Canada's government recently announced that the country is implementing a new Tax Fairness Plan that the government says will restore balance and fairness to its federal tax system by taxing income trusts in line with corporations.
According to Jim Flaherty, Canada's minister of finance, the plan will include a tax on distributions from publicly traded income trusts (or publicly traded flow-through entities) and limited partnerships. This year alone, corporations representing almost $70 billion in market capitalization have either converted themselves into flow-through entities or have announced plans to do so, Flaherty says.
The new plan also includes a reduction in the general corporate income tax rate of one-half percentage point as of Jan. 1, 2011. The 2006 Budget earlier announced that the general corporate income tax rate would be reduced from 21% to 19% by 2010 – this means that starting in 2011 the new rate will be 18.5%.
Flaherty also notes that the plan will benefit low- and middle-income seniors by increasing the age credit amount by $1,000. It will also permit income splitting for pensioners beginning in 2007 that, according to the government, will increase the incentive to save and invest for family retirement security.