OTTAWA -- Finance Minister Ralph Goodale is promising that a Christmas federal election campaign would not delay him from announcing a new regime for income trusts -- and he left the door open to respond during the political race if a decision is ready before the vote takes place.
The Liberal government has cast a cloud of uncertainty over the once-red hot income trust market by signalling it's unhappy with the current rules for trusts and may crack down on their tax treatment.
Mr. Goodale has pledged he won't make a decision before public consultations end Dec. 31. But officials have said an announcement could follow in early January.
"It is my intention to respond very quickly after the consultation is concluded and whatever the political situation may be at the time, the Minister of Finance is the Minister of Finance, and the Minister of Finance has responsibilities to discharge," he said yesterday.
Political instability is expected to lead to the defeat of the minority Liberal government by Nov. 29 with an election campaign starting almost immediately and a ballot in early 2006, possibly Jan. 9 or 16.
Finance may have a decision ready in early January and Mr. Goodale's pledge to unveil it as soon as possible means he may be doing so during the last few weeks of an election campaign.
The Finance Minister said he will still be able to discharge his duties during an election campaign. "I will be Minister of Finance until an election is concluded or the Prime Minister changes his mind. So I would obviously intend to exercise my responsibility," he said.
Income trusts pay little or no corporate tax because they pass through their earnings and cash flow to investors, who pay personal taxes on distributions they receive. The result is a lower overall tax bite than for corporate dividends, where the money is taxed twice -- once at the corporate level and once in the shareholders' hands.
Ottawa shook up the trust market in September after it revealed it could be losing hundreds of millions in annual tax revenue because of income trusts and signalled it was seriously rethinking rules governing the vehicle.
Conservative finance critic Monte Solberg called on Mr. Goodale to tell Canadians what the Liberals have in mind for income trusts before an election campaign so that voters can make up their minds which solution they prefer. "It would be nice for people to have clear alternatives on this," he said.
The Conservatives have pledged to leave income trusts alone but to reduce the tax advantages compared with corporations by lowering the effective rate of taxation on corporate dividends.
By comparison, Mr. Solberg said, the Liberal position appears to be that, " 'We've got a process and we'll decide next year,' " he said. "People need leadership, not this fudging."
But Mr. Goodale said he doesn't want to comment before consultations end for fear of prejudging the outcome. "Understand that as Minister of Finance . . . every comment that is made has the ability to affect the market," he said. " So I'm going to be very careful of what I say -- so that it's one thing for a finance critic from the opposition to speculate about A, B, C or D. The Minister of Finance has to calculate the impact of those words very carefully and that's why I'm not going to idly speculate about this subject."
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