Sunday News Roundup 22.04.10: Budget tough on tax avoidance, ISSB Montreal, SR&ED warning and more

Wrapping up the odds and ends from the past week in Canadian accounting news

Apr 10, 2022 Author: Canadian Accountant

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TORONTO, April 10, 2022 – The past week was a busy one in the Canadian accounting profession. A change in leadership at CPA Canada. A new accounting standards board in Montreal. And the federal budget, which dominated the past week’s new cycle, provided plenty of fodder for tax commentary.

Prior to the budget’s release on Thursday, CPA Canada had provided the House of Commons Standing Committee on Finance with a pre-budget submission, most notably continuing its call for a full review of Canada’s tax system. Post-budget, CPA Canada issued three focused statements addressing the issues of fiscal policy, sustainability and climate change, as well as reforms to Canada’s anti-money laundering system.

While there were no hikes in personal income tax or capital gains inclusion rates, among the headline budget items is a one-time tax on big banks and insurers and deficit-reduction measures that, according to Kevin Carmichael in the Financial Post are a sign of “maturity.” But the budget also includes a few line items of interest to the tax planning community.

The first is a pledge by the Liberals to give the Canada Revenue Agency $1.2 billion more over the next five years to “fight against tax crime.” The second is a pledge to strengthen the Canada’s Alternative Minimum Tax (AMT), which hasn’t been updated since 1986, and is pretty toothless. (Even the Financial Post, no fan of taxation, expressed surprise about the failure of the AMT.) And the third is a promise to curb aggressive corporate tax planning strategies among “financial institutions” dealing in dividend stocks and setting up in tax havens (thanks, Loblaw).

Finally, in an item of particular interest to Canadian Accountant, was the Liberal pledge to address the ability of “some people” who are “manipulating” the CCPC status of their corporations. Allan Lanthier was in the lead of calling out this trend in the Financial Post, the Toronto Star, and Canadian Accountant. Among those in the tax planning community who offered an alternative view was Michael Goldberg of Minden Gross LLP (who has also written for Canadian Accountant) writing in the Globe and Mail and for Wolters Kluwer Canada (the longer version of the Globe article).

The Toronto Star followed up on the story post-budget. While acknowledging that the government had acted upon the issue, Lanthier called the solution “ham-handed.” The article also includes quotes from a Thorsteinssons LLP tax lawyer who acts for Jim Balsillie and a representative from Canadians for Tax Fairness, representing both sides of the debate. (The Globe and Mail also reported on the new policy.)

While one Globe columnist criticized the budget as a spend, tax and pray document devoid of bold growth measures, EY Canada — which has a far more extensive tax review that highlights every nook and cranny — called the budget “an engine for growth.” Perhaps the April 7, 2022 will be remembered as the day the Liberals got serious about addressing aggressive tax avoidance. Or critics, such as Rita Trichur in the Globe, will see it as proof of the Liberals incrementalist, "kid-glove" approach to money laundering. Regardless, as one wag (an HNW client advisor) put it on LinkedIn, “Let the [tax] planning begin!”

ISSB open Montreal sustainability office

On the day before the big budget, the Chair of the IFRS Foundation Trustees, Erkki Liikanen, came to Canada to open the Montréal hub of the new International Sustainability Standards Board. The signing ceremony was the culmination of years of hard work and commitment by CPA Canada in establishing Canadian credibility on sustainability standards in financial reporting.

Liikanen was joined by Richard Olfert of CPA Canada and Valérie Plante, Mayor of Montréal. “As part of its Americas coordination role, the Montreal centre will work in close cooperation with the San Francisco office (headquarters of the Value Reporting Foundation (VRF), which is expected to be consolidated into the IFRS Foundation by June 30 2022).”

CRA issues SR&ED claims warning to companies

The Scientific Research and Experimental Development (SR&ED) program is a favourite tax planning credit used by many Canadian companies and their CPAs. But this past week the CRA issued a warning that it was seeing a rise in SR&ED claims containing false and/or fraudulent information.

“While the vast majority of claims filed for SR&ED tax incentives are compliant with filing requirements, the CRA is reminding you to make sure the information provided in your claim, including information submitted on your behalf by a representative, is valid.” Consider yourself warned.

Poseidon Concepts story ends in US jail time

Joseph Kostelecky, the top executive at Poseidon Concepts, a one-time Calgary “energy darling,” was sentenced this past week to three years in a US jail and ordered to US$406-million in restitution to investors. It’s the end of a long saga involving fraud, bankruptcy, a class-action lawsuit settlement that ensnared the company’s auditor, KPMG, and $750K in fines and costs ordered against Kostelecky by the Alberta Securities Commission.

Intuit launches QuickBooks Online Advanced in Canada

On Tuesday, Intuit made an announcement that will affect more Canadian accountants and bookkeepers on a practical basis, than any of the announcements made above. The accounting software provider launched Quickbooks Online Advanced in Canada (QBO Advanced was already available in the US), the most powerful version of QuickBooks Online, built to cater to SMBs with complex requirements and need a highly scalable solution.

Intuit has been on a roll recently with a series of big announcements in the highly competitive accounting software solutions space. With Xero appointing its first chief growth officer and homegrown Freshbooks growing its Accounting Partner Program, 2022 is shaping up to be a fascinating year in software solutions.