Subscribe by RSS

Income Trusts and the Diversified Investor

Mohammad Fadel
Tuesday, November 14, 2006

This commentary was first published in the Financial Post on November 9, 2006.

With the surprise announcement last week by the Conservative government that distributions by income trusts would no longer be exempt from corporate-level taxation, investors in income trusts have suffered material losses to those investments.

Interestingly, investors with diversified portfolios of Canadian equities would have hardly noticed a difference in their wealth and are probably wondering what all the fuss is about.

While the TSX composite index suffered a substantial loss on the day immediately following the government's announcement, it has already made up most, if not all, of those losses. Since the announcement, then, the TSX Income Trust Index has underperformed the broader TSX Composite Index by approximately 10%. Even taking into account the current yield disparity in the two indexes (approximately 9% for the Income Trust Index and 2% for the TSX Composite Index), the TSX Composite Index still comes out ahead of the Income Trust Index by approximately 3%.

More About Income Trusts

Ian Lee
Tuesday, November 14, 2006

Two commonly invoked reasons for the new tax on income trust distributions are: (1) to ensure fairness (indeed, the government introduced the new tax as the centrepiece of a "Tax Fairness Plan"); and (2) to prevent impairment of the "competitiveness and productivity" of the Canadian economy that would result from greater recourse to the income trust structure by Canadian companies.

In this online opinion article, I take issue with these justifications for the new tax.

 

Income Trusts Changes

Benjamin Alarie
Monday, November 6, 2006

The Minister of Finance announced last week changes to the taxation of income trusts that will take effect in 2011 for existing income trusts.  The following op-ed appeared in the National Post this past weekend addressing the changes.

If Jim Flaherty's reforms to taxation of income trusts are passed by Parliament, as seems likely, the affected firms face choices. It is too early to tell precisely what the predominant response will be, of course, but one thing is nearly certain: The high-distribution party will come to a dramatic end in 2011. The new taxation measures make such distributions considerably less attractive.

A high-distribution policy will no longer be optimal for income trusts beginning in 2011 because all distributions will have tax imposed at a combined federal-provincial rate of 31.5%. All income that is retained by the operating company and not paid to the trust in the form of interest will also be subject to tax -- in this case, the regular corporate tax -- at a combined federal-provincial rate of 31.5%.

Copyright Board's New Ringtone Decision

Ariel Katz
Saturday, August 19, 2006

The Copyright Board issued yesterday its decision certifying SOCAN's Tariff 24 for ringtones.   The Board set a base rate of 6% of the price paid by the subscriber for the ringtone (net of any network usage fees) with a minimum of $0.06 per ringtone.  The main legal controversy before the tribunal was whether the delivery of ringtones is "communication to the public" but I don't want to comment on that here.  Instead, I want to comment on a more fundamental issue, and ask why should the royalties be set by a tribunal at all?  Why wouldn't copyright holders and ringtone suppliers enter into voluntary agreement and decide who should pay and how much?  Ordinarily, prices are determined by the "market".  Why then are these prices set in a strange way in which one seller (SOCAN) proposes prices and then, over a period of three years lawyers, prominent economists and other experts try to convince a tribunal what those prices should be?

Dealing with Dual Citizenship

Ariel Katz
Friday, July 28, 2006

Professor Audrey Macklin wrote the following op ed that appeared in the Toronto Star today, titled "Dealing with Dual Citizenship".

Should dual citizens of Canada be entitled to the same treatment as other citizens? Prime Minister Stephen Harper wisely resisted calls to revise existing policy in the midst of the  evacuation of Canadians from Lebanon, but announced his government's intention to review Canadian practice now that the evacuation is nearing completion.

Among those who questioned the evacuation, explicit concerns centred on those Canadians in Lebanon who had been living in that country for many years and had more or less relinquished their physical connection to Canada.   

Some contended that Canada had no duty to evacuate these non-resident Canadians. Others insisted these Canadians at least ought to pay the government for the cost of evacuation.

The underlying claim is that certain rights of citizenship ought to be tied to ongoing residence in Canada. Living here, the argument goes, expresses one's commitment and membership to Canada. Choosing to live elsewhere signals greater affinity and loyalty to another state, and Canada need not take responsibility for citizens who choose another country over Canada.

