TEI urges the Canadian government to abandon legislation relating to foreign investment entities and non-resident trusts.

• Position: Tax Executives Institute

TEI's March 8, 2007, letter to Canadian Federal Minister of Finance James Flaherty was prepared under the aegis of TEI's Canadian Income Tax Committee, whose chair is David M. Penney of General Motors of Canada Limited. Contributing to the development of TEI's comments were Vincent Alicandri of Hydro One Networks, Inc.; Carmine A. Arcari of Royal Bank of Canada; Grant L. Lee of HSBC Canada; and Alan Wheable of Toronto Dominion Bank.

On November 9, 2006, a Notice of Ways and Means Motion (hereinafter "the Notice") was tabled in the House of Commons, introducing draft legislation relating to Foreign Investment Entities (FIEs) and Non-Resident Trusts (NRTs). The draft legislation in the Notice received its first reading on November 22, 2006, as Bill C-33. On behalf of Tax Executives Institute, I am writing to provide TEI's comments on the proposed legislation.

Background

Tax Executives Institute is the preeminent international association of business tax executives. The Institute's 6,600 professionals manage the tax affairs of 3,000 of the leading companies in North America, Europe, and Asia. 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 nine geographic regions, and must contend daily with the planning and compliance aspects of Canada's business tax laws. Many of our non-Canadian members (including those in Europe and Asia) work for companies with substantial activities in Canada. 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 to reduce the costs and burdens of tax compliance and administration to our common benefit. In furtherance of this goal, TEI supports efforts to improve the tax laws and their administration at all levels of government. We believe that the diversity and professional training of our members enable us to bring a balanced and practical perspective to the issues raised by the proposed legislation.

Discussion of Bill C-33

The proposed FIE rules set forth in the November 9, 2006, Notice and Bill C-33 are intended to replace the current rules in section 94.1 of the Income Tax Act ("the Act") in respect of "offshore investment funds." The draft proposed legislation also...