Archived - Our Mandate: Enhancing Canada’s International Tax Advantage

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The Panel’s mandate was to make recommendations to guide the government in establishing an international tax policy framework with respect to investment abroad by Canadian businesses as well as investment into Canada by foreign businesses.

Our recommendations aim to improve the competitiveness, efficiency and fairness of Canada’s system of international taxation, minimize compliance costs for businesses, and facilitate administration and enforcement by the Canada Revenue Agency. We attempted to make recommendations that can be practically implemented and that will increase the certainty and simplicity of Canada’s system of international taxation for large, medium-sized and small businesses.

The Panel fulfiled its mandate with an eye to complementing other elements of the government’s overall strategic policy. Establishing Canada’s competitive tax advantage is a key area of focus of Advantage Canada, the Government of Canada’s long-term economic plan. According to Advantage Canada, the tax policy needed to create that advantage is clear: Canada must achieve the lowest effective tax rate on new business investment in the G7. The Panel’s recommendations regarding Canada’s international tax system harmonize with the direction set out in Canada’s long-term economic plan.

The Panel has followed the work of Canada’s Competition Policy Review Panel with great interest, given the Competition Panel’s complementary mandate and the government’s need for a coordinated policy approach. The work of the Competition Policy Review Panel and our Panel is based on the same premise: outward investment by Canadians in foreign markets and investment by residents of other countries into Canada are critical to Canada’s long-term growth and development. Accordingly, Canada’s international tax system should facilitate both outbound and inbound investment.

The Panel’s primary focus has been on how Canada’s international tax rules affect Canadian businesses investing abroad as well as foreign businesses investing in Canada.

Although the Panel was not asked to ensure its recommendations are fiscally neutral, we have been cognizant of the revenue impact of any proposal.

The Panel was supported by a secretariat and has relied on the Department of Finance and the Canada Revenue Agency for information and data regarding the current system. These data helped us assess potential concerns with the current system and their magnitude. We also sought information and independent policy analysis through research from various independent contractors on selected topics, especially with respect to benchmarking Canada’s international tax system and understanding future directions that may be taken by our main competitors.

The Panel submitted its recommendations to the Minister of Finance on December 10, 2008.