Sunday News Roundup 23.06.11: FCA rules on IrisTel, PwC Oz woes continue, and more Canadian accounting news
Wrapping up the odds and ends from the past week in Canadian accounting news
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TORONTO, June 11, 2023 – The Bank of Canada responded to last week’s surprisingly hot economic data by hiking interest rates a quarter point this past Wednesday. This just a few weeks after the Bank said it would pause increases until the fall. Cue the pundits. David Rosenberg says the Bank will “bury Canada's debt-heavy economy,” Don Pittis says the era of free money is over, while Jim Stafford says that, despite the Bank trying its darndest, Canadian paycheques have finally caught up with interest rates.
For Canadian accountants in business positions, the rate hike is unwelcome news. CPAs say inflation and interest rates continue to be seen as the main challenges the economy faces. And now, on to the rest of the news and links from the past week in Canadian accounting.
Just the facts, CRA? Not when it comes to assessing liability
When it comes to issuing a tax ruling, the Canada Revenue Agency doesn’t need to have all its ducks in a row, or even complete its audit. That’s according to the Federal Court of Appeal, which dismissed a challenge from Iris Technologies to a Tax Court of Canada ruling, and issued its decision this past Monday. IrisTel had argued that without a factual foundation, the CRA’s assessments were “made contrary to law.”
For tax law enthusiasts, this is part of a much bigger fight between IrisTel and the Crown, one which has travelled all the way up to the Supreme Court. As previously reported, Iristel sued the CRA for $275-million over a sales tax battle in which the Agency alleged the company had engaged in a tax avoidance “carousel scheme." The company countered that the CRA did not understand the wireless business and its decision to withhold tax refunds was hurting the company’s business.
The Supreme Court has decided to combine the IrisTel case with a similar case (Dow Chemical) and will hear arguments in November of this year. As for the rather brief FCA ruling, Justice Goyette wrote that “even if there was a clear admission that the Minister made no findings of fact in assessing, the Minister would bear the burden of proving at trial facts to support the assessments.” The Minister is simply not bound to present all the facts before assessing liability.
The curtain has been pulled back on PwC Oz
Things have gone from bad to worse at PricewaterhouseCoopers down under in Australia. Last week we reported that the country’s largest pension fund was freezing its contracts with PwC over its tax leaks scandal. This week, three more pension funds announced they had frozen work with PwC, even as PwC named all 67 staff involved in the scandal, in a bid to salvage its reputation. Even its “Head of Reputation” quit.
The Economist asserted that PwC has disgraced itself down under. The danger of course is that the tax leaks scandal spreads to other countries and damages the reputation of PwC affiliates or, worse still, calls into question the widespread use of consultants by governments. The Australian Financial Review has already reported that the government for the State of Victoria has spent more than $670 million on consultants over the past five years, although presumably that would include big contracts during the pandemic.
While the fallout has thus far been limited to land of Oz, something similar did happen when KPMG was fined by the PCAOB for cheating on exams, and other firms (including PwC Canada) were either caught or confessed.
CRA wants to strike out Blue Jays
There's a whole cottage industry in Canada with Canadian accountants smoothing out the tax troubles of American athletes. This past week, the National Post reported that the Canada Revenue Agency was going after former Toronto Blue Jay stars Jose Bautista, Josh Donaldson, and Russell Martin, At issue is the level of their contributions to the Retirement Compensation Arrangement (RCA).
Sure, it's just three wealthy baseball players, but no less than Elliotte Friedman of Sportsnet has raised the issue that a win by the CRA may have adverse effects on Canadian hockey teams. Friedman says the same type of structuring helps to attract foreign hockey players to Canada. And anything that affects the multi-billion dollar hockey industry in Canada is sure to get more attention.
Quick Hits: Articles of Interest
Could tax season in Canada become a thing of the past? | About That (CBC)
Who really owns key Canadian assets? Regulators aren't sure but they want to find out: internal files (CBC)
Eye-popping Saskatoon budget update 'not the final number': city councillor (CBC)
Province retracts $580K property-tax levy on Irving crude-oil tank farm (CBC)
By Canadian Accountant staff.