Flaherty backtracks on tax measureSEE:In a reversal, Finance Minister Jim Flaherty says a new controversial tax measure will be rewritten to ensure that legitimate Canadian corporations can continue to invest abroad and deduct the interest charge from their taxes.
Under pressure to back down from a "sleeper" measure in the March 19 budget that Canadian businesses said would cost them more than $1 billion and make them less competitive, Flaherty confirmed yesterday that draft legislation being prepared by the finance department would ensure that the provision only went after tax havens and so-called double dipping.
Nevertheless, news yesterday of Alcoa Inc.' s US$33-billion takeover bid for Alcan turned up the heat once again on Mr. Flaherty and his proposed move to limit companies' ability to deduct interest on foreign financings.
Tax specialists, business groups, blue-chip chief execdutives and think-tanks have weighed in in opposition to the move. The government has said the proposal would end the practice by some Canadian-based firms of obtaining two or more deductions for interest expenses incurred to finance offshore operations.
Last month, Richard Evans, Alcan CEO, said in a published interview that the tax change could make the aluminum maker susceptible to a foreign bid because it would hinder Alcan's ability to grow through foreign acquisitions.
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