Thank you, Mr. Chairman and committee members, for inviting the Chartered Professional Accountants of Canada to comment on Bill C-4, which implements certain measures from the 2013 budget. I'm pleased to be with you via video conference this afternoon.
In my role as vice-president, taxation, I oversee the activities of CPA Canada’s tax committees, including the tax policy committee and the commodity tax committee as well as the Canadian Bar Association/Chartered Professional Accountants of Canada joint committee on taxation.
We are generally supportive of the bill. It introduces technical tax provisions that are focused primarily on protecting the tax base. They include restricting corporate and trust loss trading; broadening Canada’s thin capitalization rules; ensuring that capital gains tax cannot be avoided by a taxpayer entering into transactions that are economically equivalent to a disposition of a property; eliminating unintended tax benefits related to leveraged insured annuities and leveraged insurance arrangements; clarifying legislation to respond to court decisions; and restoring the intended tax policy results in the areas of farm losses, non-resident trusts, and future reclamation costs.
As you can appreciate, these can be very complex issues. If I could make one observation, it is that the proposed legislation was released on September 13 and the comment period ended October 15. The bill was then tabled three days later. I think we all would have benefited from a longer period of time to fully analyze, digest, and comment on legislation of such complexity.
CPA Canada has provided comments on some of these provisions through written submissions of the CBA/CPA Canada joint committee, including derivative forward agreements, synthetic disposition arrangements, and amendments to the thin capitalization rules.
Our comments were of a highly technical nature and detailed our concerns that in many instances the provisions are too broad in application. Consequently, they capture circumstances that do not appear to be intended by the government’s public policy objectives. The joint committee will continue to work with Finance to modify these rules appropriately while ensuring that the tax base is protected.
We note that Bill C-4 makes certain changes to the capital cost allowance rules. Our comment here is focused on what has not been done. We believe that in future capital cost allowance rates should be reviewed for all classes of equipment so that they correspond to the true economic life of the asset. Updating CCA rates would encourage manufacturers and others to invest in the most modern, productivity-enhancing equipment available, thus ensuring their competitiveness in a truly global economy.
Finally, I would like to comment broadly on the introduction of various anti-avoidance rules in Bill C-4. We support these changes, but they open up the broader issue of anti-avoidance rules and tax evasion. Last week, CPA Canada released a white paper entitled “Corporate tax evasion, avoidance and competition: Analyzing the issues and proposing solutions”. I believe all members of the committee have been sent a copy of this paper.
The topic of tax evasion versus legal tax planning and the related concept of corporations paying their fair share of tax is big and is getting bigger. In fact, the OECD is working on behalf of the G-20 to develop global solutions aimed at stopping tax evasion. Our white paper offers some food for thought to Canadian policy-makers and influencers, and I commend it to you. We would be pleased to return to this committee sometime in the future if you decide you would like to explore the issues of tax evasion and tax planning.
Mr. Chairman, I wish you and your colleagues well in your deliberations on Bill C-4, and I look forward to your questions.
Thank you.