Pierre Fortin
Partner | CPA, CA | Management consulting

The digital economy is an important source of potential growth for Québec companies, which nevertheless face many challenges.

Some companies are successful in taking advantage of the productivity gains and access to new markets offered by the new technologies. This evolving economy is nevertheless a source of concern for several Quebec businesses which must now compete with new businesses in their markets.

These structural changes have major impacts on the province’s municipalities, especially with regard to fluctuations in property tax income and regulations.

E-Commerce – Major developments for Quebec retailers

Data published in the past few months confirm that Quebecers are shopping more and more online and mainly on U.S. retailers’ sites. A recent study by the CEFRIO on e-commerce trends in Quebec revealed that 58% of Quebecers made online purchases during 2017 and 58% of these purchases were made on the Amazon website.

This increase in online sales is jeopardizing the traditional retail business model. Across Canada, e-commerce sales in the retail sector increased by more than 72% between 2012 and 2016. During this period, the most significant increases in online sales market shares were found in construction and gardening materials (+358%), home furniture and accessories (+282%), clothing items and accessories (+273%) and sports, leisure, music and library items (+206%).

Well established retail giants such as Sears or Jacob (women’s clothing) have already succumbed to these changes, which are also affecting chains traditionally seen as leaders in their field like Toys’R’Us. Other changes can be expected in the coming years, especially in sectors where e-commerce is less present now. For example, the growth of online car sales could force car dealers to review their business model, and grocery stores will be feeling increased competition from their online counterparts.

These disruptions are already having an impact on the province’s municipalities. Shopping centre stores are changing, reducing the leased surface area and turning to online sales platforms. In the near future, this will reduce the municipal tax base while their financial needs for delivering their services to the population will not be reduced. A reshaping of tax income sources can be expected to ensure municipalities’ financial longevity.

New digital players outside municipal regulations framework

The presence of new players from the digital economy is also upsetting the traditional regulatory framework of Quebec municipalities.

Airbnb, the largest housing service in the world, owns no rooms, and is now present in all of the province’s municipalities. In addition to taking market shares from traditional hoteliers, Airbnb is having a major impact in certain municipal territories. Apartments that had been traditionally occupied by residents are now being transformed into tourist dwellings. Income from lodging taxes, which support municipalities’ economic development, could be affected. Furthermore, displeased citizens are requiring regulatory changes to put an end to the continuous coming and going of tourists.

Another case that has been well publicized in recent years: the emergence of Uber in the taxi sector has caused quite a headache for political decision-makers. Regulatory changes had to be adopted in light of the growth of this business model.

Other digital players will emerge in the coming years and will definitely upset the usual business model. Municipalities will have to remain vigilant and become more flexible to deal with these disturbances quickly.

Municipal administration transformation opportunities

Digital changes are nevertheless generating interesting opportunities for Quebec municipalities. The new technological tools available make it possible to embrace the notion of a smart city, which can enhance the quality of citizens’ lives. Platforms like Facebook, among others, enable municipalities to increase stakeholders’ commitments, in particular by making it easier to share information and consult on a variety of topics.

Professional support by knowledgeable experts

When you are faced with these changes brought on by the digital economy, our experts can support you with:

  • Strategic planning: our experts can help you carry out your municipality’s strategic plan to determine which tangible actions will make it easier for your municipality to adapt to the new digital era.
  • Financial framework: our experts can help establish a long-term financial framework (forecasting revenues and expenses) that will better prepare you for the fluctuating sources of property tax income in the coming years.
  • Citizen participation: our experts can help design tools that will enhance the commitment of the stakeholders on your territory.

12 Nov 2018  |  Written by :

Pierre Fortin is a partner at Raymond Chabot Grant Thornton. He is your expert in Management...

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The Grant Thornton International IFRS team has published the 2018 version of IFRS Example Consolidated Financial Statements 2018 (hereinafter the “Example consolidated financial statements”) and a French version: États financiers consolidés types 2018.

The Example consolidated financial statements have been updated to reflect changes in IFRS that are effective for the year ending December 31, 2018. These include the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, which both become effective for accounting periods beginning on or after January 1, 2018. No account has been taken of any new developments published after September 30, 2018.

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How Transformation 4.0 can benefit your business’s growth? Watch this free webinar and learn about the advantages of adopting this shift in all areas of your business (in French only).

What is Transformation 4.0?

There have been three major industrial revolutions over time: steam-powered machines, production lines and computers. Now we are in the fourth transformation: the digital era.

What are the tangible impacts for businesses? Does the change affect all types of entities?

Here are some of the topics that will be covered:

  • The Transformation 4.0 in a nutshell;
  • Strategy 4.0;
  • Client experience and organizational performance;
  • Production cost and profitability analysis;
  • Artificial intelligence and advanced analytics;
  • Talent management;
  • Financial assistance.

This information session is a courtesy of Raymond Chabot Grant Thornton.

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Adviser alert – IFRS Viewpoint – October 2018

The Grant Thornton International IFRS team has published IFRS Viewpoint – Accounting for client money.

The IFRS Viewpoint series provides insights on applying IFRS in challenging situations.

Each edition will focus on an area where the standards have proved difficult to apply or lack guidance.

This edition provides guidance on client money – arrangements in which a entity holds funds on behalf of clients.

The issue

Entities may hold money on behalf of clients under many different contractual arrangements, for example:

  • a bank may hold money on deposit in a client’s bank account;
  • a fund manager or stockbroker may hold money on behalf of a client as a trustee;
  • an insurance broker may hold premiums paid by policyholders before passing them to an insurer;
  • a lawyer or accountant may hold money on behalf of a client often held in a separate bank account where the interest earned is for the client’s benefit.

If an entity holds money on behalf of clients:

  • should the client money be recognized as an asset in the entity’s financial statements?
  • where the client money is recognized as an asset, can it be offset against the corresponding liability to the client in the statement of financial position?