Sunday News Roundup 22.08.21: Early tax change warnings and more Canadian accounting news

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TORONTO, August 21, 2022 – With the passage of the Inflation Reduction Act in the US, a conversation is occurring that is very reminiscent of a similar one that occurred in Canada, when the Liberal government began beefing up the Canada Revenue Agency. For much of its history, the Internal Revenue Service had a reputation as a government agency to be feared, and the CRA was considered toothless. Years of underfunding, however, has reversed those reputations. 

Back in 1999, the New York Times was calling out Congress: ''We don't collect taxes anymore,'' one longtime I.R.S. official told The Times. ''We aren't allowed to.'' Now the Biden administration is putting back some cash into the IRS ($80 billion) and the partisan arguments have begun, just as they did (and still do) in Canada. 

Meanwhile, according to Accounting Today, the Public Company Accounting Oversight Board is on pace for a record-setting year for civil monetary penalties. 2022 penalties, which include penalties against Canadian accounting firms, will eclipse annual penalties levied in 2019, 2020 and 2021. One glaring weakness of the US regulatory world is its influence by the political party in power, as “The increase in financial penalties is likely due to the change in the composition of the PCAOB board that took place in late 2021 under the Biden administration,” says Accounting Today. 

Canadian accountants should note the culture change occurring in the US regulatory world. And now, on to the rest of the odds and ends from the past week’s news in Canadian accounting. 

Accountants opine on bad economic news

The Canadian economy is facing headwinds such as high inflation, supply chain bottlenecks, and recessionary red flags in China and the US. Patrick Brethour in the Globe and Mail makes the point that, unlike in previous months of economic growth, recent figures reveal that Canada’s low jobless rate is being driven by an unprcedented exodus from the workforce by Canadians aged 55 and older. 

Some accountants are rightly seizing the opportunity to provide their insights to the media. Iskandar Alex Nasrallah, an accountant at Ottawa’s Lekadir LLP, knows how to give a good quote. He told Business in Ottawa that small businesses that “took what they could to stay afloat” during the pandemic and are now in “sink or swim mode.” 

Tax accountants raise warnings on recent tax moves

At least two high-profile tax accountants are raising the alarm on recent news in tax law. While many accounting and law firms were nonplussed by the majority recission decision by the Supreme Court of Canada in the Collins Family Trust case, Moodys Tax Law out of Canada has started a letter-writing campaign to provincial governments, beginning with Submission Made to the Alberta Government Proposing Amendments to the Judicature Act to Improve the Ability to Correct Bona Fide Mistakes. 

And Tim Cestnick in the Globe and Mail has issued an early warning to readers that Looming legal changes that will affect Canadians’ ability to pay less tax, bringing attention to a consultation paper posted by the federal government on tightening rules around the General Anti-Avoidance Rule. The federal government has lost a high number of GAAR cases in the past few years before the Supreme Court of Canada and clearly agrees with Allan Lanthier that GAAR is “toothless.” 

Rewarding employees with the right rewards

If you’re thinking of giving out gift cards to your employees to squeeze out that extra bit of productivity, you may want to read Cash may not be the most effective way to motivate employees, which is based on a study co-authored by Adam Presslee, an associate professor at the University of Waterloo’s School of Accounting and Finance. 

“It is somewhat puzzling why so many companies go to the trouble of tangible rewards when cash rewards also lead to motivational differences,” says Presslee, but the study does contain some advice for choosing tangible employee rewards. 

Saying goodbye to AccountingWEB US

We were saddened to learn this past week that AccountingWEB US, a publisher of news about the US accounting profession, is “closing its doors,” according to parent company SIFT Media. SIFT, which specializes in B2B online marketing opportunities, blames “rising costs and decreasing margins over the last 12 months, with an increasingly commoditized US advertising market.” 

The company says that, with a US economic recession likely, it sees no prospect for keeping the brand going, and will focus instead on the operations of AccountingWEB UK. Considering that the US platform had been operating for 23 years, had a popular annual conference and a huge Twitter following, the news comes as something of a shock. The brand was also competing with AccountingToday, Going Concern, CPA Trendlines, as well as a host of accounting websites sponsored by accountancy bodies and academic journals. 

Quick Hits: Articles of Interest

CRA data show there's little to gain from increasing the minimum tax on top earners (Financial Post)
Quebec promises income tax cuts as inflation boosts provincial revenue (Canadian Press)
The Accountant Flips on Trump’s Empire (New York Magazine)
Special Commentary: Let’s Use Balance to Help Make Pillar Two Work (Bloomberg Tax)
Jack Mintz: Great Reset spending is dead, long live tax cutting (Financial Post) 

By Canadian Accountant staff.