Canada’s tax system is a quagmire of reforms started and then abandoned, treaty negotiations at a standstill and uncertainty over anti-avoidance measures. Tax professionals say that the problem is that once having identified specific areas of the tax code that need amending, the authorities try to implement change on several fronts.
This catch-all approach to drafting legislation is excessive and it causes unnecessary delays. Lengthy revision processes also make the timing of reforms uncertain. Says Torys partner Jim Welkoff: “If you are over-ambitious in your objectives, once you start down that road, you just keep on going.”
There is also a lack of coordination between the Canadian Revenue Agency and the Department of Finance, so that even when a ruling is secured, the decision may not stand. “To put it bluntly, there is a power struggle,” says Jim. “We are seeing the CRA disagree with the DoF in cases where the taxpayer has received a favourable ruling. This is a significant change from the past.”