New potential tax laws may impact Canadian businesses
May 31, 2012
It is not uncommon for companies of any size to trade their wares between nations, especially neighboring countries. Trade is a large factor of the Canadian economy, and northern businesses benefit from prosperous relationships with the United States and Europe, primarily.
However, a recent call for a shift in laws regarding importing and exporting may affect Canadian companies. Owners of firms of varying sizes may see a large change in the bottom line on their accounting software in the near future if regulations are rewritten.
Laws may be altered
Both case law and slight legislative shifts could result in revamped import/export rules that will affect Canadian businesses, experts believe. On May 30, a Bloomberg BNA webinar was held to explain the potential changes to the system.
The web discussion covered issues on both inbound and outbound investment rules, as well as the possible challenges they might pose to treaties. The Bloomberg BNA website explained the intent of the government in changing tax rules is to maximize the potential cross-border capital.
Case law may be the main catalyst for the alterations. The Bloomberg BNA site noted the recent litigation in Copthorne Holdings Ltd. v. Canada, among other lawsuits, may have lasting effects. According to auditing firm KPMG, the Canadian Supreme Court ruled the General Anti-Avoidance Rule will apply to a business transaction if a tax benefit is present. In this case, the court decided, a tax can be dissolved if the purchase was made primarily to avoid a tax or if the transaction would cause a violation of the GAAR.
According to KPMG, this may result in individuals and companies making special purchases that would minimize taxes.
Call for tax revenue
Because the global economy was greatly affected by the 2008 recession, the Canadian government is running a large deficit. According to Dow Jones, the national budget deficit for the fiscal year ending March 31 was smaller than predicted. The reason for the better figure, Tax-News said, was because of revenue garnered by taxes.
Communities have also called for lessened pressure on provinces as far as tax requirements. The Toronto Star reported there is a heavy burden on municipalities to deliver tax revenues, though they are not seeing many results from government spending. Changing the laws to collect more from importers and exporters could take some of the responsibility off citizens.
Canada a large international trader
This change in law could greatly affect many businesses in Canada, as the nation is known for trading large commodities internationally. American businesses may also see some backlash if Canadian companies slow exporting in an effort to avoid taxes. According to Ontario's government website, the U.S. receives nearly 75 percent of all Canadian exports and supplies around 51 percent of imports.