TEI participates in Canadian pre-budget consultations: also comments on VAT Invoicing, Circular 230, NJ Tax Case.

• Position: Recent Activities

The House of Commons Standing Committee on Finance should "monitor and review the international competitiveness of Canada's business tax structure, including the corporate income tax rates," Tax Executives Institute recently stated. The Institute expects to testify at a hearing before the Committee later this year.

In its August 15 written statement to the Committee, the Institute commended the Canadian government for enacting rate reductions "because business tax rate reductions increase the attractiveness of Canada for both foreign and domestic investors." Increased capital investment, in turn, spurs productivity, promotes employment, and enhances the prospects for sustainable economic growth, the organization explained. "The implementation of the phased corporate income tax rate reductions and the elimination of the corporate surtax send a strong signal to the capital markets about the government's commitment to enhancing the competitiveness of the Canadian business tax system."

TEI also stated that the competitiveness of Canada's business tax structure will be enhanced by--

* Repealing section 18.2 of the Income Tax Act, Canada and replacing it with a narrowly targeted provision that will not impede legitimate commercial operations and financing arrangements;

* Eliminating withholding taxes on intercompany dividends in the Canada-U.S. tax treaty;

* Eliminating withholding taxes under Regulations 102 and 105 for cross-border services;

* Adopting a broader exemption system for earnings of foreign affiliates;

* Increasing the incentives to the provinces to eliminate capital taxes; encouraging the provinces to revise their tax policies to enhance competitiveness; and promoting the benefits of harmonization of the provincial retail sales tax systems with the GST; and

* Implementing a corporate loss transfer system or group loss relief mechanism.

TEI's written statement is reprinted in this issue, beginning at page 375.

VAT Invoicing Legislation

TEI recently filed comments with the European Commission on a consultation paper issued by the Directorate-General Taxation and Customs Union that focused on four areas of VAT invoicing: (1) the requirement to issue an invoice; (2) the content; (3) e-invoicing; and (4) archiving. In its October 7 comments, the Institute agreed with the Directorate that the current Invoicing Directive (2001/115/EC) "did not fully meet [the] stated aims of simplifying, modernising and harmonising the conditions laid...