TORONTO, Sept. 21 /CNW/ - Changes announced today to the Tax Convention
between Canada and the U.S. will benefit Canadian businesses and the Canadian
economy, according to Canada's Chartered Accountants.
Minister of Finance of Canada Jim Flaherty and U.S. Treasury Secretary
Henry M. Paulson, Jr. today signed a protocol to amend the Canada-United
States Tax Convention. Among other things, the protocol provides for the
elimination of withholding taxes on interest and extends the benefits of the
Tax Convention to certain limited liability companies.
"These two changes to the Canada-U.S. Tax Convention benefit all
Canadians," said Kevin Dancey, FCA, President and CEO of the Canadian
Institute of Chartered Accountants (CICA).
Canada currently maintains 85 bilateral tax treaties to protect Canadian
companies and investors against international double taxation. Previously, the
Tax Convention provided for a 10% withholding tax on interest paid to Canadian
and U.S. residents. It is widely accepted that the elimination of withholding
taxes reduces the cost of capital for businesses and thus will stimulate
additional investment. Some studies have estimated that as much as $18 billion
in additional investment could result from the elimination of this tax.
"The changes announced today help create a more simple and fair tax
system and, in doing so, will have a positive impact on Canadian domestic and
foreign investment," said Dancey. "Removing the withholding tax effectively
reduces borrowing costs for Canadian businesses and will make our businesses
more efficient and competitive. This is a win for all Canadians."
Larry Chapman, FCA and a CICA expert advisor on tax policy, added that
prior to this announcement, a limited liability company was unable to benefit
from the tax reductions or other tax relief provided under the Tax Convention.
"This unfair situation will be remedied by extending benefits of the Tax
Convention to certain LLCs. Through this action the U.S. and Canadian
governments have taken a positive step to facilitate cross-border investment,"
Chapman said. "Canadian businesses have been anticipating these amendments and
will certainly welcome the tax relief that they provide," he added.
CICA's Dancey said he is encouraged by Minister Flaherty's statement
yesterday in relation to the soaring Canadian dollar. Flaherty said Finance is
considering helping Canadian business increase productivity by further
adjustments to the federal tax policy.
The CICA has been calling on the federal government to lower corporate
taxes to match those paid by small business as a means to enhance the
productivity, competitiveness and overall growth of the Canadian business
sector. "Having prosperous and growing businesses generates jobs and tax
revenue, and that benefits all Canadians," Dancey said.
The Canadian Institute of Chartered Accountants (CICA), together with the
provincial, territorial and Bermuda Institutes/Ordre of Chartered Accountants,
represents a membership of approximately 72,000 CAs and 10,000 students in
Canada and Bermuda. The CICA conducts research into current business issues
and supports the setting of accounting, auditing and assurance standards for
business, not-for-profit organizations and government. It issues guidance on
control and governance, publishes professional literature, develops continuing
education programs and represents the CA profession nationally and
internationally. CICA is a founding member of the International Federation of
Accountants (IFAC) and the Global Accounting Alliance (GAA).
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