Sunday News Roundup 23.11.12: Quebec transfer pricing, CRA interest and more Canadian accounting news

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TORONTO, Nov. 12, 2023 – For all the talk in recent years about closing international tax pricing loopholes and imposing a minimum corporate tax on multinationals, precious little has been accomplished by governments around the world. A Quebec research institute recently published a report stating that 59 Canadian companies transferred $119.8 billion in net profits to European low-tax countries over a period of about 10 years, as reported by the Toronto Star. 

The report mostly focuses on 33 companies headquartered in Quebec and the tax haven of Luxembourg. They include a who’s who of blue chip Canadian companies like Thomson Reuters (parent company of the Globe and Mail), Alimentation Couche-Tard and Saputo Inc. Many of the companies are in the food sector, which is particularly concerning, given the recent protests over high grocery prices. 

Of course, it goes without saying that all of this tax planning is perfectly legal, just as it’s obvious that many savvy chartered professional accountants are in the transfer pricing business. (We even have a category on our website devoted to the topic.) In other words, this is an accepted aspect of doing business around the world, a wink and a handshake between corporations and governments. 

When tax treaties are threatened and loopholes get squeezed, business lobbyists (e.g., chambers of commerce, business federations) inevitably trot out code words like “competitiveness.” To quote the report’s author, "We often describe the problem of tax havens, of tax avoidance as being a complex technical and legal problem when, in fact, it's a political problem," he said. Well, perhaps it was during the Panama Papers and the Paradise Papers but the world seems to have moved on. 

And now, on to the rest of the news from the past week in Canadian accounting. 

Here’s a tax strategy: Pay back the CRA

Speaking of tax strategies, much ado this week in the Globe and Mail about the Canada Revenue Agency possibly raising its interest rate on unpaid business taxes to 10 per cent. It’s currently sitting at nine per cent but, according to the CPAs quoted in the article, the extra one per cent will cause “tax advisers to shift strategy.” 

It’s understandable that some business may make cash flow decisions and delay paying back the CRA. But apparently inflation is also pinching late interest payments. As always, with tax news, the comments section is the most entertaining, with the usual motley crew complaining about the Liberals or expressing their hatred of the CRA. 

But there’s also a few intelligent comments questioning the article itself: “As a former tax adviser I find it unlikely that anyone changes their advice on delaying paying tax owing based on 1 percentage point increase in the interest charged” or “Not sure why anyone would present this as a problem. The CRA is not a bank, and neither businesses nor individuals should be considering non-payment of taxes to be a viable option to address cash flow difficulties.” 

KPMG for prime minister! Cut consultants by hiring consultants?

A chef’s kiss to Bill Murray of the Globe and Mail for the deliciously ironic Ottawa paid nearly $670,000 for KPMG’s advice on cutting consultant costs. “The department of Natural Resources, led by minister Jonathan Wilkinson, approved $669,650 for KPMG, a global professional services company, to provide managing consulting advice.” 

In other words, the feds hired consultants to tell them how to cut consultants. As reported by Canadian Accountant, consulting firms have been criticized as “the shadow public service,” and Deloitte Canada has topped its Big Four rivals in revenue because of its consulting business. As for KPMG, apparently all is forgiven since that whole Isle of Man business, that so embarrassed the Liberals back in the day. 

Podcaster Canadaland had the best take of all on the bizarre business. “Why don’t we just elect consultants?,” asked host Jesse Brown. “KPMG for prime minister!” 

Quick Hits: Articles of Interest 

Canadian

This just in: The rich are getting richer (CBC)
Top 1% of tax filers saw incomes rise by almost 10% in 2021, Statistics Canada says (Globe and Mail)
Which country’s finances are in better shape, Canada or the U.S.? (Globe and Mail)
New CPA Study Reveals Canadians’ Holiday Spending Soars Despite Economic Snowstorms (CPA Canada)

International
Layoff Watch ’23: EY Joins the Aussie Layoff Party, Now All Four Big 4 Firms Made Cuts This Year (Going Concern)
EY aims to shake up US audit business after ‘unacceptable’ number of flaws (Financial Times)
An accountant sobbed saying goodbye to her 'work bestie.' It resonated with others who said trauma-bonded colleagues helped them through tough times. (Insider)
Trudeau’s halt on carbon tax could undo years of his tentpole climate policy (The Guardian)

By Canadian Accountant staff.