Federal Minister of Finance, Bill Morneau, presented his budget on March 22, 2017. The government is continuing with its planned focus on building a strong middle class through innovation, skills, partnership and fairness. Budget 2017 focuses on giving talented people the skills they need to drive our most successful industries and high-growth companies forward, while investing in Canadians’ well-being through a focus on mental health, home care and indigenous health care.

Forecasted deficits

As widely anticipated, the budget projects significant deficits over the next several years. The government forecasts a deficit of $23 billion for 2016–17 and $28.5 million in 2017–18. Over the next four years, deficits are expected to decline gradually from $27.4 billion in 2018–19 to $18.8 billion in 2021–22.

Canada continues to have the lowest total government net debt-to-GDP ratio of all G7 countries. The federal debt-to-GDP ratio is projected to decline gradually after 2018–19 reaching 30.9 percent in 2021–22.

Investing in priorities

The government is committed to making smart, necessary investments in the economy to ensure a thriving middle class, and remains committed to a responsible approach to fiscal management.

The government will initiate three new expenditure management initiatives:

  • A comprehensive review of at least three federal departments (to be determined), with the aim to eliminate poorly targeted and inefficient programs, wasteful spending and inefficient programs, and ineffective and obsolete government initiatives.
  • Initiate a three-year review of federal fixed assets to identify ways to enhance or generate greater value from government assets.
  • Initiate a review of all federal innovation and clean technology programs across all departments, as federal programs are dispersed to simplify programming and better align resources to improve the effectiveness of innovation programs.

The government will report on the progress of these reviews in Budget 2018.

The government will also introduce legislative changes to improve the organization and efficiency of government operations, as needed.

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Benoit Turcotte
Partner | M. Fisc. | Tax

January 30, 2017 Executive Order

U.S. President Donald Trump’s January 30, 2017 Executive Order restricts the issuance of new U.S. federal agency regulations.

As a result, the Internal Revenue Service (hereafter the “IRS”) will not propose any new technical tax interpretations, other than the usual notices such as interest rate changes.

Under this new executive order, every time an executive department or agency would like to comment on or enact a new regulation, they must identify at least two prior regulations to be eliminated.

Regulations

These interpretations represent the opinion of the U.S. Department of the Treasury relating to the Internal Revenue Code (hereafter the “IRC”) and constitute a reference for interpreting the federal income tax legislation. The Treasury’s technical interpretations summarize application of the IRC by providing an official interpretation of the U.S. tax code by the Department of the Treasury. Often these interpretations are presented following requests for private letter rulings or at the Treasury’s initiative to clarify certain aspects of the law (revenue rulings).

Order objectives

According to the White House, the idea of compensating for new regulations by eliminating prior ones has the potential to provide a “regulatory balance” to the flow of new administrative formalities issued by the U.S. Government and help simplify or eliminate obsolete regulations.

Furthermore, according to the White House, the additional costs associated with the new regulations will be offset, to the extent permitted by law, by the elimination of existing costs associated with at least two prior regulations.

The impact of the order

According to President Donald Trump, businesses will find it easier to create and operate a business in the U.S., as they won’t be hampered by tax regulations.

However, opponents of the President, many of whom from the world of business and tax, would argue that this order could be detrimental to the sound administration of the tax system of the world’s leading economy, by creating or maintaining a vague regulatory framework around complex tax rules. Many also consider that these interpretations are needed for the government to function properly and for the sound management of the tax environment that U.S. businesses or companies doing business in the United States rely on.

17 Mar 2017  |  Written by :

Mr. Turcotte is a partner at RCGT. He is your expert in taxation for the Montréal office. Contact...

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On-line Tax Strategies

Did you know that intragroup transactions are often incorrect and a common source of significant assessments by the tax authorities? Many of these frequent errors can easily be avoided. The following paragraphs provide information on areas to watch out for and potential solutions to limit the impact of commodity taxes on your cash resources in intragroup transactions.

Basic rules

Enterprises are required to collect and remit taxes on taxable supplies, even in the case of transactions between companies within the same group. The consideration paid or payable to an entity in exchange for a taxable supply triggers taxes, regardless of whether an invoice has been produced. Transactions may be evidenced by a contract, invoice or even a journal entry.

 

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Maximilien Larivière
Advisor | ing. jr, M. Ing. | Tax

Even though aeronautical technologies are the result of leading edge work from scientist and engineers, the development cycle of the related products is somewhat difficult to achieve.

Because of the enormous quantity of testing that must be carried out to certify the new technologies, years and sometimes decades can go by from the time an idea is chosen for development to the time the technology is actually being used in an aircraft. Composite materials (a combination of two or more immiscible components whose properties are mutually compatible) were introduced for use in manufacturing aeronautical components several years ago. Used initially for non-structural components, such as trims and cabin panels, composites are nowadays used in structural elements. Aircraft such as the Bombardier C-Series use high-performance composite materials for such critical elements as the wings and empennage, which result is an aircraft that is up to 5,500 kg lighter than the competition’s.

Composite materials may take years to develop and their application in the aeronautics industry may not be straightforward, but they clearly represent performance benefits over comparable metal parts. Composite materials have repeatedly proven their performance, whether they are used in internal components such as partitions, monuments, ventilation ducts, floors, etc.) or for primary structural components, such as the fuselage or wings. The main benefit of using composite materials is their lighter weight compared with equivalent metal parts. Airline operators are drawn to the weight reduction factor which cuts fuel costs and increases the ecological value of the aircraft. Additionally, composite materials used in aeronautics are more resistant in fatigue than equivalent metal parts. This results in a longer useful life, which translates into greater efficiency over the aircraft’s life cycle.

Some turbine engine manufacturers, such as CFM, a GE / SAFRAN association, focus on developing jet engine parts using composite materials: certain low-temperature parts, such as fan blades, have been developed and used in commercial motors. By using composite materials in the new LEAP engine, CFM has been able to reduce the weight of each motor by 220 kg, compared to engines using standard metal parts.

There are considerable benefits to using composite materials for certain equipment, such as on-board trolleys, which can result in considerable weight reductions. Norduyn has developed the Quantum line of trolleys, made from composite materials, which are 40% lighter than conventional aluminium-frame trolleys and more corrosion- and fatigue-resistant.

While the use of composite materials may be beneficial in helping to reduce the weight of certain aircraft by thousands of kilos, the materials developed to date cannot survive the extreme temperatures of a turbojet core. If researchers are able to increase the temperature resistance of high-performance composites, in the coming years it may be possible, for example, to develop low-pressure compressor parts. This would be another advance in materials that has fostered developments in the field of aeronautics in recent years. Considering their current and future applications, there is no doubt that composites are the way to go in aeronautics!

22 Feb 2017  |  Written by :

Mr. Larivière is an advisor at Raymond Chabot Grant Thornton. He is your expert in taxation for the...

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