A Canadian political watchdog group said Friday it has filed a complaint with the federal ethics commissioner over the Conservative government's plans to tax income trusts.

Democracy Watch said it filed the complaint over promises by Prime Minister Stephen Harper in the last election campaign that the Tories would not bring in a tax on income trusts.

Duff Conacher of Democracy Watch said he wants the ethics commissioner to investigate whether Harper and Finance Minister Jim Flaherty violated rules that require all federal politicians to act "with honesty."

"Essentially, Democracy Watch's position is that the Conservative party and Prime Minister Harper extended an offer as a contract with voters with the promise in the last election, and they have now broken that contract," Conacher said during a press conference in Ottawa.

"As with any contract broken, Democracy Watch believes that there should be cause for legal action for redress and compensation for negative effects from having the contract broken."

Flaherty announced the new tax on trusts in a surprise move on Oct. 31. Trusts that began trading as of Nov. 1 or later would face the new measures in 2007. Existing trusts would have a four-year transition period and would not face the new rules until 2011.

By some estimates, the federal and provincial governments stand to lose as much as $1 billion annually in tax revenue to trusts. There are now more than 250 income trusts in Canada.

Trust conversions have been increasing in popularity because trusts do not pay corporate tax. Instead, they pay out most of their income in distributions to unitholders, who then pay tax on those distributions.

Harper has defended the government's decision, saying that had a trend of the past year continued, major corporations would continue to convert into income trusts, "which would have resulted in them paying no taxes whatsoever."

The prime minister has argued it would have shifted the tax burden to ordinary Canadians, which he said would not have been fair.

Democracy Watch also wants the investigation carried out by a provincial ethics commissioner or other ethics expert because it said it does not believe the federal commissioner can operate impartially.

The watchdog raised allegations of bias against the federal commissioner, Bernard Shapiro, in September 2005.