Mr. Speaker, the member has brought to the attention of the House a concern regarding income trusts.
As the member said, on October 31, Canada's new government announced a tax fairness plan for Canadians. The plan will restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations and will deliver over $1 billion of new tax relief each and every year for Canadians, particularly retired Canadians.
This government's commitment during the election was not intended to provide tax holidays for major Canadian corporations in Canada. It was a commitment made to protect the income of seniors over the long haul and to protect the programs that seniors rely on, such as OAS, GIS, CPP, health care and other major programs of the federal government.
This government, therefore, does not and cannot support tax holidays for major corporations. The tax fairness plan was introduced and it includes a distribution tax on distributions from publicly traded income trusts and limited partnerships. However, the distribution of existing income trusts will not be affected by this tax for four years.
It also includes a reduction in the general corporate income tax rate of an additional one-half percentage point as of January 1, 2011, the same time as the taxation of trusts will come into effect. As of 2011, the federal general corporate income tax rate will then be 18.5%.
Also included is an increase in the age credit amount by $1,000. This will raise the age credit amount from $4,066 to $5,066, retroactively effective January 1, 2006.
A major positive change in tax policy for many pensioners is also included: permitting pension income splitting beginning in 2007.
As the House well knows, we were seeing a very troubling trend in acceleration of conversions to income trusts just in the last few months, both those that were announced and those that were about to be announced. In many of these cases, the move was purely to avoid paying corporate income tax. Also, if it had been left unchecked, this new trend would have resulted down the road in literally billions of dollars in foregone revenue for the federal government to invest in the priorities of Canadians, including broad based personal tax relief and important social programs.
Provincial governments were also seeing their revenues seriously eroded by this trend.
The government had a choice: to preserve its own political capital by doing nothing and letting this trend continue and letting corporations in this country, effectively and increasingly, pay no tax at all to support the social programs available to seniors and all Canadians, or to do what had to be done for the country in spite of the fact that it would be politically harmful. We put the country first. It was not an easy decision.
The proposed new distribution tax will not tax--