Significant developments in Canadian taxation -- 1964 and 1965;

              Significant Developments in Canadian Taxation 1964 and 1965
by EDDIE D. MARCHANT Partner, Deloitte, Plender, Haskins & Sells, Winnipeg Office
Presented before the Haskins & Sells Annual Tax Conference, Washington, D.C.—October 1965
SINCE the discussion of this topic at the 1963 Conference, we have had two Income Tax Amending Acts in Canada and have witnessed a change in attitude and approach on the part of the Ministers of Fi­nance
and National Revenue.
While there have been many significant developments in Canadian taxation during the past two years, the time available will only permit me to mention a few of the income tax amendments that may be more likely to affect U.S. taxpayers having interests in Canada.
During the ten years preceding June 13, 1963, Canada was reputed to be a favourite haunt for those who wished to practice the mystic art of tax avoidance.
On June 13, 1963, the Government of Canada enacted Section 138A and thereby gave the Minister of National Revenue wide discretionary powers to deal with certain of the popular avoidance schemes of the day. While Section 138A often frustrates legitimate transactions, it has helped to create a more conservative tax climate in Canada; tax practitioners in Canada have therefore had to become more mature.
Amendments have also been enacted to prevent the unintended use of off-shore jurisdictions, pension plans, and Canadian trusts to avoid income taxes to non-resident beneficiaries.
Departmental officials have followed the Minister's example in adopting a hard line with all plans that have the appearance of artificiality.
WITHHOLDING TAXES AND DEGREE OF CANADIAN OWNERSHIP
In the June 13, 1963 Budget, the Minister of Finance increased the withholding tax rate to 20% on dividends paid or credited to non­residents
by companies that did not have a degree of Canadian owner­ship.
He similarly increased the tax rate for non-resident-owned invest­ment
corporations and branch operations of non-resident corporations.
In his March 16, 1964 Budget he announced that as a result of a U. S. tax cut he was able to reduce the 20% rate to 15%. He did not mention the fact that the increase of the previous year was a violation of the Canada-U. S. Tax Convention and automatically increased the
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