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Canadian Accountants Push For Clarity In Tax Reform Debate

by Mike Godfrey,, Washington

26 November 2013

The Chartered Professional Accountants of Canada (CPA) has released a white paper that it claims clarifies the current confusion over tax evasion, tax avoidance, and corporate income tax.

According to CPA Chief Executive Officer Kevin Dancey, "Attitudes and expectations are changing, both in Canada and internationally, so it is important they be addressed."

The white paper calls for the federal Government to consult on proposed "enhanced relationships," based on greater transparency, cooperation and trust among tax authorities, businesses, and tax advisors. It also acknowledges that tax planning is not always "black and white," partly because domestic and international tax systems are highly complex, and because there remains "considerable confusion in the public domain over what tax evasion actually means and what is acceptable tax planning."

The CPA further concedes that so-called "grey areas" can emerge. A company may engage in tax planning that is technically legal, but it runs the risk of a revenue authority concluding that the action runs contrary to the object and the spirit of the law. Tax courts and policy makers are often involved in resolving the dispute, and the CPA argues that both the taxpayer and the revenue authority could benefit from avoiding such lengthy and costly cases.

Gabe Hayos, CPA's Vice President, Taxation, explained: "Illegal tax evasion is harmful to economies and must be prevented. However, legal tax planning by businesses should be accepted as a means of reducing costs. Corporations should be expected to make legal use of low tax rates or other tax incentives that countries offer to compete for foreign investment."

Finally, the white paper outlines five key steps that Canada could take to improve its tax system. These are: keeping corporate income tax low; tightening the focus of specific anti-avoidance rules; rethinking the corporate income/consumption tax mix; using tax policy to help Canadian businesses compete, and pursuing more international tax information exchange agreements (TIEAs).

TAGS: court | compliance | tax | investment | business | tax compliance | tax avoidance | tax incentives | revenue guidance | law | ministry of finance | tax authority | agreements | tax planning | tax rates | Canada | revenue statistics | trade association | trade | Tax | Tax Evasion

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