Pending Canadian excise tax issues: December 7, 2005.

On December 7, 2005, Tax Executives Institute held its annual liaison meeting with officials of the Canadian Department of Finance on pending excise tax issues. Reprinted below is the agenda for the meeting, which was prepared under the aegis of TEI's Canadian Commodity Tax Committee, whose chair is Natalie St-Pierre of BCE Inc.

Tax Executives Institute welcomes the opportunity to present the following comments on commodity and excise tax issues, which will be discussed with representatives of the Department of Finance during TEI's December 7, 2005, liaison meeting. If you have any questions about these comments, please do not hesitate to call either Monika M. Siegmund, TEI's Vice President for Canadian Affairs, at 403.691.3210, or Natalie St-Pierre, Chair of the Institute's Canadian Commodity Tax Committee, at 514.870.6552.

Background

Tax Executives Institute is the pre-eminent professional organization of business executives who are responsible--in an executive, administrative, or managerial capacity for the tax affairs of the corporations and other businesses by which they are employed. TEI's 5,400 members represent more than 2,800 of the leading corporations in Canada, the United States, Europe, and Asia.

Canadians make up approximately 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 nine geographic regions. In addition, a substantial number of our U.S., European, and Asian members work for companies with significant Canadian operations. In sum, TEI's membership includes representatives from most major industries, including manufacturing, distributing, wholesaling, and retailing; real estate; transportation; financial; telecommunications; and natural resources (including timber and integrated oil companies). The comments set forth in this submission reflect the views of the Institute as a whole, but more particularly those of our Canadian constituency.

1. Procurement Cards

   During the meeting, TEI would like to provide its perspective on procurement card issues creating significant and unnecessary administrative challenges and costs for taxpayers (presentation attached).

2. Questions for the Department

   1. Non-resident rebate respecting installation services

      Section 252.41 of the Excise Tax Act (ETA) requires a non-resident, non-registered recipient of an installation service to file for a rebate "within one year after the completion of the service" in order to receive a rebate of the tax paid by the recipient in respect of the supply of the service. Subsection 252.41(1)(b) of the ETA protects against revenue loss owing to inappropriate rebates or input tax credits (ITCs) by non-commercial activities that acquire such supplies, so why only allow one year for applying for a rebate rather than the common two-year period allowed for other rebates, or even a four-year period consistent with the standard audit period?

      As an example, consider a the following scenario: A Canadian registered supplier who installs tangible personal property into real property at a site in Canada for a non-resident, non-registered recipient is required to invoice the tax in respect of the supply. If the supplier fails to invoice the recipient, and on audit it is determined that the tax should have been invoiced, Canada Revenue Agency (CRA) will assess the supplier for the applicable goods and services taxes (GST) and harmonized sales taxes (HST). If the supply was made within the most recent year of the audit, a rebate may still be available if the time limit has not expired. But if the supply was made before the most recent audit year, it is likely that the one-year...