Thank you.
The income trust tax plan removes tax advantages, and where there are tax advantages there is by definition government revenue leakage. If there were no tax advantages, there would not be this aggressive income trust lobby to reverse the income trust tax plan. If corporations had less combined business and personal taxes, then income trusts would be rushing to convert back to corporations to achieve these relative tax advantages. If there were no tax advantages, there would not have been a drop of about $20 billion in the market capitalization of business and energy trusts after the October 31 announcement.
I'd like to speak about the tax-deferred plans. It's my opinion, as a financial analyst with numerous years of experience both conducting financial analyses and supervising the work of up to 60 analysts and associates within the CFA Institute, of which I am presently still a member, that in the RRSPs and the pension funds there is permanent government revenue leakage. There is a tax-deferred loss. As a consequence, I do not agree with the witness testimony of Dennis Bruce, who indicates that there is a tax-deferred gain—and I believe it was on the order of $125 million—offsetting the estimates of the finance department.
I'm not going to attempt to redo the budgetary estimates; there isn't the time here. I want to use my expertise with respect to the tax-deferred loss from income trusts versus corporations in tax-deferred accounts.
There was a research report tabled by Mr. Art Field, president of the National Pensioners and Senior Citizens Federation, on February 1, 2007. From that report I determined that the present value of the tax-deferred loss from ownership of income trusts within tax-deferred plans is $98 for every $1,000 invested within income trusts. The loss occurs because you have to compare investing in income trusts in tax-deferred plans with investing in corporations in tax-deferred plans. Clearly there was a tax advantage, because the income trusts in the tax-deferred plans didn't have their business taxes collected; corporations in tax-deferred plans did.
When you take the present value of all of the aspects of the tax-deferred plan and do the proper questioning and comparison, there is in my mind an indisputable tax-deferred loss. As for the $500 million estimate, or whatever number this committee seizes on as the right one—I'm prepared to accept the Department of Finance and its expertise—the actual total loss, bringing into account the tax-deferred accounts, would in my opinion be substantially more than $500 million.
I want to turn now to the related issue noted by the various experts, including Kevin Dancey of the CICA and Dirk Lever of RBC Dominion. It has been said that there is double taxation in the ownership of income trusts, post-2011 and currently for corporations, because corporations owned within income trusts do not have the preferential tax treatment of the dividends.
It is categorically incorrect to say that within the RRSP plan and pension funds there is net double taxation, because of the structural benefits within the RRSP and the pension funds themselves.
When you calculate the investment value of corporations owned within RRSPs, you will find that the net present value and the future value of corporations owned in RRSPs will be more than that of corporations owned outside of RRSPs, and that's because, with the benefit of the upfront tax deduction, if you put $1,000 in you're going to get approximately $380 of tax savings to put to work. In addition, you have your investment income earning on a tax-deferred base and accumulating on a compounded basis over a very long period of time.
Now I'd like to turn to another matter that was of significance, which the income trust industry and others have indicated as the reason we have to reverse the income trust tax plan, and that is the reason we have to reverse the income tax plan, and that is the U.S. master limited partnerships.
The U.S. master limited partnerships are for the most part taxed identically to the Canadian income trusts following the income trust tax plan. Americans who invest in master limited partnerships in taxable accounts pay full personal taxes. Most notable, in the tax-deferred plan in the United States within master limited partnerships, individuals who own these within their IRAs must pay a special shareholder tax that is equivalent to the business taxes that would otherwise have been paid, and the purpose of that tax is to make sure that master limited partnerships within IRAs do not have an unfair tax advantage relative to corporations.
In conclusion, the master limited partnerships are not giving American retirees opportunities that Canadian retirees are allegedly going to be denied post-plan. More importantly, it is incorrect to argue that the master limited partnerships, because of their competitive advantages, are going to buy out the Canadian oil and gas industry. It is the reverse. The current Canadian income trust situation, with the Americans being able to buy them through such a strong incentive, is why the majority of our Canadian energy trusts are owned by Americans.