In recent weeks, family law has been the topic of a Quebec government public consultation. To maximize this necessary reform, it must include a review of family taxation. The reason is quite simple: there is a disconnect between tax rules and the reality of today’s families.
An in-depth review is needed
It’s obvious that the Canadian tax system is simply outdated as it applies to both our SMEs and our families. In fact, our country’s tax system has not undergone an in-depth review since the 70s. Today, the Canadian and Quebec family taxation system is simply a patchwork of measures that have been added over time without changing rules or making any in-depth amendments to the legislation. The result is ongoing involuntary breaches of neutrality.
The neutrality of the tax system for families was reviewed by Raymond Chabot Grant Thornton and the UQAM’s École des sciences de la gestion (ESG UQAM) in an innovative study published in September 2018. The study showed that in more than 70% of the situations studied, the tax rules are not neutral depending on a family’s social profile and economic class, and the couple’s legal status. One of the unfortunate consequences of these breaches of neutrality is that Canadian and Quebec families are forced to make choices based on tax implications rather than on the needs of the family’s situation.
Consider for example governments’ main incentives such as the TFSA, RRSP, RESP and RDSP. When deciding on a type of savings, families with limited financial resources must make a decision regarding these programs on the basis of tax rules, to the detriment of their real needs, limiting their financial flexibility. Moreover, consider that family businesses are still faced with tax inequity on an intergenerational business transfer at the federal level. Provincially, family businesses must also deal with transaction restrictions such as the requirement to undertake a total, rather than a partial, business transfer or the inability to retain an interest after the sale.
Quebec and Ottawa must both work on this
The Quebec government can play a key role in the Canadian family taxation reform. The current consultation on family law initiated by the Minister of Justice and Attorney General of Quebec, Sonia Lebel, is an opportunity to look at potential options regarding tax changes for a more extensive review of family-related measures. By changing the tax rules so that they are better suited for today’s families and no longer impact taxpayers’ choices, Quebec would be sending a clear message to Ottawa to harmonize measures and reduce the gaps between tax policies and family dynamics.
Our study already identified several areas for consideration in the course of the current initiative.
For example, why not introduce a system based on family rather than individual income, implement a tax rate structure based on the size of the family, create a registered general savings plan (RGSP) or authorize the possibility of a rollover at the time of death to a trust established exclusively for a dependent child?
The Quebec government and Ottawa should both be encouraged to review family taxation so that it’s more representative of our Quebec and Canadian values, such as equity and equality. It’s in everyone’s interest.
Let’s take action together!
This article appeared in La Presse + on June 25, 2019 (in French) with Emilio B. Imbriglio, the firm’s president and CEO from 2013 to 2021.
25 Jun 2019 | Written by :
Luc Lacombe is a partner at Raymond Chabot Grant Thornton. He is your expert in taxation for the...
See the profileYou could also like to read
Next article
Updated on February 14, 2024
Risk management is key to an organization’s success. Because they are exposed to all types of threats, organizations must implement a rigorous process to counter these threats and strategies for dealing with and reducing them.
An effective risk management strategy not only avoids pitfalls and provides a means to react before it is too late, but it also builds trust and confidence that reassures your customers, business partners and investors.
In the case of a publicly listed, high-growth international company with offices on several continents, such as one of our clients, you can see why such a strategy is essential.
The client, with current sales of more than US$1B, wanted a solid base on which to build its expansion by reinforcing its risk management and internal audit procedures.
The client called on our experts for support in developing and implementing an enterprise risk management framework (ERM framework) and improving the related audit controls and reports.
A rigorous process
During this extensive three-year assignment, we worked closely with the directors, officers and various department managers in several countries.
The assignment consisted in defining the company’s main business risks and risk tolerance, then setting procedures to monitor and identify them. All major risks, whether technological, financial, political or other, were taken into consideration.
At the start, our experts undertook numerous consultations within the organization to gain a clear understanding of its operations, industry and issues. These discussions provided an inventory of the company’s risk exposure and helped determine the top twenty.
This was followed by a workshop during which directors and officers discussed the risks and existing controls and ranked the top twenty by importance (i.e. their impact on the organization and the probability of their occurrence).
Using our proposed methodology, these discussions provided the means to set the tolerance level for the main risks and a framework to monitor the situation and notify the directors and officers of any problem.
Determining the tolerance level for the various risks is a complex exercise that requires careful consideration. For example, it was decided that the ten main risks would be discussed by the Board of Directors (BD) every three months and that for the others, the BD would only be notified when the risk exceeded a certain threshold.
