Tax Efficiency For Canadian Mutual Funds A 'Myth' Says Expert

by Mike Godfrey, Tax-News.com, Washington

24 October 2003

After-tax reporting of mutual fund returns in Canada is effectively unnecessary as the notion of tax efficiency in this area is largely a myth, according to one of the country’s noted mutual fund tax experts, James Golombek.

Speaking at the sixth annual AIM Trimark Professional Development day this week, Golombek, the firm’s vice-president of taxation and estate planning explained that the media tends to play up and exaggerate the effectiveness of portfolio turnover in the management of equity funds.

Mr Golombek, who also chairs the taxation steering committee of the Investment Funds Institute of Canada, argued that investors who avoid funds that make annual distributions of capital gains in non-registered accounts for tax reasons are ultimately putting themselves at a disadvantage. He noted that for some firms this is actually a selling point, with many funds boasting that they have not distributed gains for periods of five years.

“One of the most effective ways to avoid tax is to lose money” Mr Golombek pointed out, contending that tax efficiency “is not as big a deal as people think.”

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