Three Views on Leskun v. Leskun

Thursday, June 29, 2006

Three University of Toronto faculty members, each an expert in family law, have written commentaries in three different newspapers, on three consecutive days, about the recent Supreme Court of Canada decision Leskun v. Leskun. Each faculty member takes a different perspective on the decision.

Brenda Cossman, National Post: "Cheaters beware"

Carol Rogerson,The Globe and Mail: "Divorce ruling is far from faulty"

Martha Shaffer, Toronto Star: "Top court muddies divorce law"

 

Canadian Anti-Terror Law on Trial

Kent Roach
Tuesday, June 13, 2006

This commentary by Professor Kent Roach is cross-posted from the Jurist Forum.

The arrest of twelve adults and five youths on terrorism charges in Toronto has resulted in world-wide attention on Canada’s anti-terrorism efforts. The allegations are shocking. They include claims that the men tried to purchase three tons of ammonium nitrate to use in truck bombs and that they trained to prepare for terrorism north of Toronto. ...

The men have been charged with a variety of crimes under the Anti-Terrorism Act that was added with considerable controversy to Canada’s Criminal Code in late 2001. Only one other person, Mohammad Momin Khawaja, has been charged under the new law. He was charged in March, 2004 and his trial has yet to be held. The result is that the new Anti-Terrorism Act remains untested.

Read the full posting on the Jurist Forum website.

 

The TTC Shutdown

Benjamin Alarie
Tuesday, May 30, 2006

The services provided by the Toronto Transit Commission (TTC) were interrupted for almost the entire day yesterday, May 29th.  This was a major headache for the hundreds of thousands of people who travel on the TTC each day, mostly to work and to school.  The city's residents awoke on Monday morning to news that the TTC was not running.  Most scrambled to find alternate means to get to work or school, relying on car pooling, bicycles, or walking.  Let's examine what the collective cost to the city's residents was, versus the stakes that precipitated the interruption.

Rewriting IP Rights from the Back-End

Ariel Katz
Friday, May 19, 2006

Richard Owens aptly describes how the vagueness of the boundary between lawful borrowing and unlawful copying makes it difficult for creators who build upon others’ previous works. He urges us to develop intellectual property laws with clearer rules defining such boundaries.

While I agree with the motivation for the plea, I’m not sure that if the goal is attainable. Not, of course, that we couldn’t have clear rules. We could, for example, rule that any borrowing of any idea or any expression requires permission. This would be a clear rule, but one that would plague creativity with transaction costs and surely stifle it. We could have no copyright at all—again a clear rule—but assuming that copyright is important, not one that will do much good either. So I’m not sure if we can avoid Learned Hand’s challenge of fixing a boundary without ever knowing precisely where.

But not being able to define clear rules doesn’t necessarily leave us helpless. Instead of confronting the problem from the front-end (creating clear rules) we can approach it from the back-end: the available remedies and the incentives that they create. I believe that the true culprits aren’t necessarily the vague boundaries between lawful borrowing and unlawful copying, but rather their combination with the remedies available once infringement had been established.

Re-Righting Copyright

Richard Owens
Thursday, May 18, 2006

I recently published an op-ed in the National Post called "Intellectual property laws need a rewrite."  It drew an unusual amount of interest, so I thought I would post it here (albeit one might have to discount the level of interest for the fact that the article discusses the Da Vinci Code).  Comments welcome.

-------------------------------

Writers and publishers have a problem; the very law that serves their business obstructs their business.  And no one knows what best to do about it.

All new works of authorship borrow from previous ones, taking characters, plot devices, abstract ideas or even quotations.  But common though such borrowings are, copyright law makes it very hard to know exactly which ones are without risk of legal liability.  Dan Brown, author of the popular Da Vinci Code, was accused of taking too much of another work's ideas and plot. He got away with it - after a very expensive court battle made necessary by the ambiguous law.  By the time a court renders a decision in a given case, far too much money and productive time have already been spent on it.  And so, authors and publishers make very cautious decisions or even try to obscure their sources.

Faculty Blog
Subscribe by RSS