XXXXX
The purpose of this letter is to inform you of XXXXX made by XXXXX during their meetings with XXXXX Excise/GST Policy and Legislation. These XXXXX made reference to audit and policy XXXXX in its dealings with registrants.
Background
XXXXX met with XXXXX and XXXXX representatives, on May 24, 1994 to discuss the following concerns of v members:
1. claiming of notional input tax credits on purchases of scrap metal prior to 1994;
2. XXXXX[;]
3. the federal sales tax rebate and inventory of scrap metals; and
4. the recapture of notional input tax credits on exports of scrap metal prior to 1994.
XXXXX contends that purchases of scrap metal by recycling companies are in fact acquired for the purpose of supply rather than for consumption or use in the recycling process. During the meeting with XXXXX, it was agreed that the XXXXX would review its policy in this area. This review has now been completed and it has been determined that the current administrative policy will stand pending the outcome of the XXXXX.
XXXXX[.] On that basis, XXXXX has insisted that all recyclers should be entitled to claim notional input tax credits for scrap acquired by their companies for recycling.
Subsequent to the meeting it was determined that XXXXX company was audited in XXXXX. In discussions with the District Office which conducted the audit, it was determined that through an oversight, no recovery was made for notional input tax credits claimed on their purchases of used goods because the focus of the audit was to recover input tax credits for used goods subsequently exported. The district office is now aware of this discrepancy and has indicated that they are prepared to reassess the company once the entire issue of entitlement to input tax credits for used goods purchased by recyclers is resolved.
XXXXX was informed, in a meeting on XXXXX, that this discrepancy should not form the basis for the departmental policy in this matter. Further, a review of departmental publications, interpretations, audit directives, the Questions and Answers database, policy statements, and ministerial correspondence found that the Department has consistently stated that registrants will be denied notional input tax credits where used goods are acquired for the purpose of recycling prior to 1994. XXXXX has further stated that the XXXXX has allowed the claiming of notional input tax credits for recycled metal during the course of an audit. XXXXX was informed that the Department XXXXX would confirm XXXXX policy position on this issue in order to verify consistency in application.
XXXXX also considers its members to be entitled to claim the federal sales tax rebate for scrap metal purchases held in inventory as of January 1, 1991. As is the case with full notional input tax credits, the Department's policy in this area has been to deny the 50% notional input tax credit because the goods are not considered to have been acquired for the purpose of supply. While this position has been communicated to XXXXX, they have indicated that their members intend to claim the credits pending audit.
Finally, XXXXX considers that its members should not be subject to the recapture provisions for notional input tax credits when their goods are exported since its members are no longer exporting "used" goods but rather are exporting new goods from used goods which have been transformed. XXXXX has been informed that this is not the Department's position and that any notional credits claimed for goods which have been exported prior to 1994 are subject to recapture.
Status
At the XXXXX meeting, the Department informed XXXXX representatives that the XXXXX interpretation of this issue would be reviewed to ensure there are no discrepancies in interpretation.
We would appreciate it if you could confirm that the XXXXX policy in this issue is consistent with the Department's administrative policy.
If you have any questions on this matter, please contact Gwen Preston at 952-8530.
H.L. Jones
Director
General Tax Policy
Policy and Legislation
| c.c.: |
M. Matthews
G. Preston |
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