The Federal Government expressed its continued support of initiatives that encourage the exercise of direct taxation powers by Aboriginal governments including, in particular, the entering of arrangements respecting sales tax (32 arrangements to date) and personal income taxation (12 arrangements to date). It also reiterated its willingness to discuss and put into effect direct taxation arrangements with interested Aboriginal governments.
Tax Information Exchange
The Budget proposes to amend the definition of “listed international agreement” in the Excise Tax Act to add a reference to any comprehensive tax information exchange agreement in respect of another country or jurisdiction. This is in addition to the existing definition referring to the Strasbourg Convention entered into on January 25, 1988. The significance of this change is not clear, but perhaps Canada is planning on entering into agreements specifically for the exchange of information regarding VATs or excise taxes.
Poppy Rebate for Legions
The Budget proposes to amend the Excise Tax Act by adding a new rebate in section 259.1 for Royal Canadian Legions who import, bring into participating provinces, or acquire poppies or wreaths to enable Legions to recover the GST or HST payable thereon. This was a previously announced measure that comes into force in respect of payments made after 2009. Accordingly, Legions have up to two years to apply for rebates for GST or HST paid in 2010 or 2011 to date.
Proposed Changes to Financial Institutions
An extensive and wickedly complex proposal to modify the proposed HST rules governing certain financial institutions relating to the calculation of the provincial component of the HST (or the PVAT) for investment plans was announced on January 28, 2011. These are the rules that require certain financial institutions to self assess the PVAT based on the residence jurisdiction of their investors. These are meant to ensure tax neutrality and prevent such financial institutions from acquiring goods or services in non HST jurisdictions to avoid tax. The Budget confirms that these proposals will be tabled as legislative amendments or as draft regulations for approval by the Governor-in-Council.
Joint Venture Rules
The anticipated changes to the GST joint venture election rules (section 273 of the Excise Tax Act) did not appear to make the Budget. Changes to these rules are necessary to ensure that the election can be made in areas other than the construction, development or operation of real estate. It is understood that the Federal Government agrees that these changes are necessary given the uncertain administration of the election as it relates to other types of joint venture activities. However, it will have to wait for another day.