The Power of Perspectives

The Canadian Bar Association

Kim Covert

Excising uncertainty: Comments on proposed amendments to the ETA

November 30 2017 30 November 2017

 

The purpose of a definition is to define. The purpose of a clarification is to clarify. According to the CBA Commodity Tax, Customs and Trade Section, draft amendments to the Excise Tax Act do neither, and in fact create uncertainty.

In its submission, the Section comments on subsection 272.1(8) proposed in draft amendments related to “investment limited partnerships.”

While the clear intent of the amendment is to levy unrecoverable GST/HST on management or administrative services provided by general partners, the amendments as proposed create “significant” uncertainty, the Section says.

For example:

  • A limited partnership is defined to be an investment limited partnership if its “primary purpose” is to invest its funds in property consisting primarily of financial instruments, but it’s unclear how “primary purpose” is to be determined.
  • It is likewise unclear how it will be determined that an ILP’s assets are “primarily” financial instruments, since there are several possible bases of comparison.
  • Using the term “investment limited partnership” in the definition of “investment limited partnership” is circular and creates uncertainty.
  • The definition of investment limited partnerships does not appear to account for investing through tiers of partnerships. “This potential result for tiered partnerships appears particularly inappropriate when contrasted to the GST/HST relief provided in corporate structures,” the submission says. The proposed rules could require an ILP to pay unrecoverable GST in the same situation where the ETA is “specifically designed to eliminate unrecoverable GST/HST on management or administrative services provided to a holding corporation in a corporate structure in which there is underlying commercial activity in its corporate subsidiary. The difference in treatment is difficult to rationalize.”
  • The proposed amendments are inconsistent with existing partnership law and income tax law.
  • The proposed amendments “create general unfairness” by applying to activities performed before the Sept. 8, 2017 announcement date of the proposed amendments.
  • The proposed amendments raise questions about when the GST/HST will be payable, and on which tasks it will be levied.

The Section recommends stronger definitions and numerous clarifications if the amendments are to be applied.

Comments
No comments


Leave message



 
 Security code