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 ISSUE:
Questions concerning CCRA's non-assessment of a particular trust.
Position:
Referred to changes in the law enacted by Bill C-22 which ensure that all persons who leave Canada or transfer property from Canada will generally realize a deemed disposition.
August 10, 2001
XXXXXXXXXX
Dear XXXXXXXXXX:
I am replying to your letter of May 28, 2001, in which you relayed concerns expressed by some of your constituents regarding a specific case involving the taxation of property when the owner leaves the country, and the current court challenge related to this matter.
The confidentiality provisions of the Income Tax Act preclude me from divulging information from a taxpayer's file without his or her written authorization. The confidentiality provisions of the Act are fundamental to the integrity of our self-assessment system and the Canada Customs and Revenue Agency (CCRA) takes its responsibility of maintaining confidentiality very seriously. However, I offer the following general comments, which will clarify some of the issues involved in the court case.
The CCRA is responsible for administering and enforcing the Act, 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 consistently and collecting the full amount of tax owing under the law. However, the amount of tax payable for a particular year is based on the law that is in force at that time, and the CCRA does not have the discretion to change the law.
The case in question concerns a transfer of property that took place in 1991. At that time, the Act provided that a person residing in Canada who owned taxable Canadian property could leave Canada without having to pay tax on this type of property at the time of departure. However, when the former resident sold the taxable Canadian property, any capital gain realized on the sale was subject to tax in Canada at that time, unless Canada's right to tax the gain was affected by a tax treaty between Canada and the former resident's new country of residence.
As a result of concerns raised by the Auditor General about the CCRA's handling of this matter, the case and the inherent tax policy issues were considered by the House of Commons Standing Committee on Finance in its report released in September 1996. Even though the committee found that the case was dealt with in accordance with the 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 by amending the Act. Consequently, any person who leaves the country or transfers property from Canada on or after October 2, 1996, pays tax on most capital gains that have accrued in Canada up to the time of departure. Exceptions to this rule include gains that accrue on Canadian real estate and Canadian business property, which can always be taxed in Canada when they are ultimately sold.
The court case referred to by your constituents involves one individual's court challenge regarding the tax affairs of another. While the courts have permitted the challenge to proceed, they have agreed that the case should proceed under special management of the court in order to protect taxpayer confidentiality. As this matter is before the courts, I cannot comment further.
I trust the information provided is of assistance to you in replying to your constituents.
Yours sincerely,
Martin Cauchon
J.D. Brooks
July 13, 2001
957-2103
Finalized: 01/07/27 WP/ag.