Draft legislation relating to Foreign Investment Entities and Non-Resident Trusts: December 16, 2002.

On December 16, 2002, TEI submitted a letter to the Minister of Finance John Manley urging the Canadian government to withdraw proposed legislation released on October 11, 2002, relating to Foreign Investment Entities and Nonresident Trusts. The letter recommended as an alternative that the implementation date at least be deferred until taxation years beginning after December 31, 2003, to afford taxpayers time to study the legislation and consult further with the government. (TEI commented on two previous drafts of the legislation. The most recent comments on the second draft of the legislation are reprinted in the November-December 2001 issue of The Tax Executive, beginning at pages 467 and 469. The earlier comments on the first draft of legislation were reprinted in the March-April 2001 issue, beginning at page 138.)

TEI's comments were prepared under the aegis of its Canadian Income Tax Committee, whose chair is Monika M. Siegmund of Shell Canada Limited. Contributing to the development of TEI's comments were Vince Alicandri of Hydro One Networks, Carmine A. Arcari of Royal Bank of Canada, Hugh D. Berwick of Alcan Inc., and Alan Wheable of Toronto-Dominion Bank.

A draft of proposed legislation relating to Foreign Investment Entities (FIE) and Non-Resident Trusts (NRT) was announced by the government on October 11, 2002. Although the draft FIE and NRT legislation has been revised substantially from the previous versions of the legislation, Tax Executives Institute believes the legislation remains fundamentally flawed and unworkable. Hence, on behalf of TEI, I am writing to urge the government to withdraw the legislation.

Equally important, after more than two years of work by the Department of Finance to develop, revise, and fine-tune the legislation, TEI believes that it is unreasonable for the government to impose an implementation date of January 1, 2003. Taxpayers have been afforded less than eleven weeks prior to the legislation's implementation date to analyze the draft legislation and submit comments to the government on the third and latest version of the proposed legislation. Moreover, even assuming the revised rules are sound--and our preliminary analysis suggests that the regime remains over-inclusive and would benefit from additional consultations--taxpayers will need substantially more lead time to modify or develop the information systems necessary to comply with these mind-numbingly complex provisions. Consequently, we urge...