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ARTICLE · 05 JUNE 2007

Canadian Government Withdraws Proposal To Restrict Interest Deductions

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On May 14, 2007, the Minister of Finance withdrew a controversial budget proposal to deny interest deductions for debt relating to foreign investments. The withdrawal of the budget measure, first announced on March 19, 2007, had been widely anticipated.

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Article by Bryan Bailey, Leslie Morgan, Kathleen Penny, Ron Richler, Paul Stepak, Paul Tamaki, Jeffrey Trossman and Chris Van Loan, © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Tax, May 2007

On May 14, 2007, the Minister of Finance withdrew a controversial budget proposal to deny interest deductions for debt relating to foreign investments. The withdrawal of the budget measure, first announced on March 19, 2007, had been widely anticipated. At the same time, the Minister announced a more focused proposal, referred to as the "anti-tax haven initiative". The revised proposal will not come into effect until January 1, 2012, effectively deferring any change to existing rules for almost five years. While the May 14 release describes the new proposal as a "mechanism" to implement the original budget proposal, the budget proposal has in fact been effectively withdrawn.

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