Pre-budget deliberations of House of Commons Standing Committee on Finance: September 8, 2003.

• Position: Canada

On September 30, 2003, TEI testified before the House of Commons Standing Committee on Finance in respect of its 2003 Pre-Budget Consultations. TEI's written statement, which was submitted in advance of the hearing, follows. Mario M. Tombari of Imperial Tobacco Limited, the Institute's 2003-2004 Vice President for Canadian Affairs, and Monika M. Siegmund of Shell Canada Limited, chair of the 2003-2004 Canadian income Tax Committee, delivered TEI's statement to the Standing Committee.

Tax Executives Institute (TEI) commends the Standing Committee on Finance for holding pre-budget consultations again this year. The hearings provide an important avenue for the Committee to gather input from Canadians across the country and TEI is pleased to have the opportunity to participate. TEI has a number of recommendations in respect of taxation measures in order to foster economic growth and job creation, to promote a business environment favourable to investments in Canada, to ensure a high level of innovation and productivity, and to simplify the tax laws and improve their administration. We believe our recommendations will diminish compliance and administrative costs and spur economic efficiency and prosperity for all Canadians to share.

Background

Tax Executives Institute is the preeminent association of business tax professionals. (1) TEI's 5,400 members work for 2,800 of the largest companies in Canada, the United States, and Europe. TEI's membership includes representatives from a broad cross-section of the business community, with members employed in all major industries and sectors of the economy. In that sense TEI is unique--we do not represent a particular group or industry. Canadians make up approximately 10 percent of TEI's membership, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver. In addition, many U.S. and European members work for companies with substantial Canadian operations.

Summary of Recommendations

The Institute urges the Standing Committee to incorporate the following recommendations in its report on the pre-budget consultations:

* Should Federal budgetary constraints permit, accelerate the phase-out and repeal of the Large Corporations Tax.

* Abandon the 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 Customs and Revenue Agency (CCRA) under the current provisions of the Income Tax Act, adopt narrower, more targeted remedies.

* Adopt a loss transfer system (or group loss relief rules) for corporate groups.

* Recommend other improvements in the administration of the Income Tax Act, including repealing the withholding tax imposed on cross-border services, urging the Department of Finance to include binding arbitration provisions in Canada's tax treaties, and urging the Department of Finance and CCRA to streamline the reporting obligations of Canadian taxpayers in respect of their foreign affiliates.

Large Corporations Tax

Last November, TEI testified before the Standing Committee in Calgary. At that hearing, we (along with other groups) urged the Committee to recommend the elimination of the Large Corporations Tax (LCT) levied under Part 1.3 of the Income Tax Act. In February, the Government's 2003 Budget Message announced legislation...