In the face of a global trend for greater corporate
transparency, the Government of Canada recently introduced its
long-promised legislation to establish mandatory reporting
standards for payments that Canadian extractive companies make to
governments worldwide. Click here to read our
January 22, 2014 and
June 12, 2013 publications on this topic. Click
here to read the full Extractive Sector Transparency
The Extractive Sector Transparency Measures Act (the
"Act") will apply to oil, gas and mining companies that
are listed on a Canadian stock exchange, as well as to private
companies operating in Canada that meet at least two of the
following criteria: $20 million in assets; $40 million in revenue;
or 250 employees. Entities subject to the Act will be required
to file an annual public report disclosing any payments to
governments in excess of $100,000 (or an amount otherwise
prescribed by regulation). Payments will include taxes,
royalties, regulatory charges and infrastructure improvement
payments. Reporting of payments is expected to be on a
project-by-project basis to align Canada's requirements with
other G8 countries. Additional guidance will need to be provided in
the Act or regulations regarding the reporting of taxes, which are
currently defined to simply mean "taxes, other than
consumption taxes and personal income taxes."
The Act follows through on the Government of Canada's 2013
commitment to establish mandatory reporting standards, with a view
to ensuring Canada's reporting framework is consistent with
existing international transparency standards and aligned with
other G8 countries. At that time, the European Parliament had
already approved transparency rules for public and large private
extractive and logging companies, requiring them to publicly
disclose the payments they make in excess of €100,000 to
governments on a project-by-project basis. The United States
Securities and Exchange Commission adopted similar transparency
rules under the Dodd-Frank Act that required publicly
listed extractive companies to file an annual report disclosing
payments to governments on a project-by-project basis. While
the SEC's transparency rules were overturned in 2013 as a
result of deficiencies in its rule-making process, they are
expected to be reissued by March 2015.
As expected, the Act will allow for the substitution of the
Government of Canada's payment reporting requirements with
those of another jurisdiction. This equivalency clause, which
is also found in the European Union rule, would allow companies to
publish a report on the basis of the mandatory requirements of
another country (or a province or territory), provided that these
are considered equivalent to the Canadian requirements. This
clause aims to minimize the administrative burden that could
result from multiple reporting obligations. Common reporting
formats are expected for Canada, the United States and the European
Union to further harmonize mandatory reporting standards.
While the Government of Canada had proposed that its mandatory
reporting standards would include payments to Aboriginal entities,
which is unique to the Canadian reporting requirements, the Act
will delay reporting of payments made by an extractive company to
an Aboriginal government in Canada for two years to allow for
additional consultation. Extractive companies will want to
consider how these reporting requirements will affect
confidentiality requirements in existing and future revenue sharing
agreements with Aboriginal communities.
The Act is expected to be passed by April 1, 2015 and
implemented by mid-2015. As a result, extractive companies
will need to ensure their compliance systems are able to track and
record relevant payments to governments. Further, while
Canada's reporting requirements are expected to be broadly
similar to those in the United States and the European Union, dual
listed companies will want to confirm compliance in all
jurisdictions until a consistent global reporting standard
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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