Canada takes aim at tax-advantaged bond funds that use derivatives strategies
Finance minister Jim Flaherty targets funds popular with ordinary investors in tax crackdown. Is this the way forward in the international battle against tax evasion? Yakob Peterseil reports
Canadian finance minister Jim Flaherty has announced that his government will shutter approximately 70 fixed-income funds that have been marketed to ordinary Canadians as "tax-advantaged". It turns out that over the past 20 years, investors in Canada may have unwittingly poured C$20 billion into mutual funds set up for the express purpose of reducing taxes.
The funds got their name from the way they cut investors' taxes in half. The trick is achieved through a derivative. On the heels of the
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