文章基本信息

标题：Policy Forum: Seeking a More Coherent Approach to Interest Deductibility
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作者：Allan R. Lanthier ; Jack M. Mintz
期刊名称：Canadian Tax Journal
印刷版ISSN：0008-5111
电子版ISSN：0008-5111
出版年度：2007
卷号：55
期号：3
出版社：Canadian Tax Foundation
摘要：The Canadian federal budget of March 19, 2007 proposed to deny deductions for interest on funds borrowed by Canadian taxpayers to invest in foreign affiliates. On May 14, 2007, the finance minister announced a much narrower measure that would limit the denial to situations where a Canadian borrowing is part of certain cross-border financing structures—so-called double-dips. In this article, the authors comment on the economic impact of outbound investment, as well as technical issues and problems that can be expected to arise under the government’s proposal. The authors argue that any limitation on interest deductibility should be considered in the context of a broader initiative that seeks to achieve greater neutrality between businesses, and at internationally competitive tax rates. A comprehensive domestic thin capitalization rule is recommended as an alternative to the government’s proposal, to limit excessive debt leveraging in Canada in respect of both inbound and outbound investment, and also to address Canadian debt dumping by foreign investors and leveraged buyouts of Canadian businesses. Businesses maintaining reasonable levels of debt financing in Canada would not be penalized. The authors also argue that high Canadian corporate income tax rates attract debt to Canada and discourage Canadian domestic investment, and that any proposal to restrict interest deductibility should be linked with significant reductions in Canada’s corporate tax rates.
关键词：Economic impact n foreign affiliates n interest deductibility n international taxation n thin capitalization