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<title>CANADIAN COMPANIES WIN REPRIEVE FROM MICHIGAN STATE TAX</title>
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<p><font face="Arial"></font><font face="Arial" size="+1"></font><font face="Arial" size="+1">December 9, 1998 <em>(3:45 p.m. EST)</em> No. 290</font></p>
<p align="CENTER"><font face="Arial" size="+1">CANADIAN COMPANIES WIN REPRIEVE FROM </font></p>
<p align="CENTER"><font face="Arial" size="+1">MICHIGAN STATE TAX</font></p>
<p><font face="Arial">International Trade Minister Sergio Marchi today welcomed the State of Michigan's decision not to pursue for
the time being any tax discovery programs aimed at foreign-based businesses potentially liable under the Single
Business Tax. </font></p>
<p><font face="Arial">The decision means that Michigan will take no new actions requiring Canadian companies to disclose potential
tax liabilities until a mutual understanding of the situation is reached. </font></p>
<p><font face="Arial">"There is no doubt that the extended tax measures would create a burden on Canadian companies and could
harm Michigan companies as well," said Minister Marchi. "With Canada-Michigan trade reaching C$82 billion in
1997, it is clear that we must work hand in hand to keep our trade and investment relationship healthy and
prosperous." </font></p>
<p><font face="Arial">The assurance will allow Canada to pursue discussions with Michigan on the extension of its tax jurisdiction and
the retroactive application of its state business tax, an issue that has raised much concern among Canadian
businesses. </font></p>
<p><font face="Arial">Michigan's Single Business Tax was originally enacted in 1976 as a tax on the basic revenue of Michigan
companies. In February 1998, as a result of court decisions, the State of Michigan broadened its tax jurisdiction
in a way that made more foreign companies liable and made taxes payable retroactively. </font></p>
<p><font face="Arial">"The understanding between Canada and the State of Michigan provides timely assurance to Canadian
companies that have been caught off guard by these significant tax changes," said Mr. Marchi. </font></p>
<p><font face="Arial">Since the fall, the Canadian government has made a number of representations to the Michigan government.
These efforts have taken the form of representations by Minister Marchi and his officials with the Governor, the
State Treasury Department and the state's business community. </font></p>
<p><font face="Arial">Before this reprieve, Canadian companies could have faced from four years of back taxes and interest to a full
10 years in back taxes and interest, plus a 50 percent penalty. </font></p>
<p><font face="Arial">The Government of Canada realizes that this issue is not fully resolved. It will continue to defend Canadian
companies' interests in Michigan. The Canadian and Michigan governments are co-operating to keep Canadian
industry informed of further developments. </font></p>
<p><font face="Arial">- 30 -</font></p>
<p><font face="Arial">For further information, media representatives may contact:</font></p>
<p><font face="Arial">Leslie Swartman</font></p>
<p><font face="Arial">Office of the Minister for International Trade</font></p>
<p><font face="Arial">(613) 992-7332</font></p>
<p><font face="Arial">Media Relations Office</font></p>
<p><font face="Arial">Department of Foreign Affairs and International Trade</font></p>
<p><font face="Arial">(613) 995-1874</font></p>
<p><font face="Arial">This document is also available on the Department's Internet site: http://www.dfait-maeci.gc.ca</font></p>
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