Vol. 134, No. 17 — August 16, 2000

Registration
SOR/2000-322 1 August, 2000

FINANCIAL ADMINISTRATION ACT

Order Amending the Advance Income Tax Ruling Fees Order

The Minister of National Revenue, pursuant to Order in Council P.C. 1989-1949 of September 28, 198 (see footnote a) hereby makes the annexed Order Amending the Advance Income Tax Ruling Fees Order.

Ottawa, Ontario, July 25, 2000

Martin Cauchon
Minister of National Revenue

ORDER AMENDING THE
ADVANCE INCOME TAX
RULING FEES ORDER

AMENDMENT

1. Section 2 (see footnote 1) of the Advance Income Tax Ruling Fees Order (see footnote 2) is replaced by the following:

2. The fee payable by a person who requests the Minister of National Revenue to provide an advance income tax ruling is $100 for each of the first 10 hours or part of an hour and $155 for each subsequent hour or part of an hour that is spent in preparing the ruling, whether or not the request is withdrawn.

COMING INTO FORCE

2. This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Description

The Canada Customs and Revenue Agency (CCRA) provides advance income tax rulings to clients in the private sector, in respect of the tax implications of proposed business transactions. This is an essential element in the administration of the Income Tax Act and is intended to promote public confidence and encourages voluntary compliance.

The cost of providing rulings borne by those requesting the rulings has been the practice since inception of the service in 1972. This service is largely used by tax professionals for whom the cost does not represent a burden. The existing fee of $90/hour has not been updated since 1992. It has now been revised to reflect current costs of $144/hour.

It is expected that the revised fee will become effective August 1, 2000.

Alternatives

An alternative to charging for the service is simply not to charge users. This would result in Canadian taxpayers bearing the costs of approximately $2.4 million annually. Passing such costs on to Canadian taxpayers in general rather than those who benefit directly would be counter to the government's cost recovery policy and would not be an affordable alternative.

Consultation

Wide consultation with the tax professional community was undertaken over the summer of 1999 and took the forms of:

• writing to the Canadian Tax Foundation, the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants, the Association de planification fiscale et financière (APFF), and the Certified General Accountants of Canada. These groups, in turn, canvassed their governors, advisory committees, as well as their membership via internal newsletters and communiqués;
• presenting and discussing, at tax professional association meetings, the cost recovery fee increase and the goal of improving turnaround times; and
• making follow up phone calls with the executive cadre of the tax associations and foundations noted above.

The client community was grateful for having been consulted and for having had the opportunity to participate prior to the fee increase taking effect. One of the major concerns expressed was that the revised fee might exclude Small Business clients from the rulings process. It was accordingly recommended that some type of Small Business fee be introduced (e.g., $100/hour).

The CCRA has examined different options to accommodate a Small Business fee and the following approach is being recommended. All clients requesting an advance income tax ruling will be charged $100/hour for the first 10 hours and $155/hour for additional hours spent on a ruling. Since most requests from Small Businesses can be answered within 10 hours, this, in effect, provides for a reduced fee for Small Businesses. Charging a higher fee ($155/hour) for the extra hours required for more complex cases is considered appropriate as such cases generally require the attention of more senior staff. Based on current workload volumes and resource levels providing the service, it is expected that all costs will be fully recovered by this approach.

Anticipated Impact

No adverse reaction is expected to the increase in this fee as client groups have been consulted and reacted favourably to the change. In addition, their suggestion to modify the fee for small businesses has been explicitly taken into account.

Announcement

The need to update the cost recovery fee was explained during client consultation sessions noted above. Once the revised fee structure is approved, it will be announced in a communiqué to clients. Media lines have been prepared for inclusion in the Canada Gazette. As well, the fee increase will be announced on CCRA's Web site.

Compliance

Payment of the fee for service is due on issuance of the advance income tax ruling. Compliance is carried out through normal financial management controls of accounts receivable.

Contact

Mr. Roy Shultis
Director General
Income Tax Rulings & Interpretations Directorate
Place de Ville, Tower A, 16th Floor
320 Queen Street
Ottawa, Ontario
K1A 0L5
Telephone: (613) 957-2132
FAX: (613) 952-2088

Footnote a

SI/89-217

Footnote 1

SOR/98-221

Footnote 2

SOR/90-234

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with extensible hypertext markup language (XHTML 1.0 Strict).