Financial advisors need to stay on top of potential changes in tax and other public policies that might affect their clients’ financial plans, says Jack Mintz, director of the school of public policy at the University of Calgary.

“Make sure you’re up to date on coming policy changes, especially tax policy,” Mintz told attendees at the Distinguished Advisor Conference in Ojai, Calif., Monday. One potential change to watch for is in the area of testamentary trusts.

Mintz noted that Ottawa suggested eliminating the favourable tax treatment of testamentary trusts in a recent consultation paper. These trusts are now subject to graduated tax rates and the government is now concerned about the tax-motivated use of multiple trusts to take advantage of these rates. Ottawa is suggesting that these trusts face taxation at the same top rates as those that apply to inter vivos trusts.

“That’s on the agenda,” Mintz said. “And I won’t be surprised if it does happen.”

Mintz also said advisors and their clients will not see any significant moves by the federal or provincial governments to lighten the tax burden over the next few years.

“Governments are going to need revenue,” Mintz said. “And you have in Canada a real commitment [to] deficit reduction. That means [we shouldn’t] expect many taxes to be reduced over the next couple of years.”

Mintz noted that Ottawa and some provinces — Alberta, for example — have made commitments not to increase taxes. But, he noted, some other provinces may boost levies to deal with their deficits.

Further, Mintz suggested, there may be a desire in both levels of government to broaden the tax base. He cited a number of base-broadening measures instituted in recent years, such as the gradual elimination of the tax incentives provided under the labour-sponsored investment fund program and the recent phasing out of certain depreciation allowances in the oil and gas sector.

Mintz also pointed out that significant changes to the Canada Pension Plan could be coming. Prince Edward Island is championing a reform proposal that would enhance benefits and hike premiums to fund those benefits. This proposal is on the table for discussion at a meeting of the federal and provincial finance ministers slated for December.

Regarding investment strategy, Mintz emphasized that advisors and their clients who understand the implications of recent trade agreements stand to benefit in the next several years. The tentative free trade deal recently negotiated with Europe, as well as pending trade agreements with Asian nations, should provide Canadian firms with expanded business opportunities.

“Firms that have the flexibility to move between markets in North America and Asia are the ones that are going to win,” Mintz said.
Even though economic growth in Europe will likely remain subdued for some time, Mintz added, “the trade agreement with Europe is certainly something to watch in future.”