Ottawa, November 23, 2005

Archived - Minister of Finance Acts on Income Trust Issue

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Minister of Finance Ralph Goodale today responded to concerns regarding income trusts and other flow-through entities by announcing a reduction in personal income taxes on dividends, which will help level the playing field between corporations and income trusts.

"Given the uncertainty surrounding how long this session of Parliament will last, as well as the need for greater certainty and stability in the income trust market, there is a clear case for immediate action. The overwhelming consensus of submissions received in our consultation process was to reduce personal income tax on dividends" said Minister Goodale. "Today's announcement acts on that consensus and ends the consultation process."

This tax reduction will take the form of an enhanced dividend "gross-up" and tax credit to make the total tax on dividends received from large Canadian corporations more comparable to the tax paid on distributions of income trusts, and to eliminate the "double taxation" of dividends at the federal level. The Minister today tabled in the House of Commons a Notice of Ways and Means Motion to implement these measures.

"Reducing the tax individuals pay on dividends will encourage savings and investment and will help establish a better balance between the tax treatment of large corporations and that of income trusts" said Minister Goodale. "This action will benefit Canadians and result in bottom-line tax savings for them."

Improving incentives to save and invest and making the tax system more neutral with respect to business structures are important elements of the Government's recently announced Plan for Growth and Prosperity. The tax reduction announced today is consistent with the Plan's ultimate goal of achieving higher living standards for all Canadians.

Minister of National Revenue John McCallum will resume providing advance tax rulings on flow-through entity structures.

Further details about this measure are provided in the attached backgrounder.

For further information, media may contact:

Pat Breton
Press Secretary
Office of the Minister of Finance
(613) 996-7861

David Gamble
Public Affairs and Operations Division
(613) 996-8080

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