Quebec capital tax: November 21, 2003.

On November 21, 2003, the Montreal Chapter of Tax Executives Institute submitted the following letter to Minister of Finance Yves Seguin to express concern over a proposed delay in the reduction of the Quebec capital tax burden. The letter was prepared by the Montreal Chapter, whose president is Jean-Pierre Morier of GE Canada Equipment Financing.

On behalf of Tax Executives Institute (TEI), I am writing to voice our concern about a proposed delay in the reduction of the Quebec capital tax burden.

Tax Executives Institute is the preeminent association of business tax executives. The Institute's 5,400 professionals manage the tax affairs of 2,800 of the leading companies in Canada, the United States, and Europe and must contend daily with Canada's business tax laws. The comments set forth in this letter reflect the views of the Institute as a whole, but more particularly those of our Canadian constituency who constitute 10 percent of TEI's membership. TEI is concerned with issues of tax policy 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. TEI's Montreal Chapter has held regular liaison meetings with both the Minister of Finance Quebecand Quebec Minister of Revenue for many years. These meetings have fostered a mutually beneficial relationship between the Institute and the Quebec Government and we look forward to our next round of meetings.

On June 12, 2003, the government released its 2003 budget proposals and announced its intention to defer the reduction in capital tax rates that was scheduled for calendar years 2004 and thereafter. The budget proposal also announced an increase in the general paid-up capital reduction to $600,000 effective January 1, 2004.

TEI commends the Quebec government for increasing the general paid-up capital deduction, but we urge it to reconsider the decision to defer the implementation of the capital tax rate reduction. TEI recognizes and appreciates the government's concern about the potential revenue effect of the elimination of the tax, but capital taxes discourage business capital investment and destroy jobs. Moreover, capital taxes are extremely onerous for capital-intensive industries and punitive for companies in...