Income trust investors still angry one year later
About 100 income trust investorsheld aprotest rally on Parliament Hill Wednesday afternoon to mark the first anniversary of what they call the "Halloween night massacre."
It wasone year ago that Finance Minister Jim Flahertystunned the investment communityby announcing the Conservative government would bring in a tax on income trusts by 2011 — reversingacampaign pledge made months earlier to leave them untaxed.
The wrath of the hundreds of thousands of investors who had poured billions of dollarsinto these trusts was immediate and it wasn't hard to see why.
Income trusts had fast become a favourite place for many investors to put their money — especially seniors.
Most trusts paid distributions that were far higher than what they could earn with GICs or dividend-paying stocks.
On Tuesday, a Chicago couple filed a claim under NAFTA, seeking $6.5 million in damages.
"Based on Stephen Harper's very public promise, thousands of individuals and grandparents like us invested our hard earned money in income trusts and energy trusts," Marvin Gottlieb said.
The value ofincome trusts tumbled hard in the wake of Flaherty's announcement.
Within two weeks of the Halloween announcement, the income trust sectorlost about $35 billion of its market value, according to industry figures.
A year later, the sectorhas partiallyrecovered.
The TSX income trust index is still down 10 per cent from where it stood just before Flaherty's announcement.
The energy trust index isdown 16 per cent, even though oil prices have surged to record highs in the last year.
Monthly distributions have helped to mitigate total losses, but it's clear many investors are still smarting.
A few business trusts, like the Aeroplan Income Fund, havemanaged sizable gainsin the past year.
But for most trust investors, the only big gainshave come from takeover offers for their trusts and the often juicy premiums attached tothem.
More than 40 trusts have been acquiredsince the Halloween announcement.
Trust investors havespent much of the last year protesting the trust decision in a variety of ways.
Through countless news conferences, petitions and online forums, they have vented at what they see as a betrayal.
Flaherty stands firm
Despite all the pleas from investors andvigorous lobbying from the industry, Flaherty stood by hisdecision.
Income trusts would eventually face the same taxesas corporations do. Only eligible real estate investment trusts would be exempt.
Flaherty said the "tax leakage" from so many companies converting to trust statuswas threatening the economy.
The Canadian Association of Income Trust Investors has always disputed the "tax leakage" claim that trust conversions were robbing the treasury of half a billion dollars in tax revenue a year.
It wants the finance department to show how it arrived at its tax loss conclusion.
"To date, all we've gotten is 18 pages of blacked-out documents to justify what we consider basically to be an eviction notice from our landlord who says we aren't paying our monthly taxes, when in fact, we are,"Brent Fullard, CEO of the trust investors group, told CBC News.
The association also says its early prediction that the weakening of the trust sector would lead to many of them being swallowed up by foreign interests has proven correct.
No newincome trusts have been created in the last year,but more than 200 still survive. By 2011, however, it's widely expected thatmany willconvert to corporate status.