TEI comments on 2005 Canadian budget.

Tax Executives Institute has filed comments with the Canadian House of Commons Standing Committee on Finance in respect of the country's 2005 pre-budget consultations. The Institute's comments included recommendations to foster economic growth and job creation, promote a favorable business environment for investments in Canada, and ensure a high level of innovation and productivity.

In its September 6 comments, TEI urged the Standing Committee to implement as soon as practicable the 2005 budget announcement calling for phased corporate income tax rate reductions as well as the elimination of the corporate surtax. In addition, TEI made the following recommendations:

1. Abandon or substantially narrow the Reasonable Expectation of Profit (REOP) test included in draft legislation clarifying the deductibility of interest and other expenses.

2. Urge the Department of Finance to expeditiously negotiate and implement a new provision in the Income Tax Convention with the United States eliminating withholding on all dividends and interest for payments to both related and unrelated parties.

3. Abandon draft legislation in respect of Foreign Investment Entities and Non-Resident Trusts; if perceived abuses of the Income Tax Act cannot be addressed by Canada Revenue Agency under the current provisions of the Income Tax Act, adopt narrower, more targeted remedies than this draconian legislation.

4. Adopt simpler and broader GST relief provisions for transfers of property among affiliated companies in connection with corporate restructurings and reorganizations.

5. Implement a corporate loss transfer system or group loss relief mechanism

TEI will testify at a October 19 hearing of the Standing Committee, which will be held in Calgary. Monika M. Siegmund, TEI's Vice President for Canadian Affairs will represent the Institute at the hearing.

The Institute's comments are reprinted in this issue, beginning on page 485.