Revenue Canada liaison meeting on excise and GST questions.

• Position: Tax Executives Institute Canadian Commodity Tax Committee

On December 5, 1995, Tax Executives Institute held its annual liaison meeting on pending excise and commodity tax issues with officials of Revenue Canada-Customs, Excise & Taxation. (Separate liaison meetings were held with Revenue Canada on income tax issues and with the Canadian Department of Finance on both income and excise tax issues.) The meeting was arranged under the aegis of TEI's Canadian Commodity Tax Committee, whose chair is Pierre M. Bocti of Hewlett-Packard (Canada) Ltd., and the Institute's delegation was chaired by Vincent Alicandri of Xerox Canada Limited. Reprinted below are the questions that the Institute submitted to Revenue Canada in advance of the liaison meeting.

Tax Executives Institute, Inc. welcomes the opportunity to present the following comments and questions on several pending commodity and excise tax issues, which will be discussed with representatives of Revenue Canada-Customs, Excise and Taxation during TEI's December 5, 1995, liaison meeting. If you have any questions in advance of that meeting, please do not hesitate to call either Vincent Alicandri, TEI's Vice President for Canadian Affairs, at (416) 733-6762 or Pierre M. Bocti, chair of the Institute's Canadian Commodity Tax Committee, at (905) 206-3399.

1. Revenue Canada Audit Initiatives

   Since our last liaison meeting, there have been a number of developments in various Revenue Canada Audit Initiatives. We would appreciate an update in respect of the following areas:

   * The use of engagement letters to define the scope of an audit.

   * The Department's use of statistical sampling methods.

   * The scope, objectives, procedures employed, and the implementation process for Audit Protocols.

   * The Department's standards for the imposition and waiver of penalties.

   * Real-time audits.

2. Wash Transactions

   Revenue Canada's assessment practice in respect of wash transactions seemingly requires a supplier to charge and remit the GST that was inadvertently not charged. At the same time, the recipient of the supply is required to remit the GST and claim an input tax credit (ITC) for the same amount. This policy imposes a considerable administrative burden on both the supplier and recipient producing no demonstrable revenue for the government. Moreover, where the assessed transactions are identified close in time to the end of the eligibility period for claiming input tax credits, there is a risk that the recipient will be unable to claim the ITC; hence, the government...