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In response to concerns from mutual fund companies,
mortgage brokers, insurance brokers, tax experts and
others, Finance Minister Jim Flaherty took the unusual
step in late March of issuing a press release saying
that the GST changes Ottawa proposed were designed to
confirm its long-standing policy intent and “we are not
imposing new taxes.”
This problem began back in December, when the government
said it was going to clarify the rules that dictate how
GST applies to a number of financial services, in
response to recent court cases on the issue. The Canada
Revenue Agency followed up by issuing a notice with
details on the rules in February, and various financial
sector groups say that the CRA’s notice amounted to a
drastic change in tax policy that could increase the
government’s GST revenue by $1-billion a year.
Mr. Flaherty’s March press release suggested that was
accidental. To clear up the concerns he said the CRA
would review and update the details it had released on
how the rules would work.
In recent days, many groups have written to Ottawa
asking for the rules to be rewritten.
In a letter to James Rajotte, the chair of the standing
committee on finance, the Canadian Bar Association’s
commodity tax section said it “is of the view that these
GST measures, as currently drafted, are so seriously
flawed that they should be struck from Bill C-9, to
allow for the necessary consultations and for government
and industry to work together to arrive at more
satisfactory resolutions of the complex issues
involved.”
Following Mr. Flaherty’s press release, the Investment
Funds Institute of Canada asked the CRA “to confirm in
writing the long-standing and well-understood historical
understanding that the services performed by financial
intermediaries that ‘arrange for’ the issuance and
distribution of financial instruments, such as mutual
funds, are financial services for purposes of the GST”
and therefore exempt, Joanne De Laurentiis, CEO of IFIC,
wrote in a letter to Mr. Rajotte. “We are currently
awaiting a response from the CRA.”
Justin MacGregor, president of the Insurance Brokers
Association of Canada, wrote a letter to the CRA on May
10 saying “initially, we would request confirmation that
there was no intent to amend fundamental principles, and
the key principle that the supply of insurance brokerage
services, as provided by licensed insurance
professionals, remains exempt.”
Source:
Globe and Mail, Canada, dated 14/05/2010
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