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Co-Editors: David Duff, Tim Edgar, and Alan Macnaughton*
The Canadian Tax Foundation and its members extend their warmest thanks to Professor Glenn Feltham, who is retiring as co-editor of the Current Tax Reading feature to take up his new position as dean of the I.H. Asper School of Business and the CA Manitoba Chair in Business Leadership. Since the no. 5, 1999 issue of the journal, Professor Feltham has brought his eclectic background in accounting, business administration, law, and economics to bear to provide readers with topical, useful, and entertaining reviews of the tax and public finance literature. We wish him every success in his new endeavours.
Jack Mintz and Michael Smart, "Income Shifting, Investment, and Tax Competition: Theory and Evidence from Provincial Taxation in Canada" (2004) vol. 88, no. 6 Journal of Public Economics 1149-68
Jack Mintz, "Corporate Tax Harmonization in Europe: It's All About Compliance" (2004) vol. 11, no. 2 International Tax and Public Finance 221-34
The most interesting part of the second article cited above is its summary of the Canadian system in which the federal government and the provinces jointly occupy the corporate income tax field--that is, each corporation files a separate tax return, whether or not the corporation is a member of a corporate group, and then allocates the income to the different provinces based on commonly agreed factors (sales and salaries). As the author notes, this system has very few of the restrictions that normally apply in international taxation: no provincial thin capitalization rules, no provincial transfer-pricing rules, and no limits on the transferability of asset values when entities operating in different provinces are amalgamated or merged. As a result, there is great scope for interprovincial tax planning that allows income to be taxed in provinces that have low corporate income tax rates, such as Alberta and Quebec.
In the first article cited above, the authors use the Canada Revenue Agency's Corpac database to show that such interprovincial tax planning is occurring. Companies are classified into three groups: (1) firms that operate in a single jurisdiction; (2) firms that operate in multiple jurisdictions through separate subsidiaries and thus do not allocate their income; and (3) firms that operate in multiple jurisdictions through a single corporation and thus are...