The current DTA between Canada and China goes back to 1986. Since then Canada domestic policies, tax treaties, and domestic tax agreements that are in the tax treaty standards have significantly changed, said the Canadian government in a public statement. So there was a need to update the DTA to benefit both countries economies and stimulate business between them.
The updated treaty will add transparency about each other taxes and tax information exchange information provisions, based on the Organization for Economic Cooperation and Development model agreement, and it will also include modernized provisions to conform to modern international tax treaty policies.
Many scholars believe that the deal between the two economic powerhouses was not because China wants to become less reliant on Europe and the United States, two areas that have been economically stagnating for years, but instead because they both have resources and skills that the other country desires.
Pauline Shum, a professor of finance at York University, who has spent years studying Canada financial and tax systems, told Asia Outbound, he agreement is driven mostly by mutual economic benefits. I do not see much of a hidden political agenda here. Canada is a resource rich country. China, with its developing economy and economic power, is a natural trading partner to go after. /p>
The treaty agreed upon by both parties will also reduce the levels of withholding tax placed on investment and trade, and it will also eliminate double taxation for individuals earning income in the other country and people doing business.
Reducing taxes in both countries will strengthen the economic ties between them and encourage more foreign direct investment between the two states. Shum said, his treaty will encourage and promote foreign direct investment. Regarding the politics, Canada has, over the years, become independent from the U.S. (It did not fight in Iraq, for example, despite the pressure from the U.S. government at the time.) So if the changes are to Canada economic benefit, Canada will pursue them. /p>
The governments of Canada and China must first approve the treaty before it becomes official. Observers and experts have already stated that although Canada government might have disputes regarding allowing China more access to their resources and materials, a problem that has caused some irritation in the past, it should be signed within a year due to all the economic benefits that come with it.