For an e-commerce company, for example, the threshold could be the number of minutes the site experienced downtime in a month.
Efficient monitoring
Working with the client, we then developed control methods and tools to monitor the main risks in terms of the established tolerance levels.
Over a given period, our experts gathered data on the progress of mitigation strategies and situations where the risk tolerance was exceeded. Our team prepared quarterly updates, which it submitted to the BD’s Audit Committee.
We also transferred our knowledge and supported the individuals responsible for risk management in the various departments to help develop their self-sufficiency in monitoring and preparing the required audit reports for the company’s officers and directors.
Numerous benefits
Our risk management advisory services provided numerous benefits for our client, including:
- The client now has a process and proactive, consistent control measurements to detect, assess and mitigate risks;
- The framework helps reduce growth-related risks;
- BD reporting was improved and officers are better informed about risks and mitigation strategies;
- Everyone in the company is more aware of risk management and the related benefits.
As was the case with our client, implementing a global risk management strategy can prove beneficial for any medium or large-size business. It’s an excellent way of ensuring that information is circulating effectively in the organization. It improves the BD’s business decisions and reaction time when issues arise. It also serves to enhance credibility, in particular with financing companies.
20 Jun 2019 | Written by :
Marco Perron is a Partner at Raymond Chabot Grant Thornton. He is your expert in assurance for the...
See the profileNext article
IFRS Newsletter is your quarterly update on all things relating to International Financial Reporting Standards (IFRS). We will bring you up to speed on topical issues, provide comment and points of view, and give you a summary of any significant developments.
We begin this second edition of 2019 by considering the International Accounting Standards Board (IASB) Exposure Draft Interest Rate Benchmark Reform.
We then look at the implications of the IASB’s statement that an entity should be entitled to “sufficient time” in determining whether it needs to change an accounting policy as a result of an IFRIC agenda decision and in implementing any such change.
Continuing on an IFRIC theme, we then look at the agenda decisions that were issued in March and the tentative issues that are currently out for comment.
Further on in the newsletter, you will find IFRS-related news at Grant Thornton and a general round-up of financial reporting developments.
We finish with a summary of the implementation dates of recently issued standards and a list of IASB publications that are out for comment.
Download the document below.
Service
Next article
Cryptocurrency is digital or “virtual” money, which uses cryptography to secure its transactions, control the creation of additional currency units, and verify the transfer of assets.
In contrast to traditional forms of money which are controlled using centralized banking systems, cryptocurrencies use decentralized control. The decentralized control of a cryptocurrency works through a “blockchain”, which is a public transaction database, functioning as a distributed ledger. This has advantages in that two parties can transact with each other directly without the need for an intermediary, thereby saving time and cost.
More and more entities, including private enterprises, are entering into transactions in which they obtain cryptocurrencies. The following are examples of situations in which an entity may obtain cryptocurrencies:
- An entity may accept cryptocurrency in exchange for goods or services sold in the ordinary course of
its business; - An entity may purchase cryptocurrency with the intention to hold it for investment purposes (i.e., to
benefit from increases in value); - An entity may act as a broker-trader of cryptocurrencies and purchase cryptocurrencies with the
purpose of selling it in the near future in order to generate a profit from fluctuations in price or brokertraders’
margin; or - An entity may be involved in cryptocurrency mining activities.
Cryptocurrency mining describes the process in which transactions for various forms of cryptocurrency are verified and added to the blockchain digital ledger. Those that perform cryptocurrency mining are generally referred to as “miners”.
Cryptocurrency miners use large amounts of computing power to solve blockchain algorithms. Once a block has been solved by the miner, he may, depending on the mining algorithm, be entitled to transaction fees as consideration for verifying cryptocurrency transactions and entering them in the blockchain ledger. Such transaction fees are specified by the original transacting parties.
Depending on the mining algorithm, the miner may also receive a reward of newly minted cryptocurrency for solving the block, with the amount of the reward being determined by the underlying blockchain software.
ASPE do not contain explicit guidance on how to account for holdings of cryptocurrencies or cryptocurrency mining activity. Furthermore, neither International Financial Reporting Standards (IFRS) nor generally accepted accounting principles in the United States (US GAAP) provide guidance which is appropriate for entities applying ASPE to analogize to in accordance with Section 1100, Generally Accepted Accounting Principles. Download this summary of some of the main accounting issues and, in the absence of specific guidance, our views on the issues.
Service