TEI-Canadian Department of Finance liaison meeting: excise tax issues - Tax Executives Institute

Tax Executive, The, Nov, 1998

9. A number of taxpayers, industry groups, and professional associations (including TEI) have requested clarification of the documentation requirements for ITC where corporate procurement cards are employed. The burgeoning use of these cards is driven, in part, by the elimination of purchase orders and individual invoice payment for high-volume, low-dollar value transactions. Revenue Canada has so far demonstrated little flexibility in respect of the documentation requirements for purchase transactions, including those generated through procurement cards. For example, Policy Paper 184, which summarizes the criteria for use of the 6/106 formula method for claiming ITC in respect of reimbursement of the registrant employees' business expenses, requires that there be joint and several liability of the employee and the employer corporation for the credit-card balance. This requirement does not pose a problem where the employee uses a personal credit card. In the case of procurement cards, however, few (perhaps no) companies require the employee to accept personal liability in respect of payment of a delinquent account. Revenue Canada's stringent view thereby precludes the use of the 6/106 formula calculation. As a result, procurement-card users must retain copies of invoices to support the GST paid on each transaction, thereby diminishing the benefits of the procurement card. We understand that Revenue Canada is working on a Policy Statement addressing the GST and Income Tax implications of procurement cards. Has Revenue Canada approached the Department of Finance requesting legislation to ameliorate current ITC documentation requirements in order to permit ministerial discretion under section 169(5) of the ETA? We invite the Department's views and comments on the use of procurement cards and whether it supports the introduction of legislation that will permit companies to avail themselves of the full benefits of the purchasing and payment efficiencies that procurement cards afford.

10. Conclusion

Tax Executives Institute appreciates this opportunity to present its comments on pending excise and commodity tax issues. We look forward to discussing our views with you during the Institute's December 2, 1998, liaison meeting.