Canadian Committees Address Broad Array of Issues.

Retroactive Legislation, Advanced Ruling Fees, and GST Consequences of Lease-Purchase Agreements Attract TEI Scrutiny

Since the last issue of The Tax Executive, TEI's Canadian Income Tax Committee and Canadian Commodity Tax Committee have forcefully represented the interests of the business tax community in a number of submissions to Revenue Canada and the Canadian Department of Finance. The committees also made significant progress in developing the agendas for their annual liaison meetings with government officials in Ottawa. (Those meetings will be held in December.)

Retroactive Legislation

On September 10, 1999, TEI filed comments with Canada's Ministry of Finance objecting to Press Release 99-067, which announced legislation to overturn retroactively the results of certain taxpayer-favorable court decisions. In the letter to Finance Minister Paul Martin, TEI noted that, while the specific legislation affects only affects a narrow group of TEI member companies with "resource expenditures," the practice of introducing retroactive legislative affecting transactions and expenditures more than 11 years ago could undermine taxpayer confidence in the fairness, and perceived fairness, of the self-assessment tax system.

The letter from TEI President Charles W. Shewbridge, III notes that the Finance press release introduces substantial changes in the Income Tax Act in the guise of "clarifying" amendments. "If applied broadly to other interpretative disputes between taxpayers and the government," the comments said, "this form of remedial action ... is extremely inequitable and one sided. In other words, `Heads the government wins (in litigation); tails, taxpayers lose (by retroactive `clarifying' amendments)!'" The letter observes that among the perverse effects of retroactive legislation is that it undermines the Appeals function of Revenue Canada by encouraging taxpayers to "seek protection from retroactivity that the courthouse provides" for open tax years. The letter closes by urging the government to withdraw the retroactive legislation, and, if necessary to clarify the Act, reintroduce it with a prospective effective date.

The letter is reprinted in this issue, beginning at page 448. TEI's comments were prepared under the aegis of the Canadian Income Tax Committee, whose chair is John M. Allinotte of Dofasco, Inc. Contributing substantially to the development of TEI's comments was Monika M. Siegmund of Shell Canada Ltd.

Advance Ruling Fee...