Tax Law Commons^™

Tax Classification Of Foreign Entities In China: The Current State Of Play, Wei Cui

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This article considers recent changes to the classification of foreign entities under Chinese tax law, the implications for China’s treaty partners in this regard and the general legal framework within which future changes may occur.

The Ioc Made Me Do It: Women's Ski Jumping, Vanoc And The 2010 Winter Olympics, Margot Young

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This case comment discusses the judicial decisions in Sagen v. VANOC regarding the constitutional challenge brought by women ski jumpers to their exclusion from the 2010 Vancouver Winter Olympics. While the claimants argued that the constitutional equality provision (section 15 of the Canadian Charter of Rights and Freedoms) had been infringed, the BC courts' decisions focussed on the novelty of the state action problem. At least one level of court accepted that the exclusion was discriminatory but the challenge failed because the decision to exclude lay within the power of the International Olympic Committee, an entity beyond the ambit of …

Responses To Tax Treaty Shopping: A Comparative Evaluation, David G. Duff

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Over the last 40 years, the world has experienced exponential growth in international trade and investment, as well as the number of bilateral tax treaties which now number roughly 3,000. As the globalization of economic activity has greatly increased opportunities for tax avoidance and evasion, so also has the expansion of the international tax treaty network increased opportunities for taxpayers to take advantage of domestic tax rules and bilateral tax treaties by arranging their affairs in ways that reduce taxes otherwise owing or eliminate them altogether. Regarding many of these arrangements as abusive treaty shopping, the OECD and several member …

Responding To Sovereign Funds: Are We Looking In The Right Place?, Wei Cui

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At a superficial glance, Internal Revenue Code Section 892 appears to favor sovereign wealth funds (SWFs) over foreign private investors by exempting the former from tax on a significant range of US investments. This has recently led to calls for its abolition. Several authors, however, have challenged this view by pointing out that the impact of US tax on the relative competitiveness of SWFs and private investors should be analyzed in terms of the investors’ comparative, not absolute, advantage. And such analysis hinges on whether foreign private investors are taxed by their home countries on a worldwide basis, as well …

Indirect Taxation Of Cross-Border Services In China: (Partial) Switch To Destination-Based Taxation, Wei Cui

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In early November 2008, China's State Council approved a major overhaul of the country's VAT: starting in 2009, registered VAT payers are allowed to claim input credit for VAT paid on purchases of equipment and other non-real-property fixed assets. The change marks a decisive abandonment of China's previous esoteric "production-type" VAT (which disallowed input tax credit for fixed asset purchases) in favour of the conventional consumption-type VAT, and a giant step in the rationalization of the coun­try's tax structure. It also promises to accelerate the pace of VAT reform, the next major stage of which is widely regarded as expanding …

Designing Foreign Tax Credit Rules In China: The Case Of Foreign Loss Limitations, Wei Cui

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Over the last few years, China’s large trade surplus against other countries, as well as its high domestic savings rate even relative to its high investment rate, have resulted in a very substantial foreign currency reserve that puts the country in the position of a significant capital exporter. The huge amount of foreign currency assets held by the Chinese government— near $1.9 trillion at the end of 2008 — and a breathtaking series of acquisitions made by Chinese firms overseas are now salient items in international business reporting and public discussion. China’s new posture as an exporter of capital has …

Business Tax: China's Quasi-Vat, Wei Cui

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On 1 January 2009, new VAT rules entered into force in China. Under these rules, all registered businesses are entitled to recover VAT on the purchase of capital assets other than immovable property. The Chinese VAT system does however not yet cover services and transactions concerning immovable property, which are still subject to the all-stage, cumulative business tax. In this article, the author explains that the process of gradual transformation of the business tax into a VAT has started and that the current business tax should already be seen as a quasi-VAT.

