On December 29, 2021, TEI submitted comments to the Department of Finance Canada concerning the government’s proposal to introduce a new limitation on the deduction of business interest expense, as described in Budget 2021. In general, the proposal would limit the amount of net interest expense that a corporation could deduct in computing its taxable income to a fixed share of the corporation’s earnings. TEI’s comments raised a range of concerns with the proposed limitation, including its potential to erode the competitiveness of Canada’s international tax system, the necessity of providing commonsense grandfathering rules, and its problematic application in certain industries.
TEI’s comments were developed jointly by a working group of interested members under the aegis of TEI’s Canadian Income Tax Committee, whose chair is Patricia Likogiannis. Principal responsibility for drafting TEI’s comments was exercised by Watson M. McLeish, TEI tax counsel. To view the submission, please visit www.tei.org/advocacy.