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Nestor Hobe'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:

N Hobe
Ottawa Ontario

Sept 28,2005

Denis Normand
Tax Policy Branch, Business Income Tax Division
Department of Finance,
17th floor, East Tower,
140 O'Connor St.
Ottawa, Ontario
K1A 0G5

Following is my response to the consultation paper of the Department of Finance on tax and other issues related to Flow Through Entities.

I am concerned by the choice of words in section 6 of the Consultation document which characterize FTE's as possibly causing "Distortions of Investment Decision." Distortion is an unfortunate description which betrays the drafter's bias; a "distortion" obviously implies the need for correction as opposed to alternate wordings such as "Shift of Investment Decision" or "Rebalancing of Investment Decision" for which a more objective analysis could be expected.

I am unable to respond to the substance of the Consultation Document as it lacks a clear description of the specific issues under consideration, that relate to the subject of Efficiency in the Canadian economy.

The term "Efficiency" as used in the document is too vague by itself for a comparison between the corporate model and FTE entities and without guidelines doesn't lend itself to a meaningful contribution or response to the Consultation Document. Here are some general questions on the subject: What aspects of Efficiency is the Finance Department going to evaluate or take into consideration? How will the Department evaluate the Efficiency of FTE stakeholders to promote Canada's financial well being? Will FTE stakeholder's role in spending their higher level of contributions be taken into account for their contribution in promoting business activity? Will their role as re-investors of distributions be analyzed for its efficiency in monitoring FTE's executive investment decisions thereby promoting better (i.e. more efficient) governance? This subject may boil down to a comparison of the efficiency of Corporate executive decisions hidden behind closed doors with those made by FTE executives who can be more efficiently scrutinized by their stakeholders. Might I be completely misguided as to the aspects of "Efficiency" under consideration?

As a trust unit holder, I thank you for the opportunity to provide this limited response. Please feel free to communicate with me by Email.

Sincerely,

Nestor Hobe
Ottawa, Ontario