This Week in Tax
Canada Signs Multilateral Agreement
Canada recently signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. As a result, Canada’s tax treaties with other participating jurisdictions will be modified with an added preamble and technical rule. The Department of Finance issued a brief technical explanation of what this means for Canada’s tax treaties. Essentially, a principal purpose test will be added to the treaties. Benefits under a tax treaty will be denied where one of the principal purposes of an arrangement or transaction is to obtain a benefit under that tax treaty. Canada also adopted a provision of the BEPS minimum standard that will result in adding a mandatory binding arbitration provision to its bilateral treaties.
CRA Provides Update on Real Estate Tax Compliance
It’s no secret that the CRA has been intensifying its audit activities relating to real estate in the Greater Vancouver and Greater Toronto areas. This week the CRA provided some results of these compliance enforcement activities. From April 2015 to March 2017, the CRA has assessed $329.4 million unreported income as a result of auditing real estate transactions. Also, more than $17 million in penalties were applied as a result.
Government Confirms No Tax on High Speed Internet
The House of Commons Heritage Committee released a report with 20 recommendations to assist the Canadian media industry. One of these recommendations was to introduce a 5% tax on high speed internet services, the proceeds of which would be used to fund Canadian content. However, the government immediately rejected the recommendation of introducing the tax.
Bill C-44 Hits Roadblock in the Senate
According to the Globe and Mail, Bill C-44 (the first Budget 2017 implementation bill) may not win support from the Senate:
“Finance Minister Bill Morneau may not have enough votes in the Senate to pass his budget bill intact after Liberal senators came out swinging against several aspects of the legislation.”
These aspects include: the increased excise tax on beer and spirits, the Infrastructure Bank, and modifying financial oversight. A senator has moved a motion to remove the infrastructure bank sections from the bill for further study, but it’s unclear whether this motion is allowed under the rules of procedure. Essentially, it appears that Bill C-44 will move slowly through the Senate as it is heavily debated. If the Senate makes amendments to the bill or outright defeats it (this is rare), it will be interesting to see how the government will respond.