The Investment Funds Institute of Canada (IFIC) is calling for tax changes from the federal government to help asset managers complete globally.
In its submission to the House of Commons finance committee’s pre-budget consultation, IFIC is calling for changes to encourage investment from foreign residents.
The interest group representing Canada’s investment funds industry wants the feds to make the safe harbour rule less restrictive as well as change the rules around withholding tax on collective investment vehicles (CIVs), or mutual funds.
The federal budget, to be released next winter, will be the Liberal government’s last before the 2019 election. The finance committee will hear testimony from groups this fall.
The IFIC submission says Canada’s safe harbour rule, introduced in 1999, hasn’t kept pace with international developments—including rule changes in Australia that make it easier for firms in that country to manage assets of foreign funds. IFIC is asking for a number of changes it says will improve competitiveness.
The organization is also calling for changes to the withholding tax for foreign investors on distributions of income from a trust. It’s proposing that the feds “eliminate the Canadian withholding tax on distributions from Canadian trusts to the extent that the tax would not otherwise apply if the foreign investor had held the underlying assets directly and not through the trust,” the submission says.
The proposed changes would reduce fees for Canadian investors by attracting more foreign investment, creating scale for Canadian asset managers and reducing management expense ratios, IFIC says.
The changes would also increase tax revenues by attracting more foreign investment, the submission says.
Read the full submission here.