CHAPTER 1 SOLUTIONS
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Solution to Assignment Problem One - 1
The circumstances under which a general provision of the Income Tax Act can be overridden are as follows:

1. In those situations where there is a conflict between the provisions of an international tax treaty and the Income Tax Act, the terms of the international tax treaty will prevail

2. While court decisions cannot be used to change the actual tax law, court decisions may call into question the reasonableness of interpretations of the ITA made by either the CRA or tax practitioners.

3. In some cases, a more specific provision of the Act will contain an exception to a general rule. For example, while ITA 18(1)(b) does not allow the deduction of capital expenditures in computing business income, ITA 20(1)(aa) contains a provision that allows the deduction of landscaping costs.

Solution to Assignment Problem One – 2
Some of the possible examples of conflicts between objectives would be as follows:
1. Revenue Generation and International Competitiveness The need to lower rates of taxation in order to be competitive on an international basis is in conflict with the need to generate revenues.

2. Fairness and Simplicity In order to make a tax system simple, a single or small number of tax rates must be applied to a well established concept of income with only a limited number of deductions or exceptions available. This is in conflict with the goal of tailoring the system to be fair to specific types of individuals, such as the disabled.

3. Revenue Generation and Social Goals The desire to provide funds to certain types of individuals (Old Age Security) or to provide certain types of services (health care) may be in conflict with the need to generate tax revenues.

4. Flexibility and Certainty To make a tax system flexible in