Canadian Bijuralism And The Concept Of An Acquisition Of Property In The Federal Income Tax Act, David G. Duff

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The acquisition of property plays an important role in the federal Income Tax Act (ITA), determining eligibility for a number of tax benefits, including entitlement to capital cost allowance, investment tax credits, and the deductibility of interest expenses incurred in respect of eligible property. In spite of its importance, the concept of an acquisition of property is not defined in the ITA, and it has been subject to divergent interpretations in the common law and the civil law. The author traces the sources of law informing the meaning of an acquisition of property in the common law and the civil …

Tax Avoidance In The 21st Century, David G. Duff

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Over the past few decades, several factors have contributed to what numerous revenue agencies and academic authors have characterized as a significant increase in tax avoidance activity. This paper considers both the causes of increased tax avoidance activity over the past several years as well as governmental responses to this phenomenon in key common law jurisdictions, notably Australia, Canada, New Zealand, the United Kingdom and the United States. Part 2 examines the concept of tax avoidance, distinguishing unacceptable or abusive tax avoidance both from illegal tax evasion on the one hand and acceptable tax planning or tax minimization on the …

Tax Expenditures To Limit The Growth Of Carbon Emissions In Canada: Identification And Evaluation, David G. Duff, E. Ian Wiebe

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Unlike the U.S., which relies heavily on tax expenditures as instruments of energy and climate change policy, Canada has introduced very few such tax expenditures, relying instead on voluntary initiatives, direct subsidies, and limited regulatory measures to limit carbon emissions. This paper identifies and evaluates the most prominent tax expenditures in Canada to limit the growth of carbon emissions. As background to this inquiry, Part II reviews Canadian experience with carbon emissions over the last two decades and the limited government response to this growing problem. Part III identifies the most prominent tax expenditures that Canadian governments have introduced in …

Carbon Taxation In British Columbia, David G. Duff

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Among alternative public policies to reduce emissions of carbon dioxide and other greenhouse gases (GHGs), environmental taxation represents a promising but often under-utilized approach-particularly in North America where the introduction of any new tax involves enormous political challenges. In Canada, however, British Columbia became the first North American jurisdiction to implement a consumption-based environmental tax specifically designed to reduce GHG emissions when BC's provincial government enacted a carbon tax effective July 1, 2008.

This paper provides a general overview and initial evaluation of British Columbia's carbon tax, explaining the background to the announcement of the tax in the Provincial Government's …

Tax Fairness And The Tax Mix, David G. Duff

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Since a society’s tax system is one of its most basic and essential social institutions, the justice or fairness of this tax system is an important subject for social and political theory, as well as for practical politics. In order to assess the fairness of any particular tax or the tax system as a whole, however, it is essential to consider the purpose of the tax and the tax system in general. While the most obvious purpose of most taxes is to raise revenue to finance public expenditures, taxes are also employed to regulate social and economic behaviour and to …

The Legacy Of Uk Tax Concepts In Canadian Income Tax Law, Benjamin Alarie, David G. Duff

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This article examines a specific category of legal transfers between the United Kingdom and Canada, considering the legacy of UK tax concepts in Canadian income tax law. Two main areas are considered where, in our view, this influence has been most profound: (i) the concept of income deployed for Canadian tax purposes; and (ii) judicial approaches to statutory interpretation and tax avoidance. Although the rules and concepts that Canadian courts and legislatures have adopted in each of these areas have necessarily evolved over time, the path of this evolution as well as current approaches reflect the enduring influence of UK …

Neuman And Beyond: Income Splitting, Tax Avoidance, And Statutory Interpretation In The Supreme Court Of Canada, David G. Duff

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This comment examines the Supreme Court of Canada decision in Neuman, considering the grounds of the decision itself as well as its implications for income splitting, tax avoidance, and the manner in which the Supreme Court of Canada interprets the Income Tax Act. Part II reviews the facts of the case, its judicial history, and the decision reached by the Supreme Court of Canada. Part ill evaluates this decision in light of the text of s. 56(2), the purpose of this provision, and the practical consequences of the court's interpretation. Part IV considers the implications of the decision and subsequent …

The Prospect Of New Partnership Taxation In China, Wei Cui

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China's revised Partnership Law requires the government to tax partners but not partnerships. Previous partnership tax rules applied only to partnerships with individual partners, and suffered from major flaws, the most important of which is that the character of income received by a partnership is not completely preserved when allocated to the partners, with the result that individual partners are overtaxed on both labor and investment income. In other words, there was no true flow-through taxation. The paper recommends improving the flow-through treatment of income, but argues that because Chinese partnerships are unlikely to be prepared in the short-term to …

