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To: Johnny Canuck who wrote (41185)	5/18/2004 1:39:44 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69822

Ottawa suspends trust cap plan By TERRY WEBER Globe and Mail Update E-mail this Article Print this Article Advertisement Finance Minister Ralph Goodale said Tuesday Ottawa will suspend proposed caps on income trust investments by pension funds in the wake of industry concern over the plan. The suspension will allow further consultation on the proposal, which was originally announced in the March federal budget. “The Government's overarching goal remains to ensure that funding for priorities such as health care and education is not jeopardized by the erosion of the corporate tax base," Mr. Goodale said. “But the concerns raised by pension funds and other interested parties deserve a closer look.” The measures were originally to take effect on Jan. 1, 2005. In its most recent budget, the federal government moved to limit both the size of investment and degree of participation in business income trusts by pension funds, saying unlimited access could have a "significant impact" on government revenues. Income trusts, quickly approaching $90-billion in market capitalization, have become increasingly popular because of the steady stream of income they pay to investors and the advantages provided by their largely tax-free structure. The proposed investment cap, however, was quickly derided by the country's biggest pension funds, including the massive Ontario Teachers Pension Plan Board, which called the proposal discriminatory and said it put that province's teachers at a disadvantage. The proposal also drew criticism because of a loophole exempting pension funds managed by the Caisse de dépôt et placement du Québec from the cap. “Since the March 23, 2004 tabling of the budget, several pension funds, financial market stakeholders and provincial governments have raised concerns about the proposed investment limits,” the federal Finance Department said in a statement released Tuesday. “In response to these representations—including a request from the Government of Ontario—the proposals to limit pension fund investment in business income trusts will be suspended.” The decision to suspend the caps has been widely foreshadowed by earlier reports in The Globe and Mail. Mr. Goodale said Tuesday's announcement gives federal finance officials a chance to consult with industry and provincial government representatives. Details of that process are expected to be finalized soon. The budget proposed to limit pension funds to holding no more than 1 per cent of fund assets in business income trusts and no more than 5 per cent of a trust's units. Investments by funds in resource-royalty and real estate investment trusts would not be affected by the limits. Deferred income plans that are registered pension plans — such as RRSPs and registered retirement income funds — would similarly not be affected by the caps. As well, the budget proposed that interests held by non-residents in mutual funds — including royalty trusts, REITs and other funds whose value comes making from Canadian holdings — be subject to capital gains taxes.