Finding Silver Linings in the Storm An Evaluation of Recent Canada--US Crossborder Tax Developments

Commentary 272 | 5 C. D. Howe Institute each country, and the CRA has taken the position for tax-planning purposes by US investors to that LLCs and their owners do not qualify.10 The consolidate losses and to maximize their US foreign reluctance to extend benefits to LLCs stems in part tax credits.12 from the fact that Canadian federal and provincial The extension of treaty benefits to members of [...] A lack of crossborder investment: steps to maintain Canada's empirical work in the international tax arena tax competitiveness vis-à-vis the United States, and and uncertainty about the ways taxpayers react draft legislation to eliminate double-dip financing of to tax changes with respect to crossborder invest- crossborder investments with related firms in the ment thus creates problems for legal [...] Nonetheless, to the extent that tax policy reasons, there might be more effective tax competition brings overall benefits to the initiatives with which to attack the apparent 15 The study, conducted by the US Treasury Department, explains the United States' relatively high METR and relatively low average tax rate by noting that the United States has a relatively narrow tax base that permits more d [...] In its original proposal, the Department poration deducts the interest and lowers its tax of Finance (Canada 2007, 241-42) noted that this bill while the corresponding income inclusion in reform had been discussed earlier by the Technical the foreign affiliate is free of tax (assuming the Committee on Business Taxation (Canada 1997) affiliate is located in country without a corporate and by the au [...] A concern in the decision by the European Court of Justice.24 If the Canada-US context is the fact that Canada has new tax laws prove to be difficult or impossible to agreed to extend national - that is, nondiscrim- enforce, the Canadian government should consider inatory - treatment under the US-Canada tax similar reform efforts to amend Canadian thin treaty only to permanent establishments of US.