The Resource Policy forum: Seeking a more coherent approach to interest deductibility

Policy forum: Seeking a more coherent approach to interest deductibility

Label
Policy forum: Seeking a more coherent approach to interest deductibility
Title
Policy forum: Seeking a more coherent approach to interest deductibility
Creator
Subject
Language
eng
Summary
The Canadian federal budget of March 19, 2007 proposed to deny deductions for interest on funds borrowed by Canadian taxpayers to invest in foreign affiliates. On May 14, 2007, the finance minister announced a much narrower measure that would limit the denial to situations where a Canadian borrowing is part of certain cross-border financing structures - so-called double-dips. In this article, the authors comment on the economic impact of outbound investment, as well as technical issues and problems that can be expected to arise under the government's proposal. The authors argue that any limitation on interest deductibility should be considered in the context of a broader initiative that seeks to achieve greater neutrality between businesses, and at internationally competitive tax rates. A comprehensive domestic thin capitalization rule is recommended as an alternative to the government's proposal, to limit excessive debt leveraging in Canada in respect of both inbound and outbound investment, and also to address Canadian debt dumping by foreign investors and leveraged buyouts of Canadian businesses. Businesses maintaining reasonable levels of debt financing in Canada would not be penalized. The authors also argue that high Canadian corporate income tax rates attract debt to Canada and discourage Canadian domestic investment, and that any proposal to restrict interest deductibility should be linked with significant reductions in Canada's corporate tax rates
Citation source
In: Canadian tax journal = Revue fiscale canadienne. - Toronto. - Vol. 55 (2007),
http://library.link/vocab/creatorName
  • Lanthier, A.R
  • Mintz, J.M
Geographic coverage
International
Language note
English
http://library.link/vocab/subjectName
  • interest deduction
  • double dipping
  • foreign investment
  • thin capitalization
Label
Policy forum: Seeking a more coherent approach to interest deductibility
Instantiates
Publication
Label
Policy forum: Seeking a more coherent approach to interest deductibility
Publication

Library Locations

    • IBFD Library AmsterdamBorrow it
      Rietlandpark 301, Amsterdam, 1019 DW, NL
      52.3736660 4.9336932
Processing Feedback ...