OTTAWA (Reuters) - Finance Minister Jim Flaherty said on Tuesday he will not revisit his controversial policy to tax income trusts even though the issue may return to haunt him in an upcoming election campaign.
In an interview with Business News Network television, Flaherty was asked whether he might bow to demands of disgruntled investors hurt by the new tax and soften the rules, particularly for energy trusts.
“No, its the law now,” he answered.
“I know they’re going to target me and I’ve been told how many millions of dollars they’ve put aside just to target me in my riding, and I guess that’s part of life, but the decision we made was a decision for the good of the country and for future generations,” he said.
Flaherty stunned investors in October 2006 with a plan to begin taxing the then C$200 billion ($187 billion) income trust sector as of 2011, breaking a promise of the governing Conservative Party.
A group of angry investors has been lobbying hard against Flaherty ever since and demanding a reversal of the policy. The opposition Liberal Party also opposed the change.
Trusts are investment vehicles that had become highly popular because they are structured to pay little or no corporate tax, allowing them to distribute cash directly to unitholders.
Prime Minister Stephen Harper has suggested he will request the dissolution of Parliament this week and call and election for October 14.
Flaherty denied that the leader wanted a snap election to avoid governing during tough economic times, repeating that Canada’s fiscal record is among the strongest in the industrialized world and that “there is no deficit looming.”
“I think the motivation for an election now is simply that the House of Commons doesn’t function well. I lived through that for two and a half years,” he said.
Reporting by Louise Egan; editing by Rob Wilson