Finance Minister Jim Flaherty’s income trust tax announcement on Oct. 31, 2006, was certainly no treat for Canadian citizens and businesses. Earlier last year, Harper and the Conservatives made an election promise not to tax trusts.

But yesterday afternoon, a number of MPs shelled out a treat of their own. A Parliamentary committee – with commentary from the Liberal Party, the NDP and the Bloc Quebecois – released a report criticizing the proposed tax, saying it has had a “devastating effect on Canadian investors.”

But there was no criticism without counsel. The 66-page report also lists recommendations.

The committee recommends that the government reduce the 31.5% tax on the income trusts to only 10% and that this be effective immediately, providing a refund for all Canadian investors. It also recommends a 10-year tax-free period for income trusts to replace the original four years indicated by Flaherty.

The committee also wants transparency. It recommends that the government release the information on how it estimated the amount of lost tax revenue due to trusts. In the fall, Flaherty announced that trusts cost Ottawa approximately $500 million a year. “It is imperative that a democratic government be as transparent as possible when levying a new tax so that it can be held to account by its citizens,” the report says.

For some background information on this subject, click here.

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