Enhancing certainty
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Certainty in tax law is in the best interest of the tax community as a whole — revenue authorities, taxpayers and tax advisors all benefit from a clear understanding of the law at any point in time. To improve certainty, we present these suggestions:
- While comfort letters are an effective stop-gap measure when unintended tax results are identified, legislation in support of comfort letters should be enacted as soon as possible . Delays have created uncertainty on two fronts:
- While taxpayers arrange their affairs according to comfort letters, these letters are not law
- Comfort letters cannot be considered in the preparation of audited financial statements. Thus, transactions are at times deferred or executed in a less than optimal manner under existing enacted legislation — the resulting increase to cost and complexity impairs the competitiveness of Canadian companies.
- Tax proposals should be introduced and advanced through the legislative process in a reasonable time period, allowing for public consultation
- Legislative amendments should be prospective unless they are merely corrections or clarifications of existing law. While the government does at times need to act swiftly to close an unintended “loophole”, we support appropriate grandfathering where a particular tax policy is well known and understood.
Taking a consultative approach
The Department of Finance has often sought outside advice for significant changes to complex legislation. We encourage this approach as it can identify unintended consequences of proposed new laws.
Specifically, the Department of Finance has proposed several changes in international taxation that are not yet draft legislation. While we encourage the Department of Finance to move forward with these complex proposals, we strongly recommend that these be released for consultation before they are tabled for first reading in the House of Commons.
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