A quarterly survey of 175 chief executive officers, chief financial officers and chief operating officers was done by the Gandalf Group for Report on Business and ROB-TV. According to newspaper reports, the study showed that there is both “a dramatic split among those who back Ottawa’s move and those who dislike it” and has significantly diminished both trust and non-trust executives’ confidence in the government.

Statistics indicate that, “The [tax] ruling has emerged as a divisive issue, pitting those who run trusts against those in non-trust businesses, according to a new survey of top executives.”

In a report on the survey results in the Report on Business, Richard Blackwell wrote that the survey found approximately 58% of those executives surveyed support or strongly support the tax decision. But a significant 40% said that they oppose or strongly oppose the new tax.

Like investors, trust executives have a sense of betrayal because of the Conservatives broker their earlier promise not to change the trust rules. However, it is telling that the new tax doesn’t affect managers as much as investors in that nearly one in five trust executives were indifferent or approved of the tax with 44% not “very” angry.

Among trust executives, a total of 82% reported they didn’t like the new tax with more than half of these executives, 56%, saying that they strongly opposed the tax. And approximately three-quarters or 74% of executives at non-trust public companies reported that they supported the new tax with almost one in three or 30% being very supportive of trust taxes.

Generally, executives at both trust and other companies disliked the way the tax decision was made and communicated in so far as people felt “blindsided” by the move to tax. And executives felt that the government “lost credibility by reversing earlier promises...About 60 per cent of the executives surveyed said the government should consult with business before making these kinds of tax changes.”

Nearly one in three executives at non-trust companies and two of three executives at trusts said they felt the new tax on trusts was a betrayal by the government in so far as it was a reversal in public policy by the Conservatives. 

Qualitative feedback during the study showed that some executives have accepted the government suggestion, albeit unproven rationale and ill-informed theory, that trusts are “bad” for Canadians and our economy. But the most significant response to the surprise tax announcement in terms of change in attitude was a sudden distrust of or growing bad feelings about officials in the new government.

Before the tax announcement, a survey in September indicated that barely 2% of executives had an unfavourable impression of Mr. Flaherty in his role as Minister of Finance. After the news of taxes on trust, the survey in November survey showed that nearly one third of executives had a negative impression.  That included 13% reporting a “somewhat unfavourable” impression of the Minister with 19% saying they had a “very unfavourable” impression.

Executives indicated that they sought decisions made in a prudent manner.  Without that, the rule-setters lose credibility and, by implication, the markets and economy on which those rules are imposed. More than half, approximately 57%, of the executives involved in the survey said that they were concerned that the sudden change in tax laws “hurt Canada’s reputation among foreign investors”.

Regardless of their feeling about the content of the new tax rules and about trusts, comments from those surveyed showed that executives assume that stable policy and participatory decision-making provides the fundamental basis on which people to take risks and make investments.

The tax ruling and change in sentiment including a loss of confidence in Canadian markets comes at a bad time in general.  The study also found that fewer executives, now compared to two months ago, had confidence that the Canadian economy would continue to outperform other economies. There was a sense that the U.S. economy is improving, but that business in Canada would only “grow moderately” in the coming year.