Implementation of a formal loss transfer system: June 20, 2003.

• Position: Canada

On June 20, 2003, TEI President Drew Glennie submitted a letter to Canadian Minister of Finance John Manley urging the Department of Finance to review its 1985 proposal to establish a corporate loss transfer system, re-propose it for consultation with taxpayers in 2003, and implement such a system legislatively during 2004. The adoption of a formal system for sharing corporate group losses, Glennie said, would remedy a deficiency in the Income Tax Act. TEI's comments were prepared under the aegis of TEI's Canadian Income Tax Committee, whose chair is Monika M. Siegmund of Shell Canada Limited. Contributing substantially to the preparation of the submission was David M. Penney of General Motors of Canada Limited. Also contributing to the development of TEI's comments were Sab Meffe of Canadian National Railway, Ronald L. Cook of TransCanada Pipelines, Limited., Stephen J. H. Drielsma of Manulife Financial, Peter M. Sorenti of Ivaco, Inc., and Morris M. Weinstock of Bell Canada

On behalf of Tax Executives Institute (TEI), I am writing to urge the government to introduce a formal system to permit the sharing and utilization of tax losses and other tax attributes among groups of related corporations. A formal tax loss-transfer mechanism--or group tax loss relief--has been a matter of discussion in Canada for many years. The government eliminated the previous loss consolidation system in 1952 and a debate, which continues to this day, ensued about developing and implementing a replacement system. In May 1985, the Department of Finance joined the debate by issuing a discussion paper entitled A Corporate Loss Transfer System for Canada, outlining a proposal to remedy this deficiency in Canada's tax system. TEI commented on the Department's 1985 paper and has subsequently raised the issue in multiple forums and in liaison meetings with representatives of the Department of Finance. The time for debate has ended; the time for action has arrived.

Background

Tax Executives Institute is the preeminent association of business tax executives. The Institute's 5,300 professionals manage the tax affairs of 2,800 of the leading companies in Canada, the United States, and Europe. Canadians constitute 10 percent of TEI's membership, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver, which together make up one of our eight geographic regions, and must contend daily with the planning and compliance aspects of Canada's business tax laws. Our non-Canadian members (including those in Europe) work for companies with substantial activities in Canada. In sum, TEI's membership includes representatives from most major industries including manufacturing, distributing, wholesaling, and retailing; real estate; transportation; financial services; telecommunications; and natural resources (including timber and integrated oil companies). The comments set forth in this letter reflect the views of the Institute as a whole, but more particularly those of our Canadian constituency.

TEI concerns itself with important issues of tax policy and administration and is dedicated to working with government agencies in Ottawa (and Washington), as well as in the provinces (and the states), to reduce the costs and burdens of tax compliance and administration to our common benefit. We are convinced that the administration of the tax laws in accordance with the highest standards of professional competence and integrity, as well as an atmosphere of mutual trust and confidence between business and government, will promote the efficient and equitable operation of the tax system. In furtherance of this principle, TEI supports efforts to improve the tax laws and their administration at all levels of government.

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