I was riding the subway today and picked up a copy of The Metro for some light reading. The Money Matters column by Henry Choo Chong (CGA), caught my eye as he answered a reader question about the different tax promises that each party is bringing on their platform for the Canadian election.

Henry was definitely correct to point out that simply voting for a particular party because of their tax policies is really not the right way to base a decision. Nevertheless, he analyzed 3 major points from the 3 major federalist parties. Unfortunately, the tax policies of the Bloc Quebecois do not offer any substance for the rest of Canada and none of the other independent parties have anything worth saying on the subject of the country’s finance.

I will do the same for these each political party starting with The Conservatives today, The Liberals tomorrow, and The NDP the day after! Be sure to come back and read my analysis of these tax policies!

Goods & Services Sales Tax (GST)
The Conservatives promise to reduce the current 7% GST to 5%. This will generate a huge shortfall in the tax revenue. It is weird to see The Conservatives make such a move as the GST was introduced by Brian Mulroney’s Conservative government in 1991. Steven Harper is making a bold statement that this new breed of Conservatives are unlike the old Conservative party. I would certainly welcome such a tax cut, but what would impact myself more and what I think should be more deserving to be cut is the gas taxes that the Federal and Provincial governments levy on us. The environmentalists won’t like my preference as gas tax is considered a deterrent and motivation for more environmental friendly transport. I realize a gas tax won’t impact the bottom line of more Canadain families than the GST cut would. Heck, I hope they do both!

Childcare Credit
The Conservatives will be giving families $100 per month for each preschool age child in the family. They won’t restrict how the family spends that money. In my opinion, this version of the childcare program will become the next “easily abused handout” as soon as its enacted. There must exist a system to prevent and deter abusers. However I do agree that the program should be as simple as possible. We don’t need to spend billions helping parents and also billions running the system. No party has offered a solution that balances the need to aid parents versus simply giving a blind handout.

Eliminate & Defer Capital Gains Taxes
This is the real bomb that Conservatives are dropping on the population. Many financial critics are saying that this law heralds the end of Registered Savings Plans (RSPs). The Conservatives vow to eliminate capital gains taxes on capital property donated to charities. They will also allow investors to defer capital gains on sales of property assets such as stocks and real estate if the proceeds are re-invested within 6 months. Investors will be able to flip properties and achieve the same tax deferral benefits even if they are trading outside RSPs. The population that will benefit the most are the large institutional investors. This would certainly give the investment community a further jump start to an already flourishing Canadian investment landscape. As an investor, I certainly welcome this promise, but am afraid that this will lead more investors to investing in an arena that they are not familiar with.

Bank Mergers
A Conservative government would almost certainly pave the way for the big banks to merge. Bank stocks will benefit from a Conservative election win. Canadian financial institutions have been a main staple of the Canadian portfolio that its hard for me to imagine how the merges will change the landscape of the investment and financial industry. As if the banks don’t have enough power on the Canadian economy already! The banks want to merge to have an instant padding to their bottom line, but they are really crying for the mergers to be able to compete better internationally. From the track records of TD and RBC, I’m saying that bank mergers will not do anything for their expanasion plans. It’s only a temporary fix.

Tomorrow, we will review the Liberal’s tax promises! Stay tuned!