With the federal election campaign in full swing, Canada’s political parties are presenting their campaign promises on what they’ll do if elected.
While public finance isn’t a hot-button election issue, it’s nonetheless crucial to the country’s financial health.
To protect future generations, we must have a plan to balance the federal budget in a short horizon and reduce public debt. Tackling these issues is in everyone’s best interest. Passing on a heavy financial burden to our children would hinder their ability to make choices down the road. We’d be mortgaging their future and, in a sense, their well-being.
Establishing “two budgets” for a clear and predictable budget plan
Given the size of the pandemic debt, Raymond Chabot Grant Thornton believes the government should introduce special budgetary measures aimed specifically at reducing the deficit generated by pandemic-related assistance programs. These special measures should be presented separately from regular budgetary measures. The next federal government must present fiscal measures that are part of a clear and predictable budget plan. To this end, the firm believes that such measures—including some that may be bold, ambitious and in some cases offered on a temporary basis—should serve to give the economy a quick boost and to reduce the deficit and debt resulting from recent government aid programs.
This is why the firm believes new measures should be defined under two fiscal frameworks. More concretely, the next budget plan should be split into two parts that are considered separate “budgets.” An exceptional situation called for exceptional measures with equally exceptional budgets. The first fiscal framework would address the extraordinary deficit and pandemic-specific debt generated since March 2020 and the various measures that will generate the wealth necessary to reduce this deficit over time, while the second fiscal framework would address the regular service needs of taxpayers, including businesses, that would be typical in normal circumstances, as it was prior to the pandemic.
Even before the pandemic, when the conditions were right for generating surpluses—particularly with full employment—the government’s coffers posted a $14 billion deficit at March 31, 2019, and a $39.4 billion deficit at March 31, 2020.
Following historic annual deficits of $334.7 billion (projected at March 31, 2021) and $138.2 billion or greater the following fiscal year, the Office of the Parliamentary Budget Officer projects the deficit to reach $24.6 billion by March 2026. The total federal debt already stood at $721.4 billion for fiscal 2019–20. It’s expected to hit $1.19 trillion by the end of the current fiscal year and $1.32 trillion in March 2026. Considering the magnitude of these numbers, we must act quickly and get our fiscal house in order with a long-term plan. The devil is in the details!
Without a doubt, aggressive economic intervention was—and still is—necessary to help us get through the pandemic. The crisis would have been far more devastating if nothing had been done. Canada’s next government must continue to support the country’s economic recovery by providing assistance to the most vulnerable populations and to businesses in the industries hit hardest by the pandemic. Going forward, we need more sector-specific measures.
For example, the environment is a critical issue in this election. Environmental protection is important to people of all ages, as well as organizations and a wide range of actors. It’s even more important for the future of our planet and the well-being of upcoming generations. Public finance should be considered a similar priority, as it creates the financial means to implement concrete environmental protection measures.
Reducing the pandemic debt without raising taxes: a smart solution
Given the state of our public finances, we need to help businesses grow and broaden the tax base through job creation, particularly while we face a labour shortage. For the next generation, the solution to this problem is well-orchestrated immigration and integration.
Canadian taxpayers are already overtaxed. The federal government shouldn’t pursue this avenue as a means of bringing in more money. Quebec’s tax burden is already very high, ranking 1st in Canada and 11th out of 38 when included with OECD member countries. Therefore, tax increases would neither be desirable nor sustainable. This is particularly true for businesses that still need liquidities to recover, create jobs and increase productivity.
The next federal government should consider introducing temporary tax measures to accelerate the collection of capital gains tax, which would be collected later anyway. Raymond Chabot Grant Thornton recommended this and other measures in its 2021 federal prebudget proposal.
For a period of 24 months:
- Allow taxpayers to withdraw funds from their RRSPs at a combined federal and provincial tax rate of 15%, payable immediately, by establishing a structured mechanism to ensure the sound management of the retirement fund;
- Allow taxpayers to pay capital gains tax on assets (shares, revenue properties, etc.) also at a combined federal and provincial tax rate of 15%;
- Allow Canadian taxpayers to withdraw funds from their holding corporations and pay a combined federal and provincial tax rate of 20% on dividends;
- Allow corporations to increase their capital dividend account to 30% of expenses incurred on initiatives that benefit the health of their employees. This private-sector investment will lead to better lifestyle habits and lower healthcare spending in the future. Corporations could therefore pay their shareholders tax-free dividends amounting to 30% of these eligible expenses.
Increase the tax base by reopening the federal immigrant investor program
We also believe this is a good time to reopen immigrant investor programs, federally and in Quebec, as this would increase foreign investment in the country and contribute to our economic recovery. Canada stopped recruiting these newcomers in 2012 and officially ended its immigrant investor program in 2014. Now that economic recovery is a priority, a program of this nature would be particularly helpful as it would drive considerable economic benefits. It’s worth noting that between 2015 and 2020, the United States recruited more than 55,000 investors through their Immigrant Investor Program (EB-5). The program requires applicants to make a US$500,000 investment, which is then used to bolster the country’s economy. In Europe, foreign investors injected nearly €22 billion in the various jurisdictions between 2015 and 2019 through this type of immigration program.
Bold tax measures like these could be implemented quickly, as could the reactivation of the federal immigrant investor program. Intergenerational equity and the stability of public spending are at stake. There are ways for the federal and provincial governments to increase their revenues without increasing the tax burden on taxpayers. This would allow us to bring down the pandemic-related debt, balance the budget more quickly and reduce the burden on future generations.
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The auditor’s response to the risks of material misstatement arising from estimates made in applying IFRS 17 Insurance Contracts.
