In the 25-year history of the goods and services tax, its application to investment fees has been the subject of a series of battles between the investment funds industry and the federal government.

The industry has successfully won at least two court battles striking down GST on investment fees, first in 1999 and subsequently in 2009, only to see the government quickly impose retroactive legislation aimed at both ensuring the tax continues to be payable on investment fees and keeping the amounts already collected.

The industry, like Rocky Balboa, refuses to give up.

Read: ORPP delay, GST relief on investment association’s budgetary wish list

During the 2016 pre-budget consultations, the Investment Fund Institute of Canada (IFIC) made a submission to the House of Commons standing committee on finance requesting 100 per cent rebates of GST/HST to make taxation of investment funds consistent with the treatment of other financial products and services. Failing that, it requested a 33-per-cent rebate consistent with the pension-entity rebate available to registered pension plan trusts.

The federal government’s policy position is that the management and administration of investment funds, including those that may be embedded into other exempt financial products and services, aren’t financial services.

To the extent the courts have found the legislation to be inadequate in regards to the government’s administrative position, it has amended the legislation to correct such inadequacies and preserve the tax policy goal.

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Statistics published by IFIC in 2010 showed the blended GST/HST tax rate on fund investment fees was 0.18 per cent of fund assets that are currently in the magnitude of $1.2 trillion, excluding pension funds. That amounts to total annual tax revenue of almost $2.2 billion of GST/HST for the federal government and HST provinces.

IFIC argues the average Canadian investor will benefit from the removal of the tax on investment fees, but the government would no doubt have to replace such a significant loss of revenue through a tax increase elsewhere, thus making any net benefit unlikely.

On reflection, I was wrong to liken the industry to Rocky Balboa. Perhaps, like the Black Knight character in the film Monty Python and the Holy Grail — after losing his arms and having both of his legs cut out from under him — it’s simply time for IFIC to say, “All right, we’ll call it a draw.”

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Greg Hurst is a Vancouver-based pension consultant with Greg Hurst & Associates Ltd.

These are the views of the author and not necessarily those of Benefits Canada.

Copyright © 2018 Transcontinental Media G.P. Originally published on benefitscanada.com

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