Minister of Finance Ralph Goodale today announced that he has asked Minister of National Revenue John McCallum to postpone providing advance rulings on income trusts effective immediately, a move that may halt trust conversions ahead of the government’s decision on how to deal with trusts.

This move may stall the planned conversions of companies such as CI Fund Management Inc. When CI announced its intention to convert to a trust it said it would seek an advance income tax ruling from the Canada Revenue Agency relating to the conversion.

“Tax rulings are generally not required for transactions of this nature, but we feel it is prudent given the size of CI – even though the structure we are contemplating is similar to existing income trust structures,” Bill Holland, CI’s chief executive, said at the time.

The firm had planned that the conversion would be considered by its board of directors in early October, and, if approved by the board, would be submitted to CI’s shareholders for their approval at the annual meeting of shareholders to be held not later than Nov. 30.

Goodale notes that McCallum supports this request. On Sept. 8, the federal government issued a paper and launched consultations on the economic and fiscal implications of flow-through entity structures, such as income trusts. Submissions will be received until Dec. 31.

“We launched consultations because of our concern about how the increased use of this type of business vehicle may affect economic growth,” said Goodale. “We have a viable and productive corporate sector that invests, creates jobs and contributes its fair share of tax. I want to make sure that government tax revenues are appropriately safeguarded, but even more importantly I want strong and vibrant Canadian enterprises of all sizes in all sectors contributing to a dynamic and growing economy.”

Goodale said that while these consultations are underway and until the government announces what action it may take, it would be inappropriate for the government to issue advance tax rulings on these matters.

He encouraged the public to participate fully in the consultation process. He added that the Department of Finance is closely monitoring developments in the FTE market with a view to proposing measures in response to the consultations. The government will consider what, if any, transitional measures would be appropriate.