Putting an end to royalty trusts?
"The proliferation of the income trust raises a number of tax policy questions. The income trust financing structure may lead to a substantial erosion of the corporate tax base," Paul Hayward, a lawyer at the Ontario Securities Commission, wrote in the "Canadian Tax Journal".
"The proliferation of the income trust highlights a serious flaw in the system. Some investors may not fully appreciate that they are purchasing a product that is packaged as a fixed-income product but that in many cases resembles, in economic terms, an equity claim," he said, adding that the Income Tax Act is complicit if investors are being misled about the nature of their investments.
The only solution, he said, is legislating to put an end to them. "Some sort of legislative response is not only necessary but inevitable," Hayward said. |
