Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: reports of loss of tax revenue on the emigration of a trust or on the distribution of property to a non-resident beneficiary
Position: referred to draft legislation which proposes to ensure that all persons, including trusts, who leave Canada or transfer property from Canada, will realize a deemed disposition at the time of departure (with exceptions for Canadian real estate and Canadian business property which is taxed when sold)
Reasons: House of Commons Standing committee report of Set 18, 1996; draft legislation on migration dated Dec 17, 1999
August 21, 2000
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your correspondence addressed to the Honourable Paul Martin, Minister of Finance, concerning the Federal Court of Appeal's decision in The Queen et al. v Harris. Mr. Martin sent a copy of your letter to Mr. Cauchon on July 14, 2000.
The confidentiality provisions of the Income Tax Act prevent me from divulging information from a taxpayer's file without his or her prior written authorization. In accordance with these confidentiality provisions, I cannot comment further on the court challenge referred to in your letter.
The role of the Canada Customs and Revenue Agency (CCRA) is to administer and enforce the Act as passed by Parliament, while the Department of Finance is responsible for tax policy and any proposed changes to the Act. The CCRA is committed to applying the tax laws in a consistent and fair manner, which includes the collection of the full amount of tax owing under the law. However, the amount of tax payable for a particular year is based on the law in force for that year and the CCRA does not have the discretion to change the law.
Generally, the Act currently provides that any person residing in Canada who owns taxable Canadian property may leave Canada without having to pay tax on this type of property at the time of departure. However, when a former resident of Canada sells taxable Canadian property, any capital gain realized on the sale is subject to tax in Canada, unless this law is affected by a tax treaty between Canada and the new country of residence.
The concern raised in your correspondence with respect to a possible loophole or favouritism in respect of a specific person relates to one of the tax policy issues raised
in the Auditor General's 1995 report. Those issues were considered by the House of Commons Standing Committee on Finance in its report released on September 18, 1996.
Even though the committee found that the specific cases referred to in the Auditor General's report were dealt with in accordance with existing provisions of the Act and that there was no evidence of wrongdoing, it recommended that the Act be amended to address the tax policy issues. The Department of Finance responded to those recommendations on October 2, 1996, by announcing draft amendments to the Act, which when enacted, will be effective as of that date, and most recently, by tabling a Ways and Means Motion in the House of Commons on June 5, 2000, to implement these proposals. As a result, any person who leaves or transfers property from Canada will pay tax on most capital gains that have accrued in Canada up to the time of departure.
Exceptions to this rule will include gains that accrue on Canadian real estate and Canadian business property, which can always be taxed when they are ultimately sold.
I appreciate the opportunity to address your concerns.
Yours sincerely,
Bill McCloskey
Assistant Commissioner
Policy and Legislation Branch
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