The Supreme Court Of Canada Crumbles Mr. Christie's Cookie, Anthony F. Sheppard

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In British Columbia (Attorney General) v. Christie, 2007 SCC 21, [2007] 1 SCR 873, the unanimous full bench of the Supreme Court of Canada upheld a provincial sales tax ("PST") on legal services, rejecting a Charter challenge and overturning the lower courts' decisions that partially invalidated the tax. The taxpayer, a lawyer practising poverty law in British Columbia, challenged the validity of a provincial sales tax charging 7 percent on fees billed for legal services and payable on billing. The PST on legal services required lawyers and notaries public in private practice to add the tax onto their billings. The …

Justice Iacobucci And The 'Golden And Straight Metwand' Of Canadian Tax Law, David G. Duff

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The article examines the contributions of Supreme Court Justice Frank Iacobucci in the Canadian tax jurisprudence. The traditional Anglo-Canadian and American judicial approaches to tax statutes was taken into account. Key information about significant tax decisions made by Iacobucci is presented. On the other hand, his judicial restraint and legislative supremacy was also evaluated.

China's New Personal Income Tax Return Filing Regime, Wei Cui

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In December 2005, as newly authorized under the amended Personal Income Tax Law (PITL), China’s State Council announced that taxpayers with annual income in excess of RMB 120,000 (US$15,000) would be required to file annual tax re-turns.The task of designing the procedures for the new return filing requirement was delegated to the State Administration of Taxation (SAT). On November 6, 2006, 11 months after the new return filing requirement was announced, and less than two months before the first filing season was to begin,the SAT finally issued a set of rules on filing procedures, including a new sample annual tax …

The Supreme Court Of Canada And The General Anti-Avoidance Rule: Canada Trustco And Mathew, David G. Duff

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On October 19, 2005, the Supreme Court of Canada released the first decisions in which it considered the general anti-avoidance rule (GAAR) in Sec. 245 of the federal Income Tax Act (ITA). Effective for transactions entered into on or after September 13, 1988, this rule was enacted as a deliberate response to the Supreme Court of Canada decision in Stubart Investments Ltd. v. The Queen and was intended to reduce what the Court had described as "the action and reaction endlessly produced by complex, specific tax measures aimed at sophisticated business practices, and the inevitable, professionally guided and equally specialized …

Private Property And Tax Policy In A Libertarian World: A Critical Review, David G. Duff

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The idea that taxes involve the confiscation of private property is widely held in popular thinking and scholarly writing. This article challenges the libertarian foundations of this assumption by critically examining libertarian theories of private property and their implications for tax policy. Part II summarizes the leading libertarian theories of private property, reviewing John Locke's argument in the Second Treatise of Government and Robert Nozick's account in Anarchy, State, and Utopia. Part III examines the implications of these libertarian theories for tax policy, considering libertarian prescriptions for substantive tax measures as well as institutional arrangements that affect tax policy outcomes. …

Road Pricing In Theory And Practice: A Canadian Perspective, David G. Duff, Carl Irvine

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Like other developed countries, Canada experienced massive increases in road transportation since the end of the Second World War. At first, Canadian governments attempted to match the growing demand for road transportation by improving the quality and capacity of roads and highways - significantly increasing the extent of paved roadways and introducing a national highway system supported by federal shared-cost funding. Since the 1970s, however, Canadian governments have been less willing to invest in roads and highways, as growing environmental concerns lessened public enthusiasm for automobiles and urban expressways in particular. At the same time, government support for public transit …

Symposium On Tax Avoidance After Canada Trustco And Mathew: Summary Of Proceedings, Benjamin Alarie, Sanjana Bhatia, David G. Duff

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On October 19, 2005, the Supreme Court of Canada released its much-anticipated decisions in The Queen v. Canada Trustco Mortgage Co. and Mathew v. The Queen, the first two cases from Canada's highest court addressing the general anti-avoidance rule (GAAR) in section 245 of the federal Income Tax Act. The Faculty of Law at the University of Toronto hosted a symposium on November 18, 2005, which brought together academics, practitioners, representatives of the Canada Revenue Agency, and Chief Justice Donald Bowman of the Tax Court of Canada to discuss the implications of the decisions. This article summarizes the formal presentations …

The Abolition Of Wealth Transfer Taxes: Lessons From Canada, Australia And New Zealand, David G. Duff

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When the United States acted to phase-out its estate tax by 2010, it joined a small but growing group of countries which have also repealed their wealth transfer taxes. In Canada, federal gift and estate taxes were repealed in 1972 and provincial wealth transfer taxes were abolished in the 1970s and 1980s. In Australia, State and Commonwealth wealth transfer taxes were repealed in the late 1970s and early 1980s. New Zealand followed suit in the 1990s, reducing estate tax rates to zero in 1992 and repealing the tax in 1999. This paper reviews the abolition of wealth transfer taxes in …

