Finance ministers Jim Flaherty today tabled a Notice of Ways and Means Motion in the House of Commons to prevent tax deferral and avoidance through the use of foreign investment funds and trusts.

The motion proposes to tighten the income tax rules, responding to concerns raised by the Auditor General. The measures in the motion relate principally to the taxation of income that is earned through the use of non-resident trusts and foreign investment entities. The measures generally follow the draft legislative proposals released for comment in 2005 and have been amended to generally take effect only for taxation years that begin after 2006.

The motion also includes a number of technical amendments to update the Income Tax Act and ensure the law reflects government policy. In this regard, the motion would correct or clarify the application of existing provisions, implement measures that have already been announced, or deal with other income tax situations that require a legislative response.

“Our new government is committed to a tax system that is both competitive and fair,” said Flaherty. “The motion we tabled today will amend existing income tax rules to help ensure that income earned by Canadians through foreign jurisdictions, including tax havens, is subject to tax as if it had been earned in Canada.”