We are pleased to share “The auditor’s response to the risks of material misstatement arising from estimates made in applying IFRS 17 Insurance Contracts” which has been issued by the Global Public Policy Committee (GPPC).
The GPPC comprises representatives of the six largest accounting networks being BDO, Deloitte, EY, Grant Thornton, KPMG and PwC.
IFRS 17 heralds a new era of accounting for insurance contracts because it sets out principles-based requirements that aim to improve the comparability of the measurement and presentation of insurance contracts across entities reporting in jurisdictions applying International Financial Reporting Standards (IFRS). The impact of IFRS 17 will be felt by many stakeholders including, but not limited to, preparers of financial statements, those charged with the governance of entities that issue insurance contracts, investors, regulators, analysts and auditors.
With IFRS 17’s anticipated mandatory effective date of January 1, 2023 moving ever closer, all types of businesses, not just registered insurance businesses, need to start evaluating the impact of the Standard now. In particular, audit committees should be considering the quality of the financial reporting of IFRS 17.
With this in mind, the GPPC has issued another paper which builds on the paper issued in 2020 “Implementation of IFRS 17 Insurance Contracts – Consideration for those charged with governance.” This additional paper focusses on the auditor’s approach to auditing estimates and associated judgments made in the application of IFRS 17.
The publication mentioned above follows this IFRS Adviser Alert.
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Updated on July 13, 2023
An IT security audit contributes to mitigating risks and maintaining the confidence of your customers and partners.
Companies need to make IT security a priority in order to limit the risk of data loss or fraud. With cyberattacks on the rise and so many organizations transitioning to remote work, businesses of all sizes are facing major challenges.
Issues linked to your technology, processes or human error could impact customer or partner confidence in your company and ultimately damage your business’ reputation. Then, of course, there’s the costs that could arise from any incidents.
Here are some questions to ask yourself:
• Has your business already adopted IT security best practices?
• Are these practices documented and communicated effectively?
• Is your incident response plan up to date?
• Have you implemented proper controls such as data backups or workstation and server protection?
An IT security audit is a comprehensive security check-up aimed at answering all these questions. The exercise helps identify which best practices should be maintained and what mitigation measures are needed to address detected vulnerabilities.
What’s the purpose of an IT security audit?
Security audits are sometimes wrongly perceived as a punishment or criticism, especially if company management requests one without the technical teams being in agreement. But in fact, IT audits are a great way to gain the support of decision makers, to put in place the right processes and solutions for the organization, and to highlight the return on investment.
First and foremost, an IT security audit is an open discussion with the organization’s key people, providing a clear understanding of any operational issues, risks, and existing or potentially missing mitigation measures.
This exercise aims to produce a market standard gap analysis and to guide the organization to comply with the requirements certifications, such as ISO27001.
With active threats all around, security incidents are even hitting the major players that should have robust protections in place experience security incidents. No matter how big or small your organization is, you can’t turn a blind eye to your vulnerabilities.
Even if everyone in the company takes their responsibilities very seriously, security checks and balances can be unintentionally overlooked. An IT security audit helps you make sure your organization has set up the right prevention, detection and corrective measures to remain resilient in the face of cyberincidents.
What are the advantages of an IT security audit?
IT security audits are based on existing guidelines and industry standards (ISO, CIS, etc.). By comparing your company’s current situation to a specific reference baseline, we perform what’s called a gap analysis. The idea is to identify missing control measures along with their associated risks and potential impacts on your organization.
The audit also gives you the chance to set up recurring verification processes so that your organization’s growth or evolution remains aligned with any requirements identified during the audit.
There are several advantages to a third-party audit. For example, it can :
- Give you an expert assessment of your organization’s cybersecurity maturity;
- Formalize processes and ensure that everything is properly documented;
- Provide a starting point for implementing a continuous improvement process;
- Strengthen the organization’s security, optimize processes and make the company more resilient;
- Lead to practical recommendations that support changes;
- Increase partner and customer confidence through active IT security management;
- Facilitate relationships with insurers thanks to formally established processes;
- Reduce the risks associated with cyber threats by implementing recommendations;
- Strengthen trust and alignment between management and the provider (internal or external) regarding IT management.
The team of experts who will assist you in this exercise will also be a key partner in the event of an incident, offering you effective support.
We’re living in a digital age and the transformation is occurring at breakneck speed. Your company’s ability to inspire confidence in its technology management is critical to its long-term viability and success. IT security affects all business industries and is key for operational continuity. An experienced external expert will point out any critical aspects you may have missed and direct you to the best available solutions for your organization.
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IAS 36 Impairment of Assets is not a new standard, and while many of its requirements are familiar, an impairment review of assets (either tangible or intangible) is frequently challenging to apply in practice. This is because IAS 36’s guidance is detailed, prescriptive and complex in some areas.
The Insights into IAS 36 series have been written to help preparers of financial statements and those charged with the governance of reporting entities understand the requirements set out in IAS 36, and revisit some areas where confusion has been seen in practice.
The first three publications in the Insights into IAS 36 series are:
- Overview of the Standard;
- Scope and structure of IAS 36;
- If and when to undertake an impairment review.
The first publication Overview of the Standard provides an “at a glance” overview of IAS 36’s main requirements and outlines the major steps in applying those requirements.
The second publication Scope and structure of IAS 36 looks at the scope of the impairment review (i.e., the types of assets that are included) and how the review is structured (i.e., the level at which assets are reviewed).
The third publication mentioned above explains if and when a detailed impairment test as set out in IAS 36 is required.
The publications mentioned above follow this IFRS Adviser Alert.
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