Canadian advisory panel embraces TEI suggestions for reform.

• Position: Tax Executives Institute

The Advisory Panel on Canada's System of International Taxation has released a comprehensive report urging broad reforms to Canada's international tax regime. The December 10, 2008, white paper on Enhancing Canada's International Tax Advantage makes myriad recommendations, endorsing and incorporating many made by TEI in its submission to the panel. TEI President Vincent Alicandri observed that, "This document bears TEI's finger prints throughout--in recommendations cited as TEI's by the Panel as well as others that are unattributed." A copy of the Panel's final report is available at http://www.apcsit-gcrcfi.ca/07/index-eng.html.

The Advisory Panel was established in November 2007 by the Minister of Finance with a broad mandate to improve the competitiveness, efficiency, and fairness of Canada's system of international taxation, minimize compliance costs, and facilitate administration and enforcement by the Canada Revenue Agency. The Panel released its initial views in an April 2008 report and established a consultation framework. Responding to the Panel's invitation for comments, TEI's Canadian Income Tax Committee swung into action, meeting with the Panel in June and preparing an extensive set of comments and recommendations in its July 15, 2008, submission. (TEI's comments are reprinted in the July-August 2008 issue of The Tax Executive.)

Among the highlights in the final report, the Panel noted that Canada's anti-deferral rules must be weighed against any compliance and administrative costs that may impede the ability of Canadian companies to compete in global markets. Citing TEI's submission, the Panel cautioned that "(T)he FIE and NRT ... rules ... are overbroad, complex, convoluted, difficult to apply, and virtually impossible for taxpayers to comply with."

In recommending that Canada eliminate its withholding tax requirements related to services performed and employment functions carried on in Canada where the nonresident certifies the income is exempt under a Treaty, the Panel parroted themes articulated by TEI in the submission to the Panel as well as in numerous other submissions to CRA, the Department of Finance, and the House of Commons Standing Committee on Finance that stretch back more than 10 years.

The Panel also noted that the complexity of international activities means that CRA and Department of Finance need more resources and cited TEI's recommendations for additional resources as a way to (i) improve guidance for...