Proposed changes to Canadian Excise Tax Act.

On May 1, 1992, Tax Executives Institute filed the following with the Canadian Department relating to proposed changes to the Canadian Excise Tax Act. The comments were prepared under the aegis of the Institute's Canadian Commodity Tax Committee whose chair is D. John Nichol of Petrol-canada Inc. James A. McFall of Xerox Canada Limited contributed materially to the preparation of the comments, whose submission was coordinated by Andrew G. Kenyon of the Canadian Imperial Bank of Commerce, the Institute's Vice President-Region I.

Tax Executives Institute, Inc. is pleased to submit the following comments on two issues arising from pending amendments to the Excise Tax Act.

Background

Tax Executives Institute is an international organization of approximately 4,800 professionals 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 members represent nearly 2,000 of the leading corporations in Canada and the United States.

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. 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; and resource (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.

Federal Sales Tax

Inventory Rebate

Under section 120 of the Excise Tax Act (the Act), a Federal Sales Tax Inventory Rebate could be claimed in respect of inventory held for sale on January 1, 1991, which had been subject to the Federal Sales Tax (i.e., "taxpaid") of 13.5 percent. The general claim rate for the rebate, as established by regulation, was 8.1 percent. The intent of this rebate was to eliminate the double taxation of inventory held at the time of transition from the Federal Sales Tax (FST) regime to the Goods and Services Tax (GST) regime. The FST component of tax-paid inventory would be refunded to the person holding the inventory at January 1, 1991, with the benefit being passed on to customers through lower pricing. The...