4. Committee findings and recommendations for changes in the law

The Committee main findings with respect to Canada's current and possible future policy with respect to the taxation of migrants' gains are as follows:

• Canada appropriately taxes non-residents, including former residents, only on gains that can be considered to have a source in Canada.

• The concept of taxable Canadian property (TCP) establishes the sorts of property in respect of which non-residents' gains are considered to be sourced in Canada. Although the concept applies primarily to non-residents, Canada's policy for the taxation of emigrants requires that it apply as well to residents of Canada.

• Canada's policy of negotiating bilateral tax treaties that generally accord with the OECD model does require Canada to relinquish its right to tax some gains, in return for the right to tax others. This practice is standard among OECD countries.

Based on these findings, the Committee makes the following recommendations:

Recommendation 1: Classification of property

That the Minister of Finance consider amendments to the Income Tax Act to prevent the inappropriate manipulation of a property's status as between "taxable Canadian property" -- the sort of property on which non-residents' capital gains are taxed in Canada -- and other property.

Recommendation 2: Scope of TCP definition

That the Act be amended to clarify that property may be taxable Canadian property to any taxpayer, whether the taxpayer is a resident of Canada or a non-resident.

Recommendation 3: Distribution of trust property

That changes be made, if necessary, to ensure that any accrued gains on trust property distributed to a non-resident beneficiary are taxed either in the hands of the trust or in the hands of the beneficiary.

Recommendation 4: Emigrants' accrued gains

That the Minister of Finance consider amendments to the Act to compute an emigrating individual's tax liability on all gains that have accrued up to the time of departure, other than gains that will never be treaty-protected from Canadian tax, with actual payment due only on realization (provided the emigrant has given adequate security).

Recommendation 5: Information reporting

That all individual emigrants from Canada be required to report all property holdings to Revenue Canada at the time of emigration.