Finance Minister Shirley McClellan has indicated that the province is “studying whether it’s necessary to create its own withholding tax on trusts to stop the flow of money out of the province.”

Recent reports included comments from the Alberta Energy Minister, Greg Melchin, who has asked that the overall review pays attention to tax on trusts.  In August, Mr. Melchin, wrote to McClellan to to include income trusts in the review.

The Alberta Sun Sun reports the Tory minister as saying, “We’ve had the discussion with finance ministers across Canada. We’ve agreed to be part of that review and we’ll get a result. I think the end of December is the deadline for that.”

The review is part of a broader process in Alberta that will not be concluded until after the Federal Department of Finance completes its review of income trust and flow-through entities. According to the Edmonton Sun, “Ottawa is reviewing the way it deals with investments by Canadians and foreigners as well as tax-exempt pension funds.”

The initial ideas for exploration in Alberta include introduction of a provincial level withholding tax aimed, like the existing federal tax, at individuals who receive trust distributions outside of Canada. With a tax of only 15% on distributions, non-residents are seen to have preferential treatment on their income, compared to Canadians.

Some in government and media have characterized the Alberta study as a process through which Alberta will “plug a tax loophole” involving income trusts. Others have characterized the move as being one of the Province trying to tap into an oil gusher of profits with the free flow of cash coming from trusts.

So the dialogue goes, demonstrating need for more real perspective and less dramatic characterizations.