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Is the Capital Cost Allowance System in Canada Unnecessarily Complex?

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  • Odette Pinto

    ()
    (Grant MacEwan University)

  • Rock Lefebvre

    ()
    (Certified General Accountants Association of Canada)

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    Abstract

    The purpose of this paper is to investigate whether recurrent changes to Canada’s Capital Cost Allowance (CCA) system have significantly increased its complexity leading to incremental costs and inefficiencies for businesses. The study examines the extent to which the CCA system meets the principles of simplicity, equity and neutrality, assesses the efficiency of using the system as the vehicle for introducing economic incentives, and gauges how the CCA system affects the international competitiveness of Canadian businesses. Informed by views of accounting professionals and industry representatives, the results of the analysis provide evidence of the increased complexity of the CCA system. The system falls short on several key principles of a sound tax system and does not properly represent economic reality of the underlying assets. Moreover, the use of the system for economic incentives is generally not effective; however, representatives from certain industries emphasize the importance of such incentives for retaining international competitiveness.

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    File URL: http://ideas.cga-canada.org/WorkingPapers/130401.pdf
    File Function: First version, 2013
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    Bibliographic Info

    Paper provided by Certified General Accountants Association of Canada in its series Working Papers with number 130401.

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    Length: 19 pages
    Date of creation: Apr 2013
    Date of revision:
    Handle: RePEc:cga:wpaper:130401

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    Related research

    Keywords: Captial Cost Allowance system; tax simplification; international competitiveness; accelerated capital cost allowance; tax policy;

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    1. Annabelle Mourougane, 2008. "Achieving Sustainability of the Energy Sector in Canada," OECD Economics Department Working Papers 618, OECD Publishing.
    2. Duanjie Chen & Jack M. Mintz, 2009. "The Path to Prosperity: Internationally Competitive Rates and a Level Playing Field," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 295, September.
    3. Jack M. Mintz, 2007. "2007 Tax Competitiveness Report: A Call for Comprehensive Tax Reform," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 254, September.
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