On July 21, 2022, TEI submitted preliminary comments to the Canadian Department of Finance about the Government of Canada’s proposal to implement Pillar Two of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) two-pillar plan for international tax reform, as contemplated by the federal budget documents tabled in Canada’s House of Commons on April 7 (Budget 2022).
TEI’s comments highlight several areas of significant, widespread concern with the plan’s implementation in Canada, as contemplated by Budget 2022, that warrant further and careful attention. These concerns include: 1) an overly ambitious effective date, which TEI recommended should be delayed until at least 2024; 2) the continued increase in the compliance burden imposed on taxpayers by Pillar Two implementation, in addition to other recent compliance and reporting obligations, which TEI recommended could be ameliorated by a safe harbor and a comprehensive review of current reporting obligations to identify and reduce duplicate reporting; and 3) failure of certain current Canadian tax incentives to qualify for favorable treatment under Pillar Two’s model rules, among several other concerns.
A working group of concerned members developed TEI’s comments under the aegis of TEI’s Canadian Income Tax Committee, at the time chaired by Patricia Likogiannis. Ben Shreck, TEI tax counsel, supported this initiative from the TEI staff.