Canada To Streamline GST For Financial Services Sector

by Mike Godfrey, Tax-News.com, Washington

31 January 2007

Jim Flaherty, Canada's Minister of Finance, has released draft legislation covering several measures aimed at improving and streamlining the application of the goods and services tax/harmonized sales tax (GST/HST) with regard to Canada's financial services sector.

The draft legislation released on Friday will address GST/HST advantages that currently exist in favour of imported financial services over comparable domestic services.

The government has also proposed a new legislative framework for the GST/HST input tax credit allocation regime applicable to financial institutions. The framework will streamline the application of the GST/HST input tax credit rules for these institutions and reduce the uncertainty arising from the lack of specific guidance in the current legislation.

The Minister also announced that stakeholder consultations would be undertaken on two proposals: replacing the complex system of legislative and administrative rules that currently apply to different pension plan trust structures with a new, uniform GST/HST rebate system that will apply fairly and equally to all such structures; and introducing a new GST/HST annual information schedule for financial institutions to improve GST/HST reporting in the financial services sector.

"The financial services sector is a key element of the Canadian economy," Flaherty commented.

"Ensuring that the tax system functions smoothly and fairly in relation to it will support its continued success both at home and abroad. This ultimately benefits consumers and the Canadian economy," he concluded.

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