Tax Treatment Of Charitable Contributions In Canada: Theory, Practice, And Reform, David G. Duff

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Tax recognition for charitable contributions in Canada takes the form of a deduction where the contribution is made by a corporation or for the purpose of gaining or producing income from a business, a nonrefundable credit where individuals make qualifying gifts to eligible recipients, and a reduction or exemption from capital gains tax on gifts to eligible recipients of qualifying cultural property, publicly traded securities, or ecologically sensitive land. This article reviews different rationales for the tax recognition of charitable contributions, concluding that the most persuasive rationale is to indirectly subsidize the quasi-public goods and services that charities provide and …

Tax Policy And Global Warming, David G. Duff

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The Canadian government announced its ratification of the Kyoto Protocol to the United Nations Framework Convention on Climate Change on December 17, 2002. Under this protocol, Canada has agreed to reduce annual emissions of greenhouse gases (GHGs) to 6 percent below 1990 levels during the period 2008-2012 - a commitment that requires a 30 percent reduction relative to projected GHG emissions for 2010 assuming business as usual. In order to achieve this objective, the Canadian government has established specific reduction targets and proposed various policy instruments in its climate change action plan (CCAP) released in November 2002. Although the main …

The Federal Income Tax Act And Private Law In Canada: Complementarity, Dissociation, And Canadian Bijuralism, David G. Duff

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This article examines the relationship between the federal Income Tax Act (ITA) and provincial private law, evaluating judicial decisions and statutory provisions according to the goals of Canadian bijuralism expressed in the policy on legislative bijuralism adopted by the federal Department of Justice in June 1995, the preamble to the first Federal Law-Civil Law Harmonization Act, No. 1, and new sections 8.1 and 8.2 of the federal Interpretation Act. The first part of the article reviews notable cases in which Canadian courts have recognized a relationship of complementarity between the ITA and provincial private law, looking at cases arising in …

Special Federal Tax Assistance For Charitable Donations Of Publicly Traded Securities: A Tax Expenditure Analysis, David G. Duff

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This comment questions both the justification offered in the Department of Finance study and tax assistance for charitable giving in the form of a reduced capital gains inclusion rate on gifts of publicly traded securities. The article begins by presenting the most persuasive rationale for special tax treatment of charitable contributions under the income tax and the implications of this justification for the design of an appropriate tax incentive. In light of this analysis, the article turns to the reduced capital gains inclusion rate on gifts of publicly traded securities and the justification offered in the Department of Finance study. …

Pay Equity: A Fundamental Human Right, Margot Young

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This paper undertakes the limited task of determining what interpretive consequences, if any, might flow from the removal of federal pay equity provisions from their current location in the Canadian Human Rights Act and placement of such provisions in their own stand-alone legislation. Part of the interpretive stance courts currently bring to their consideration of the federal pay equity provisions reflects the placement of these provisions within federal human rights legislation. Courts have held that human rights legislation has a special nature or quasi-constitutional status. This status results from the fundamental character of the values the legislation expresses and the …

Recognizing Or Disregarding Close Personal Relationships Among Adults? The Report Of The Law Commission Of Canada And The Federal Income Tax, David G. Duff

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Beyond Conjugality, the Report of the Law Commission of Canada on close personal relationships among adults, reviews a number of federal statutes in which legal consequences turn on specific kinds of relationships among adults, and it proposes a new methodology for assessing existing or proposed legal rules that employ relational terms in order to accomplish their objectives. This comment on the Report addresses its most significant recommendations regarding personal income taxation and income support in Canada: that the tax credit for spouses and common law partners should be repealed and that the GST credit should be fully individualized. Questioning both …

Charitable Contributions And The Personal Income Tax: Evaluating The Canadian Credit, David G. Duff

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The last fifteen years have witnessed significant changes in the way that charitable contributions by individuals are treated under the Canadian Income Tax Act. The most significant of these changes involves the conversion in 1988 of what had previously been a deduction for charitable contributions whereby the value of the tax benefit depends on the donor?s level of income, into a tax credit under which the value of this benefit depends on the total amount of charitable contributions claimed in the particular taxation year. As a result of this amendment, Canada has become the only developed country that recognizes charitable …