue of  flow-through entities and lost revenue ancient history.


Dr. Grant A. Bracher
Nanaimo, British Columbia