A Double Canadian Tax Arrangement in the Offing?
With US tax reform, Canada will have to take proactive measures to protect its tax base.
Slashing the US corporate income tax rate 14 points to 21% will all but certainly reduce the likelihood US companies will choose inversions to countries with lower rates. And while the tax overhaul is unlikely to draw full-blown inversions back to the US, companies should reconsider their cross-border configurations—especially with Canada.
US reform fits into a global trend of countries seeking to attract companies—the proverbial race to the bottom, as some may call it. The average 25% rate comprising federal and state taxes puts the US slightly below the average of the top 30 countries in terms of GDP and slightly above the OECD average. For other countries, especially neighboring ones like Canada, the US’s biggest trading partner, the more important change may be less its southern neighbor’s more attractive tax rate, and more its own relatively less attractive one. What’s a Canadian to do? Follow the Irish example? Read more here.
Despite overall inertia about moving away from the London Interbank Offered Rate, there have been a few proactive organizations that are at least looking to amend the language in the documentation. The problem is that just changing the language may not be enough, according to Fitch Ratings. And unless it’s revised again, some $4 trillion in syndicated loans could be repriced. If this happens, it may “affect a company's cost of debt, which may ultimately implicate credit quality if altered significantly.” Read more here.
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