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Canada To Improve Taxation Of Financial Institutions

by Mike Godfrey, Tax-News.com, Washington

02 January 2007


Jim Flaherty, Canadian Minister of Finance, has announced proposals to improve the taxation of financial institutions by better aligning the current tax rules with new accounting standards set out by the Accounting Standards Board that came into effect as of October 1, 2006.

"Canada’s New Government is acting to make our tax system simpler and fairer," said Minister Flaherty.

"The proposals I am putting forward will reduce the compliance burden on financial institutions and improve the economic efficiency of the tax system by improving the measurement of income and capital for tax purposes," he explained.

The proposals relate to the mark-to-market properties (in particular, specified debt obligations) held by all financial institutions, policy reserves that are deductible by insurance corporations in computing income for tax purposes, and the minimum tax for life insurance corporations resident in Canada. These proposals would be broadly revenue-neutral.

Details are being released to provide financial institutions and their advisors with information on the proposed changes in advance of the draft legislation that will be released for public comment in 2007.


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