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Ottawa, May 18, 2004 Minister of Finance Announces Consultations on Pension Fund Investment in Business Income TrustsRelated document: Minister of Finance Ralph Goodale today announced that the Budget 2004 proposals to limit investment by pension funds in business income trusts will be suspended to allow for further consultations. These measures were originally proposed to take effect January 1, 2005. "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," said Minister Goodale. "But the concerns raised by pension funds and other interested parties deserve a closer look." The limits proposed in Budget 2004 were designed to prevent corporate income tax revenue losses due to large investments by pension funds in business income trusts. Pending provincial legislation to provide limited liability to investors in income trusts would accelerate pension fund participation in the business income trust market. Given the size of pension funds and their tax-exempt status, this could have a significant impact on the corporate tax base. 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. 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. Officials will consult with representatives of the pension fund industry, the investment industry, provincial governments and other interested parties. Details of the consultation process will be released soon. Following consultations, the Government will issue legislative proposals. As stated in the budget, the Government will continue to monitor the development of the income trust market. A backgrounder containing further information is attached. ___________________
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