Ian Bragg, vice-president of research and statistics at the Securities and Investment Management Association, told The Globe and Mail “these measures would penalize ordinary Canadians saving for retirement, education, or other long-term goals, and create unnecessary uncertainty in the market.” Bragg stated that the draft legislation could cost Canadian investors more than $81bn in added taxes, prompting calls for the issue to be raised at the highest levels of Canada-US trade dialogue.
The bill threatens to override the Canada-US tax treaty that has been in place since 1942, dramatically raising withholding tax rates for Canadian corporations and individuals earning US income.
Canadian corporations currently benefit from a 5 percent withholding tax on dividends from US subsidiaries. This would rise by five percentage points each year under section 899 until it reaches 50 percent—20 points above the statutory US rate. Canadian individuals, who now face a 15 percent withholding tax on US securities, would also see that rate rise to 50 percent if the provision is enacted, according to the Globe report.
The proposed changes would reverse decades of cross-border tax coordination.
Karl Dennis, national leader for KPMG’s US corporate tax team in Canada, told the Globe the eventual impact of the bill will depend on final legislative developments.
