They’ve said it before. And during the election, they are compelled to say it again.  In a “read my lips” move, Monte Solberg, the Conservative Party Finance Critic, confirmed Party tax policy regarding income trusts, in a poltical interview.

He said that a Conservative government would not tax trusts. And he indicates that the Liberal party plan to reduce taxes on dividend paying stocks is exactly what the Conservative policy has always been.

The TrustInvestor can confirm that stance in so far as direct discussions with Mr. Solberg happened in October at which time he was proposing a credit on corporate tax dividends and saying nothing about taxing income trusts.  Following those discussion with Solberg, Conservative party leader Stephan Harper made pre-election statements about “no new tax on trusts”, all during the Finance Department Consultation process.

Solberg said in an interview that, “When the Liberals made their announcement, that’s what we had been proposing....So we’re very supportive of that approach and we’ll be explicit about it when we release our platform...later this week.”

In regard to it, government officials suggest that according to the dividend tax credit proposed, the highest personal tax rate on dividends would shrink to about 21% from about 32%. Such a tax drop would require some coordination of tax policy between the Federal government and provincial tax authorities, coordination that will not occur in Quebec and is not known yet for some other provinces.

However, this recent clear confirmation of policy from Mr. Solberg is useful for voting investors. Many have been concerned that, during the run-up to the election, policies can change. And last week, Stephen Harper said he intended to “roll back” a number of Liberal tax cuts announced in November. He has been working to create a new position for the Conservatives and setting his own tax plan, stating that he wasn’t restricted to implementation of Liberal policy or promises.

The Conservative reversal of Liberal policy proposals are, according to statement so far, focused more on Liberal plans to:
- Cut tax rates for low-income earners; and;
- Increase basic personal exemptions from income tax by $500.

Most newsworthy from the early days of electioneering, Stephan Harper promised to reduce the General Sales Tax (GST) from 7 percent to 5 percent over coming years. So now we also have Solberg stating that, “We are supporters of income trusts and...oppose tax measures that would raise taxes on income trusts.”

With need for coordination of policy with provincial authorities, the pre-election statements about trust tax remind investors that tax policy is both complicated and speculative. It’s difficult to calculate the total impact of proposed changes to personal and corporate tax rates along with new credit rules, given that those calculations need to incorporate a discount or premium to measure the potential that proposals will not be fully implimented as proposed.

And what of the other major parties?  Canadian income trust policy is not of much interest to the PQ.  It’s not clear if it fits with the Green Party agenda for “green” policy.

The NDP have made news by attacking the Liberal party on the way the Finance Minister, Ralph Goodale announced trust related tax policy.  The New Democrats have made allegations that someone in the Finance Department, under Goodale’s authority, leaked information to investors who made money with the information, prior to formal announcement of policy.

But substantial and specific policies on tax are not as clearly stated by the NDP as from other parties.  Third party analysts suggest that the NDP— often characterized as the party that pushes for more social programs and to increase taxes —is the group that is proposing overall policy changes that most diminish total taxes for Canadians.

On income trust taxation, the NDP demonstrate that there are many routes to fulfill policy intent and so many questions to be answered. Written responses from NDP members of parliament to iTrustInstitute and individual constitutent queries during the autumn Consultation process, showed that the NDP was committed to stopping the $300 million tax leakage due to trusts. That leakage was proposed by the Department of Finance Consultation Paper in terms of corporate tax.  It was not clear to investors, therefore, whether the NDP intended to place punitive policy on trusts, increase taxes for investors including seniors, or raise corporate taxes to compensate for theoretical leakage.

And despite confirming statements, tax promises, trust concerns or seroius intent, the operating reality of income trust policy can not be known until after the election.  No doubt, further research, education and government dialogue with an engaged public might best produce an outcome most beneficial to the most Canadians, us.

The most political conclusion possible: The iTrust Institue invites all members of all parties and individuals to participate in a meaningful exploration and thoughtful development of the potential for benefit and growth found in the income trust market, whoever takes power to whatever extent.