Liberal Leader Stephane Dion says Finance Minister Jim Flaherty has shown an unwillingness to discuss possible improvements to the government's income trust tax.
Flaherty appeared before a Commons finance committee on Tuesday and defended the plan, which has come under fire from opposition parties and those affected in the private sector.
"We need to know if it's the best policy and we are asking the minister of finance to co-operate. Today, he didn't," Dion told Mike Duffy Live.
"He went to the committee, he said 'This is what it is,' and he left ... We need to know the facts in order to figure if there is a way to improve it."
He added that his party has assembled various tax experts to examine the plan.
But Flaherty said he has no desire to change his decision, while acknowledging it was done "without any pleasure or joy."
"One of the values of this is certainty," he said.
"Any suggestion of a change would just create uncertainty in the marketplace. We don't want to do that; we want to move on."
Flaherty told the Commons committee he based his decision on fairness for all Canadians, who would have ended up paying more taxes if income trusts were left untouched.
He added that within the corporate sector the current rules "give income trusts a tax advantage and distort investment decisions that give income trusts better access to capital than entities that are organized in the corporate form -- that is levelling the playing field between corporations."
Flaherty said the Tax Fairness Plan achieves two critically important goals:
- It restores balance and fairness in the tax system
- It strengthens the Canadian economy now and into the future
Flaherty did apologize to investors negatively affected by the tax.
"It is regrettable that some investors suffered financial losses," he said. "Although it was a very difficult decision it was an absolutely necessary decision for the future of our country."
Flaherty argued that the levy helps protect Atlantic Canadian provinces from an erosion of tax revenue they're currently receiving from East Coast offshore oil riches.
Without the tax, energy firms mining the petroleum would convert to trusts and pay lower taxes on operations there, said Flaherty.
The Tories introduced the levy last October -- which will tax new trusts this year and existing ones in 2011 -- as a way to make sure that income trusts are taxed the same as corporations.
Despite calls to lengthen the tax-free grace period for existing trusts to 10 years, Flaherty said he would not do that since it would cost Ottawa another $3 billion in lost revenue along with billions for the provinces.
"Delaying only puts off the ultimate goal of this decision," said Flaherty.
Income trusts are businesses that pay little or no corporate tax. Corporations that convert to trusts pay most of their cash flows to investors in monthly distributions, who often can defer paying taxes.
Under the new rules, the government intends to impose a distribution tax on payouts by income trusts.
The Conservatives had initially promised during their election campaign not to introduce a tax. The broken promise is what is fueling the majority of the criticism from opposition parties.
"It was Stephen Harper just a year-and-a-half ago... saying 'We will never destroy income trusts'," said CTV's David Akin in Ottawa. "This is the political problem for the Conservatives... that is why there is so much political life in this issue."
Cost to Canada
Flaherty said the federal government lost about $500 million in tax revenues in 2006 but he called the figures 'conservative.' He said the numbers don't include the millions in lost provincial tax revenues or what would have been lost if Telus Corp. and BCE Inc. had moved forward with plans to convert to income trusts.
He also said Alberta expected to lose $450 million annually in tax revenues if the tax was not imposed.
"Some of the information demonstrates to me that in fact the tax leakage on that issue is greater than anticipated," Flaherty told The Globe and Mail Monday. "The more I look at this -- and I spent a good part of the weekend reviewing it again -- I am more convinced than ever that this (tax) was the right decision."
The Commons finance committee will discuss the income trust tax during six hours of hearings expected to stretch over two days.
Liberal finance critic John McCallum said the committee would like to call Flaherty back after the panel has heard and digested the Conservative figures and other expert testimony.
The committee has been inundated with requests from the private sector who want to have their say on the tax.
With more than 200 groups and individuals pushing to speak before the committee, only a few will actually be granted the right to appear.
The Conservatives have come under criticism for refusing to show calculations justifying how they concluded that income trusts were costing the government millions of dollars in taxes.
Flaherty released the figures in a on Tuesday.
