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17 May 2024

This underscores the need for a thorough review of the Act, a sentiment shared by CPA Canada in our 2024 pre-budget submission, which recommended prioritizing a principled approach to tax policy and administration driven by purpose and vision. [...] The CRA was recently compelled to exempt bare trusts from the 2023 reporting obligation due to its inability to administer the breadth of bare trusts. [...] This ambiguity is increased when the government ignores its own economic substance test to accomplish its own objectives as with the deliberate tax revenue generation associated with the increase in the capital gains inclusion rate. [...] Only two weeks after the budget, the CRA’s Income Tax Rulings Directorate said the “crystallization of an accrued gain, solely as a means of ensuring access to the current inclusion rate, would not, in itself, be subject to GAAR.” With the potential lack of economic substance in crystallization transactions, this statement may actually create further ambiguity with the general application of GAAR. [...] However, the increasing complexity of the Income Tax Act and regulations is reaching a point where even seasoned practitioners may struggle to navigate it with confidence.



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