TEI liaison meeting with Canadian Department of Finance on excise tax questions: December 9, 2009.

• Position: Tax Executives Institute

On December 9, 2009, Tax Executives Institute held its annual liaison meeting on excise tax issues with officials of the Canadian Department of Finance. The agenda for the meeting, which is reprinted below, was prepared under the aegis of TEI's Canadian Commodity Tax Committee, whose chair is Diana M. Spagnuolo of Imperial Oil Limited. Also materially participating in the drafting was Carol Felepchuk of TD Bank Financial Group. Mary Lou Fahey, TEI General Counsel, serves as legal staff liaison to the committee. The minutes of the meeting will be posted to TEI's website when they become available.

Tax Executives Institute, Inc. (hereinafter "TEI" or "the Institute") welcomes the opportunity to present the following questions on Canadian commodity tax issues, which will be discussed with representatives of the Department of Finance during TEI's December 9, 2009, liaison meeting. If you have any questions about the agenda, please do not hesitate to call Sherrie Ann Pollock, TEI's Vice President for Canadian Affairs, at 416.955.7373, sherrieann.pollock@rbcdexia.com; or Diana M. Spagnuolo, Chair of TEI's Canadian Commodity Tax Committee, at 403.237.2948, diana.m.spagnuolo@esso.ca.

Technical Questions

1. Harmonization

   1. Update. TEI supports the decisions of the Provinces of Ontario and British Columbia to harmonize their provincial sales taxes (PST) with the federal goods and services tax (GST), but continues to believe that financial services should be zero-rated. During the liaison meeting, please provide an update on developments concerning the adoption of a harmonized sales tax (HST).

   2. Place of Supply Rules for Services and Intangibles. As the HST is introduced in additional provinces, significant issues will arise relating to the current place of supply rules for services and intangibles. TEI recommends that the following principles be used as a basis for revising these rules:

      If the supply for services or intangibles is considered to be made in Canada under the current federal Excise Tax Act (ETA), the location (i.e., address) of the customer as evidenced by the business agreement should be used to determine the tax to charge. If the customer is located in one of the harmonized provinces, then the HST would apply.

      The government may consider exceptions to the rule to attribute the supply to a province other than that in which the customer is located if it relates to tangible personal property or real property located in that other province, or if the supply is made to an individual who is in a province at the time it is performed and had contact with the supplier (similar to sections 7 and 10.1 of Part V of Schedule VI of the ETA). These exceptions, however, should be as limited as possible in order to simplify HST administration.

      In some respects, similar rules now exist in the exceptions to the place of supply rules within the regulations (e.g., for computer-related services, Internet, and trustee services for registered retirement savings plans (RRSP), registered retirement income funds (RRIF), and registered education savings plans (RESPs)).

   3. Exceptions to the Place of Supply Rules for Services. If the place of supply rules for services are not revised, the implementing regulations should be expanded. Currently, the statute provides that place of...