Thank you for inviting me. It's a great honour and a privilege to be here, and it's a great privilege to see democracy in action.
Before I start, I want to point out that as opposed to some of the people who came here, I don't represent any interest group. I don't have any financial interest whatsoever in income trusts. I don't get commissions from them. I'm just an academic. As you probably know, I have a professorship in financial analysis, and I've been following the trusts since their inception, as well as other things.
My angle is not taxation. Taxation is very important—my good friend and colleague Jack Mintz made very good comments—and of course tax leakage is a serious issue. My angle is the perverse incentives that existed prior to the legislation. I think the tax change is actually a step in the right direction, but let me make my points very briefly.
If you take a look, many of the income trusts that we have out there have no business being income trusts. In order to be an income trust—a company that distributes most of its cashflow—distributions have to meet certain conditions. As condition number one, a company has to be a mature company. That means it has large operational cashflows and small capital investment. Condition number two is that it still has lots of time remaining in this stage. Condition number three is stability. It has to have stable income—in other words, stable revenues and stable expenses—and less or almost no uncertainty.
If you take a look at some of the recent companies that registered as income trusts, they violate every one of the conditions, or most of them. As such, I think what we have now is a bubble. If we hadn't stopped it now, in the long run more investors would lose their money.
I hope I'm wrong in many respects, but I think you are going to meet me again in the future, talking about the income trust debacle and why so many companies registered. If people ask me, I'll be more than happy to answer about the perverse incentives of the financial institutions and management and so on.
Thank you very much.