A new association wants Canada’s auditor general to examine the Harper government’s justifications for its controversial income trust tax.

The Canadian Association of Income Trust Investors, or CAITI, is calling for a public audit into Finance Minister Jim Flaherty’s Tax Fairness Plan before Parliament passes it into law.

On Oct. 31, 2006, Flaherty announced the Conservative government would slap a tax on income trusts. Existing trusts were given a four-year tax-free grace period.

CAITI’s announcement comes as a commons committee prepares to meet Wednesday to discuss whether to hold public hearings on the income trust tax.

The coalition said it wants to aim particular scrutiny at Flaherty’s notion that income trusts siphon away $500 million in tax revenue each year from government coffers.

“The assertion of tax leakage and the analysis that supports such a notion has never been made public, audited, or been subject to peer review.” CAITI said in a statement.

It said Flaherty’s “tax leakage” assertion is based on analysis that excludes taxes paid on income trusts held in retirement accounts, which are subject to the highest level of personal taxation.

Second only to employment income, retirement income is the second largest source of government revenue, CAITI said.

It said some 3.5 million Canadian investors have been either been directly or indirectly affected by Flaherty’s plan, with each losing between $20,000 to $25,000.

The hardest hit are those providing for, or saving for, their retirement, the group says.

“The loss of savings and the loss of income resultant from the (Tax Fairness Plan) will materially affect these Canadians’ standard of living and financial security in retirement,” the group said.