Invest Skeptically

Diane Francis at the National Post wrote (Dec 9) that “not a single objective announced by Flaherty and Harper was achieved” from the income trust debacle–also pointing out that Mark Carney was instrumental in the government’s policy decision. Whatever you believe about the quantum of the ‘tax leakage’ issue, the intense acquisitions in the trust sector since October 31, 2005 have resulted in a situation where the government will likely receive significantly less tax revenue from these businesses. Francis also provides a great summary of trust buyouts before and after the tax change announcement.

Continued investment uncertainty

A look through Deloitte’s webpage on income trusts highlights that, even more than a year later, trustees still face many uncertainties that make the best strategic next steps not so clear.

Comments from an insider

John Risley, Chairman of Clearwater Seafoods, was on BNN’s SqueezePlay (Dec 5) speaking about–among other things–income trusts. He concedes that the government had a “really difficult problem” given the market’s extraordinary fascination with the asset class. He also raised some strong points for why the income trust industry was so important: trust mania helped small-medium sized companies access public equity markets, and, the structure encouraged good management accountability of excess cash in that management’s responsibility was to “payout all the cash” and say, “look if we want to do something we’ve actually gotta ask you [...] cuz you’ve got to put the cash back in the company”.