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(March 9, 2007) The Canadian Association of Income Trust Investors issued a release on Friday arguing that “tax leakage” is not a valid reason for the federal government to impose taxes on income trusts, claiming support from members of the banking community.

CAITI said the government’s tax policy was premised on the belief that income trusts caused a substantial loss of tax revenues, or tax leakage, from corporate taxes.

Corporations in Canada pay taxes at the rate of 6.2%, on average, according to CAITI, so a 31.5% tax on income trusts is biased toward favouring corporations over income trusts. In addition, it said the Canadian government has not released the statistical data that support its assertions about tax leakage.

In the absence of that data, CAITI said, it has derived figures from third-party experts who estimate that there would be a loss of $32 million in tax revenue, 14 times less than Finance Minister Jim Flaherty’s estimates.

According to CAITI, TD Bank sent a letter to its clients that stated that the government’s claims about tax leakage were based on assertion and not market certainty. CAITI added that leading research analysts from BMO and RBC Capital Markets expressed similar views during testimony at recent public hearings.

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Market slide rattles consumer confidence: RBC

(March 9, 2007) The RBC Consumer Attitudes and Spending by Household Index reported on Friday that U.S. consumer confidence has been rattled by the recent drop in the stock market.

Measuring the attitudes of 1,000 American consumers earlier in the week, RBC Financial said that a softening of consumer confidence was evident across the board. As a result, the index decreased by almost 11 points to 92.3, compared to 103.0 in February.

“Consumer confidence still remains relatively high by historical standards but is being weighed down by the combination of the housing slowdown, the shock to the stock market in late February, a slight ‘untightening’ of the labour market and rising gasoline prices,” said T. J. Marta, economic and fixed-income strategist for RBC Capital Markets. “The key questions going forward are whether housing really is beginning to stabilize, whether stock market volatility abates and the extent to which the job market remains robust.”

Marta added that RBC believes consumer confidence and the economy will soften in the next few months but then regain steam in the second half of 2007.

Some of the statistics that RBC highlights in the index include the RBC expectations index drop of 20 points from 69.2 to 49.3 and the increase in the number of respondents who expect a weaker economy, which rose from 11% to 17%..

Consumer expectations regarding personal financial situations remained statistically unchanged in March, although, RBC points out, nearly 39% of respondents said they expected improvements in personal financial strength six months from now, compared to 36% in February.

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Middlefield offers transfer of mutual fund shares

(March 9, 2007) Middlefield Mutual Funds announced Friday that, in connection with the planned dissolution of MRF 2005 Resource Limited Partnership, it is proposing to transfer all of the assets of MRF 2005 to the Growth Class of Middlefield Mutual Funds Limited in exchange for mutual fund shares having the same aggregate net asset value as that of the partnership.

Attempts will be made under applicable income tax legislation to conduct the transfer on a tax-deferred basis, Middlefield said.

It added that MRF 2005 will be dissolved on or about May 15, 2007. Investors will then be able to redeem their growth class shares, retain them for longer-term growth or switch tax-free into any of its other mutual fund classes.

The nine fund classes are Short-Term Income, Income Plus, Income and Growth, Canadian Balanced, Index Income, Growth, Resource, Equity Index and U.S. Equity.

Middlefield stressed that remaining invested in funds avoids incurring the capital gains tax liability that arises upon redemption of the mutual fund shares.

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Charges laid in bogus tax deduction scheme

(March 9, 2007) The Canadian Revenue Agency and the RCMP have laid charges against two tax planners who they say were engaged in ongoing tax fraud, helping their clients claim higher tax deductions through falsified charitable donation claims.

The CRA and the RCMP allege that the two tax preparers included false charitable donation deductions totalling over $3 million on tax returns prepared and filed on behalf of more than 400 clients between February 2005 and August 2006, thereby defrauding the Government of Canada of more than $1 million.

The two agencies also allege that forged charitable donation receipts were provided to the CRA to support their bogus claims. Investigators say the planners collected more than $300,000 in fees, which were based on approximately 20% of the false refund the clients received.

Leye “Dickson” Akingbesote of Toronto and Karl Walters of Markham have been charged with fraud over $5,000.

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(03/09/07)