TEI comments on interest imposed on GST: December 20, 2002.

On December 20, 2002, TEI President J.A. (Drew) Glennie sent the following letter to Ed Gauthier, Deputy Assistant Commissioner, Canada Customs and Revenue Agency, concerning the interest assessed when addition Goods and Services Tax is due upon importation of goods. The letter follows up on an issue raised during TEI's liaison meeting with CCRA on December 3, 2002, and was prepared under the aegis of TEI's Canadian Commodity Tax Committee, whose chair is Martina Krummen of Air Canada.

During TEI's December 3, 2002, liaison meeting with CCRA, a question arose concerning the imposition of interest on the Goods and Services Tax when goods are imported into Canada, and the importer subsequently realizes that additional GST is payable. The issue was discussed in the two previous liaison meetings and, at CCRA's suggestion, TEI sent a letter to the Director of the Trade Incentive Programs Division recommending a solution. (A copy of TEI's February 14, 2001, letter to Candace Breakwell is attached.) [Ed. Note: The letter is reprinted in the March-April 2001 issue of The Tax Executive.]

The issue arises in the context of a voluntary disclosure of tax liability by a taxpayer. TEI believes that when a taxpayer has voluntarily disclosed an additional GST liability due upon importation of goods, the interest on that GST should be waived. This position is consistent with CCRA's internal policy that recommends administrative tolerance when items are voluntarily disclosed and with the goals outlined in the Fairness Package, which is aimed at harmonizing the fiscal policies applicable to the GST, income tax, and customs laws.

At TEI's most recent liaison meeting, CCRA requested the Institute to consider alternative solutions to the problem. Upon further review, TEI believes that the administrative solution we originally identified is the simplest and most efficient one. This solution could be expeditiously issued and would provide clarity for all parties. Although a legislative solution may provide more certainty, the implementation of such a provision would cause undue delays in resolving the issue. We suggest that CCRA has the authority to implement this solution administratively, in a manner similar to the wash transaction policy established by CCRA under the Excise Tax Act. See GST/HST Memoranda Series 16.3.1.

TEI appreciates the opportunity to meet with CCRA and to provide additional comments in respect of this issue. As mentioned during our meeting, we would be pleased to provide additional assistance in implementing the proposal. If you should have any questions, please do not hesitate to contact either Glenn G. Wickerson, TEI's Vice President for Canadian Affairs, at 403.233.1135, or Martina Krummen, chair of the Institute's Canadian Commodity Tax Committee, at 514.856.6675.