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Message from the

Executive Director



January 2017


Hello to all CTF members—

Happy New Year! I hope that you could take time over the holiday season to relax and spend time with friends and family, and that you’re feeling restored and ready for the coming year. All signs point to a very interesting and busy 2017 for the Canadian tax community.

There is currently a lot of speculation about both the timing and the content of the upcoming federal budget. Finance Minister Bill Morneau has undertaken, somewhat earlier than usual, national pre-budget consultation meetings with senior private-sector economists, and this may indicate an acceleration of the cycle.

The ongoing tax expenditure review has fuelled rumours that significant changes may be proposed to some fundamental elements of the Income Tax Act—the small business deduction, for example, and the capital gains inclusion rate. Although tax simplification may not be one of the goals of this review, the density and administrative complexity of many recent proposed amendments, particularly those related to the taxation of private corporations, suggest that the time for meaningful change to the Act—change that brings clarity and efficiency—may have come. Perhaps more than one objective could be achieved: Finance could tackle both tax policy and legislative design. Although most tax professionals would welcome the latter, the implications of the former could prove less popular.

The sluggish Canadian economy and the need for deficit management pose further challenges for the government in its budget planning. Certain US developments, too, will require a thoughtful response: the anticipated corporate tax rate reductions, and the spectre of a protective US border tax that could adversely affect cross-border trade, investment, and labour mobility.

In short, the 2017 federal budget could prove most interesting.

Another important area that, like the budget, is currently the subject of much uncertainty and discussion among tax professionals is the ambit of GAAR. The decisions in Oxford Properties Group Inc. (2016 TCC 204) and Univar Holdco Canada ULC (2016 TCC 159) are very difficult to reconcile. The current issues of The Arnold Report, Tax for the Owner-Manager, and Canadian Tax Focus all include
excellent analysis of these two cases. The authors of these analyses provide a variety of insights, but their common conclusion is that the current state of GAAR jurisprudence is most unhelpful. This perception, which many of you have echoed in conversations with me over the last few months, brings to mind the (in)famous GAARTboard invented by the fiscal artist Michael O’Connor. How does one determine the object, spirit, and purpose of the relevant provisions? What is the impact of a subsequent clarifying amendment to the statute? Oxford Properties and Univar provide conflicting answers to these key questions. Brian Arnold goes the furthest in suggesting a possible solution. I encourage you to read his piece for details and then decide for yourself whether you agree with him
or not!

In contrast, greater certainty has come to another area of tax law: the doctrine of rectification. The Supreme Court of Canada’s decisions in Fairmont Hotels Inc. (2016 SCC 56) and Jean Coutu Group (2016 SCC 55) bring welcome clarification in this regard—although the consequent narrowing of the doctrine may be less welcome to both practitioners and taxpayers. One wonders whether the 2017 budget and the eventual clarification of GAAR will meet a similarly mixed response.

To discuss the SCC rectification cases, the Canadian Tax Foundation hosted a pair of sessions (one in each official language), with a national webcast, on January 23. I hope that you were able to attend. If not, you may sign up at any time to view the webcast, which will be posted on the Foundation website.

See you in February,

Heather L. Evans,
Executive Director and CEO

2/23/2017 3:40:36 PM